Firms increase night operations to benefit from cheaper power

The number of manufacturers that are turning to operating at night and benefiting from the discounted off-peak tariff surged 56.6 per cent last year, even as the government considers reviewing the tariff to relax the requirements to enable more firms to benefit from the tariff.

The number of companies that are now benefitting from the Time of Use (TOU) tariff increased to 2,241 by the end of the year to June 2024 up from 1,431 the previous year, according to data by the Energy and Petroleum Regulatory Authority (Epra).

The increase was largely due to the opening up the tariff to small and mid-sized manufacturers in April last year. 

The companies operating under the tariff saved Sh1.84 billion over the year, a 28.6 per cent increase from Sh1.43 billion saved over the year to June 2023.

The tariff, which was aimed at spurring electricity consumption at night when consumption dips significantly and leaves power infrastructure idle, offers manufacturers a discount of up to 50 per cent on power consumed between 10pm and 6am as well as weekends and public holidays. 

To benefit, however, firms had to meet stringent conditions, including exceeding their six-month average consumption. 

Epra director general Daniel Kiptoo said the authority plans to finalise the review of the tariff to enhance adoption and utilisation.

He noted that among the factors that have affected the uptake of the tariff include the Covid-19 pandemic, where consumption among many factories dipped significantly and many are yet to get back to their earlier consumption levels.

“We, as the regulator, are working with the ministry and the utility (Kenya Power) in rethinking the thresholds that firms have to meet to benefit from the tariff so that then we can come up with a mechanism that allows more industries to take advantage of the tariff,” he said.

“We believe that we can make it more friendly and have more customers be able to participate and increase their production.”

Kiptoo added that there will be considerations to ensure that industries still have certain thresholds to meet so as to avoid a scenario where they migrate their operations to off-peak hours. This will shield Kenya Power from a drastic fall in revenues.

“In doing this, we are careful to ensure that we do not leave the utility out of pocket and they are able to meet their revenue requirements,” he said. 

Industries, both large and small, account for the bulk of power consumed in the country.

According to the Energy and Petroleum Statistics report for the year to June 2024 that Epra published Thursday, companies accounted for 68 per cent of the power consumed over the year, with households accounting for 30 per cent.

The TOU tariff was introduced in December 2017. It was aimed at lifting manufacturing in the country but also increasing consumption at night, when demand significantly falls when industries and households shut down.

Power consumption patterns in the country are such that during the peak hours of between 6pm and 10pm, the power generation sources struggle to meet demand that peaks at about 2,132MW.

This falls significantly to 1,100MW deep into the night, which are the hours that the tariff aims at spurring demand.

The requirement that industries must surpass their monthly consumption to benefit from the tariff was also expected to lift Kenya Power’s earnings.

While hailed at its launch as among the initiatives to reboot the country’s manufacturing sector, the uptake of the tariff remained low with industries saying the thresholds set are too high and only a select number of companies can meet them. 

The surge in the number of companies benefitting from the tariff this year has increased following the inclusion of small and mid-sized industries to the list of the firms that benefit from the tariff in last year’s tariff review.

Industrial and commercial power users get a discount of as much as 50 per cent when they use power during the off-peak hours of between 10pm and 6am and in meeting certain thresholds.

On Saturdays, the off-peak hours are from midnight to 8am and again from 2pm to midnight and then the whole day on Sundays and public holidays.

Over a given month, power consumers only benefit if their consumption is over and above their average consumption over the last six months.

Under the tariff, Commercial and Industrial Five (CI5) category of customers, who are metered at between 450 volts, pay an energy charge of Sh5.99 for a unit of power consumed during the off-peak hours. 

Ordinarily, this cadre of customers pays Sh11.98 per unit of power consumed during the day. The energy charge is, however, loaded with taxes, levies and pass-through costs, which tend to push power costs up.

Sometimes the impact of loading these costs can have a major impact on the cost of power. This is especially so in the case of variables such as fuel cost charges and foreign exchange adjustments, which can change every month to reflect the economic realities.

Kiptoo also said that in reviewing the TOU tariff, Epra is also seeking to update the e-mobility tariff to remove the consumption limit of 15,000 units per month. 

In last year’s tariff review, Epra introduced the electric mobility tariff in which electric vehicle firms pay Sh8 per unit of power consumed during the off-peak hours and Sh16 for units consumed during the day. 

The firms, however, consume much of their power during the night, when the fleets of electric vehicles, many of them PSVs, are not working.

This has meant that many of the EV charging stations outstrip the 15,000 units’ cap, beyond which their charges double to Sh16 per unit.

Kiptoo said the review of the TOU provision for the EV tariff is expected to address challenges faced by e-mobility firms that consume more than 15,000 units per month and face higher charges under the commercial and industrial power tariff.