New rules give ERC power to set, review and adjust electricity tariffs

• The tariff regulations give the Energy Regulatory Commission (ERC) powers to set, review and adjust power tariff structures for holders of electricity generation, transmition, import, export and distribution licences.

Firms dealing with electricity will face tighter scrutiny from the energy regulator once rules seeking to keep the sector in check come into force.

In the Kenya Gazette on Friday, Energy minister Kiraitu Murungi invited the public input on the proposed electricity tariff regulations.

The regulations, the ministry said, are expected to lead to cheaper, quality and improved services for consumers while ensuring profitability and competition in the industry.

The rules are also expected to improve reliability and security of electricity supply.

“Better outcomes may include lower costs for consumers in the due course than would otherwise be the case through improved operating efficiency, improved planning [and] services that better meet the needs of existing and potential electricity consumers,” read part of an explanatory note in the Gazette.

The tariff regulations give the Energy Regulatory Commission (ERC) powers to set, review and adjust power tariff structures for holders of electricity generation, transmition, import, export and distribution licences.

For each electricity licence holder, the ERC is expected to define tariff control measures and develop a tariff constraint formula. The categories of tariffs that will fall under the ERC’s mandate will include system operation tariffs, fuel cost tariffs, electricity transmission tariffs and retail activity tariffs.

On the other hand, the companies are expected to submit detailed reports of compliance with the tariff constraints within six months after the end of each tariff year. The electricity regulatory accounts require companies to preserve detailed financial records for a period of at least seven years.

The public now has 40 days to submit comments and concerns to the ERC before the rules come into effect.

The publication of the regulations comes even as the government engages private sector consultants to review the electricity tariff structure in the country.

In November last year, the government hired Canadian company, SNC Lavalin Engineering, to research a new electricity tariff structure which matches the ongoing investments in the sector.

Independent power producers

Over the last few years, Kenya has seen the growth of independent power producers with firms like Thika Power Ltd (TPL), Gulf Power Ltd (GPL) and Triumph Power Generating Ltd (TPGL) starting operations.

Mumias Sugar who’s core business is not energy has also stepped into the fray by generating and selling power to the government.

In the new rules, the ERC is charged with ensuring that companies in the sector continue to attract debt and equity capital to finance their investment programmes, despite the tariff control measures.