The truth behind Kenya Power billing scam

In the Kenya Power annual report for the year ended June 2017, most of the company’s executive managers who are in the dock for abuse of office charges pose elegantly in suits and wearing smiles on their faces.

On the surface they had reason to. The company had returned a profit of Sh42 billion up from the previous year’s Sh38 billion after meeting the essential costs of buying power from producers.

Going down the income statement, however, should have turned their smiles into frowns.

Transmission and distribution costs, at Sh33.4 billion, were 16.4 per cent above the previous year’s Sh28.7 billion.

In comparison, electricity sales had grown by 5.8 per cent from Sh87 billion to Sh92 billion. Costs were rising three times faster than income, a trend which if carried forward would be unsustainable.

SH6.5 BILLION NET PROFIT

In the end, the company had a net profit of Sh6.5 billion, down from Sh7 billion, meaning it was consuming nearly 85 per cent of the money it made.

In addition, it had reduced its balances in the bank, had restructured its loans and was carrying a debt of Sh122 billion, which was taking Sh6 billion to service besides an overdraft facility of Sh4.7 billion.

This synopsis highlights the devil in the detail of erratic and high power bills that have left customers perplexed and are the subject of a class action suit filed by lawyer Apollo Mboya against the company.

Insiders attribute the high bills to uncontrolled contracting of thermal generators, who are paid capacity charges even when they supply nothing and rising operational costs motivated by corruption as the key contributors to inflated bills.

To keep power bills at manageable levels, experts point at phasing out of diesel operators from the energy mix.

FUEL COST

“Why is there a fuel cost? There needs to be an evaluation on whether all the power generators who are paid even when they do not supply like during the rains are necessary,” one industry player said.

Another pointed to corruption which he said had seen Kenya power oversupplied with items such as concrete poles, transformers and voltage stabilisers.

Under a policy to stabilise supply, Kenya Power was to gradually replace wood poles with concrete ones, which can withstand accidents along main roads.

It has since turned into a lucrative business where concrete poles replace fairly new wooden poles and are ordered in excess to sustain suppliers.

This, an insider said, explains why there are many concrete poles lying idle along less busy roads because they were bought with no regard to the network expansion plan.

IMMEDIATE NEEDS

“The poles are bought beyond immediate needs and removed from stores to sites by managers to ensure the stock is kept at desired levels. The same applies to voltage regulators which are hang on lines even when they are not needed like where the short distance between sub-stations automatically ensures stability,” an insider said.

The Auditor-General Edward Ouko cited billing last year as the key audit matter facing the company.

The matter raised by Mr Ouko is at the heart of complaints by customers – both pre-paid and post-paid – over erratic and high billing, which is threatening one of Jubilee’s key campaign promises of expanding electricity consumption and reducing costs.

In a letter to the Competition Authority of Kenya on January 10, suspended Kenya Power Managing Director Ken Tarus admitted that there had been erroneous billing after the company changed its system.

COMPENSATION

“In November 2017, we migrated to a new Integrated Customer Management System. We have realised that there have been errors in the conversion to the new system and that some bills, which have been sent out reflect an amount due in excess of what should have been charged,” Mr Tarus said, without elaborating how customers who had been overbilled would be compensated.

He was responding to accusations by Mr Mboya filed with the Competition Authority that the company was abusing its monopoly and buyer power by sending inflated bills to customers in a bid to recover Sh10.1 billion in fuel cost charges that had inexplicably been factored omitted from monthly electricity bills.

Mr Mboya said the backdated bills, of which Sh2 billion had been recovered by January, were meant to help the government keep a lid on utilities (cost) in an election year. Orders were then given for Kenya Power not to recover the outstanding amount until the case is heard and determined.

In May, the High Court directed Kenya Power to respond to the class action suit by the Electricity Consumers Society and to explain the inflation of the bills.

ELECTRICITY CONSUMPTION

Flyers from Kenya Power on billing leave consumers with more questions than answers.

In one, inviting consumers to calculate their electricity consumption, Kenya Power says the base cost for each unit is Sh8.10 before adding the monthly standard charge of Sh150, cost adjustments and taxes.

In another meant to help customers understand their power charges, it says a graduated scale in the basic charge applies in three phases.

For each of the first 50 units Sh2.50 per each is charged while Sh12.75 is charged for each unit between 51 and 1500 .

Each unit above this level, where Industries would fall, is charged at Sh20.57. To that are added charges to cushion the company from forex losses (Sh6 billion last year) and producers from high fuel costs (Sh22 billion in 2017) which vary each month.

For this month, the fuel charge is at Sh4.5 per unit and the forex charge Sh1.20 per unit. When other charges to fund the operation of water and energy regulators are added, the cost of power per unit more than doubles.