Kenya Power cuts off defaulters to bridge gaps in revenue collection

Kenya Power managing director Ben Chumo (right) with Standard Chartered Bank Kenya and East Africa chief executive Lamin Majang at the signing of a loan agreement at Stima Plaza last week. PHOTO | ANTHONY OMUYA |

What you need to know:

  • Firm plans to install smart metres at its large customers for greater efficiency
  • The power cut-offs that include Mumias Sugar mill and at least seven prisons is aimed at recovering lost revenue and raising funds to finance pending projects.
  • Kenya Power plans to install smart meters at its large customers in Nairobi beginning in January to improve revenue collection.

Kenya Power began disconnecting electricity a week ago at public and private institutions and businesses that have defaulted on payment.

The power cut-offs that include Mumias Sugar mill and at least seven prisons is aimed at recovering lost revenue and raising funds to finance pending projects.

It is understood the utility is owed nearly Sh2 billion. According to Kenya Power’s financial statements for the year ended June 30, money owed, including arrears on power bills, has risen from Sh14.2 billion in 2012 to Sh25.3 billion this year.

Kenya Power is faced with short-term liabilities totalling Sh48.8 billion during the period under review, up from Sh31.2 billion in 2012.

“We will literally disconnect supply to all defaulters. We have to find a solution to all our pending bills. The company stands to lose the value for its money as defaulters take long to make payment,” Kenya Power managing director Ben Chumo said in a telephone interview.

A list of debtors obtained by the Sunday Nation from Kenya Power indicates that government offices including ministries and other institutions such as parastatals and prisons owe the utility close to a Sh1 billion.

Another Sh650 million is owed by private institutions. Kenya Power is also demanding Sh150 million from small-scale consumers that include households and mid-sized consumers. The bills remain unpaid for an average of three months.

KAMITI'S POWER CUT OFF

Among the institutions whose connection was cut is Nairobi’s Kamiti maximum security prison where Prisons Commandant Wanini Kireri confirmed that the facility had been without power and water for a week.

Mumias Sugar is among the businesses whose power was cut off. 

The amount of money the Nairobi Securities Exchange- listed company owed Kenya Power was not disclosed, but a Mumias spokesperson said the firm is reconciling its accounts to establish the exact amount it owes Kenya Power.

“We do have bills that are not paid; we are reconciling the numbers,” Margaret Makhungu said in an interview.

Kenya Power is embroiled in legal battles with several institutions listed as defaulters as some of the outstanding bills date to periods before these institutions began operations. Some of the disputes date back more than five years.

The company recently increased its borrowing to plug a financing gap for its projects, citing the pending settlement of electricity bills as the main reason for loss of revenue.

On Wednesday, the firm signed a deal with Standard Chartered Bank for a Sh17 billion ($190 million)  loan to upgrade its network.

Mr Chumo has defended the company’s turn to commercial loans that are often priced higher that credit from bilateral lenders like the World Bank, citing the length of time it takes for these institutions to process loan requests.

Kenya Power paid Sh4 billion in financing costs, including interest on loans, in the last financial year to June 30, an increase of Sh1.7 billion over the Sh2.3 billion paid the previous year.

KP’s long-term borrowing increased to Sh53 billion from Sh42.9 billion during the period under review.

Kenya Power plans to install smart meters at its large customers in Nairobi beginning in January to improve revenue collection.

The company recently announced that it had set aside Sh150 million for the two-year project that targets 5,000 customers whose monthly bills exceed Sh100,000.