The Energy Regulatory Commission (ERC) has turned down KenGen’s proposal to sell electricity directly to large customers. The regulator said the company cannot enter the retail market because of the possible conflict of interest that would occur.
On Wednesday, ERC said electricity distribution is the role of Kenya Power while electricity generation is KenGen’s.
Avoiding a Conflict Of Interest
“We don’t want a scenario where one single player would be doing everything – generating and at the same time selling to end users as this could present a conflict of interest and hurt a segment of consumers.”
“We want KenGen to focus on generation and Kenya Power to stick to distribution,” ERC director-general Pavel Oimeke said.
The NSE-listed power producer had recently shown interest in selling bulk power directly to new factories in Naivasha located close to its Olkaria geothermal power plants. These factories would benefit from low-priced power because of the proximity to the power plants.
Through a proposed Energy Bill – that is not yet approved – KenGen hopes to gain approval to sell wholesale power as a means of increasing its revenues.
Oimeke highlighted the adverse effect of interrupting the different roles that each state entity has been given with respect to energy. Before 1996, Kenya Power was responsible for energy production, transmission, and distribution, a model that was an unsustainable model. As a result, KenGen and Ketraco were created.
The rejection of KenGen’s bid means that the company will have to move its focus back to enhancing KenGen Energy Services, a subsidiary developed to deal with non-generation business as a method of increasing revenue.
The company’s half-year profit to December declined by 11.4 percent to Sh4.09 billion while its bottom line dipped by 30 percent to 2.9 billion because of the high cost of financing debt.
KenGen’s shareholders have gone two consecutive years without receiving dividends. Therefore, increasing revenues is an important factor for the energy producer.
KenGen and other power producers sell electricity to Kenya Power for distribution to consumers. The company controls 70 percent of Kenya’s installed power capacity.