Kenya Power is expected to lower the cost of electricity bills by a further 15% months after taking a similar initiative.
The latest move comes after the National Treasury offered the power retailer a Ksh7.05 billion subsidy to caution it from being hurt financially.
The Treasury issued the subsidy after the Independent Power Producers (IPPs) refused to cut their tariffs and allow Kenya Power to lower consumer bills, according to a report by the National Assembly’s Budget Committee.
The government first reduced electricity bills in January and was expected to do so again in April, but IPPs objected.
The IPPs argued that the country has no unilateral right to interfere with contracted capacity and payments, and that the state must protect Power Purchasing Agreements (PPAs) signed over 20 years ago.
IPPs claimed that they spent billions of shillings on power plant construction using a combination of debt and shareholder funds sourced on the strength of PPAs or wholesale electricity tariffs.
To move forward with its plan to reduce the electricity bill, the state has decided to provide subsidies to both protect Kenya Power from losses and to cushion Kenyans from the high cost of living.
“To shield KPLC from the effects of the electricity price reduction before the implementation of this second phase, the company has been allocated Sh7.05 billion in the proposed budget for 2022/23,” the Budget and Appropriations committee said.
Since President Uhuru Kenyatta took office in 2013, the price of 50 units of electricity has nearly doubled, rising from Ksh508 in July 2013 to Ksh945 in December last year before falling back to Ksh769 in February 2022.
The reduction in electricity bills comes at a time when Kenya’s inflation rate hit a 27-month high of 7.1% in May, forcing households to reduce their budgets and purchases of goods and services.