How to Purchase Kenya Power’s Wholesale Electricity

The Energy and Petroleum Regulatory Authority (Epra) recently reviewed electricity tariffs, adding a bulk tariff for the first time, which will take effect on April 1, 2023, for a three-year period.

With the new tariff, large consumers will be able to purchase electricity in bulk from Kenya Power at a reduced rate and resell it to end users, including tenants, for a profit.

Here is how the power purchase and sale agreement will operate.

Why is there a bulk power tariff in place?

The tariff is intended to increase distribution efficiency and lessen Kenya Power’s burden of pursuing defaulters.

The upfront payment made by bulk power buyers ensures that Kenya Power will safeguard every shilling made from the power sold under this arrangement. The responsibility for checking on consumer payments will fall to the bulk power buyer.

Which consumer group qualifies for the bulk tariff?

The rate is applicable to heavy electricity users, primarily commercial entities like shopping centers and owners of sizable residential areas. Domestic customers are not eligible.

These customers use more than 15,000 kilowatts per hour per month in the C12, C13, C14, C15, C16, and C17 consumption bands.

What is required to purchase electricity in large quantities from Kenya Power and resell it?

Customers who want to purchase large amounts of power from Kenya Power must obtain retailer licenses from the energy regulator. They will be able to resell electricity to their clients thanks to this license.

A power purchase agreement with the electricity distributor must also be applied for.

How do the prices of bulk power and other consumer bands compare?

In comparison to the unit cost in the domestic tariff, the bulk tariff’s cost per unit is lower. For instance, in the first year of the new tariffs, which went into effect at the beginning of this month, the bulk tariff is set at Sh12.12 per unit compared to Sh20.97 per unit for domestic consumers.

What criteria does Epra use to set the price at which end users purchase electricity?

The cost of the total units that customers purchase in bulk from Kenya Power and the cost of installing the alternative power source, primarily solar or a diesel-solar hybrid, are the two main factors that the energy regulator takes into account.

The retail price for the end user is then calculated by Epra using the costs of the units generated by the internal power system and those purchased from Kenya Power.

Any request for a bulk tariff may be approved or rejected by the energy regulator on an individual basis.

The vast majority of bulk power tariff customers have internal power generation, primarily solar and biomass.

How much profit will consumers make when they buy power in bulk and resell it?

The margin cap set by the energy regulator is secret. This is done to prevent those who purchase large quantities of electricity from realizing inflated profits.

Why has it taken so long to put this provision into effect if the Energy Act permits the private sector to participate in electricity distribution?

This is so because the most recent review was completed in 2018, and the inclusion of such a tariff can only be made in the comprehensive review of tariffs. This is the reason Epra included it in the new tariffs, which took effect on April 1, 2023, for a three-financial-year period.

Exist any businesses that purchase power in large quantities and resell it to customers?

At the moment, Kenya Power is selling electricity in bulk to Great Wall Apartments in Mavoko and Tatu City, who then resell it to their residential and commercial tenants.

Additionally, it is widely anticipated that many investors starting businesses with a focus on real estate and who have a backup energy source (most commonly solar, biomass, or a hybrid) will choose the bulk tariff.

This is primarily because there is a growing trend among investors, particularly in real estate (residential, commercial, and mixed), where most of them are eager to offer all necessary amenities to their tenants.