Kenya is poised to allow private entities entering the electricity distribution sector to import power from neighboring countries, aiming to stimulate competition and drive down wholesale tariffs, as proposed by the Energy and Petroleum Regulatory Authority (EPRA). This move seeks to open up the electricity distribution market, introducing competition alongside Kenya Power to enhance service delivery to consumers.
By broadening the options for power distributors, the aim is to foster increased competition in wholesale tariffs, ultimately leading to reduced power costs for consumers. Presently, only Kenya Power has the authorization to engage in electricity import agreements with foreign producers, holding deals with entities like Ethiopia Electric Power and the Uganda Electricity Transmission Company Limited.
In the draft Energy Electric Power Undertaking Licensing Regulations of 2024, EPRA suggests granting licenses to firms for importing and exporting electricity, allowing them to either sell imported electricity to consumers or export locally generated power to neighboring countries. This provision offers firms a wider market scope and pressures Kenya Power to offer more competitive rates to power producers. Ethiopia and Uganda currently supply excess hydroelectric power to Kenya, presenting potential sources of imported electricity.
However, these firms must obtain regulatory approval for their consumer tariffs, akin to the process Kenya Power undergoes with EPRA for tariff review and approval.
The proposed license for electricity import and export is one of five licenses offered to new entrants in the electricity generation and distribution sector. These licenses include permissions for constructing, operating, and maintaining electricity generation systems, as well as approvals for building and operating infrastructure for power transmission.
Additionally, there’s provision for retail supply licenses for selling, billing, and revenue collection. The draft regulations signify the government’s efforts to end Kenya Power’s long-held monopoly in the electricity sector, aiming to introduce a more competitive market landscape.
Firms intending to venture into electricity distribution can utilize the distribution and transmission networks of Ketraco and Kenya Power, subject to payment of wheeling charges for system usage. Renewals for these licenses will require application to EPRA three years before expiry, as stipulated in the draft regulations pending adoption by Parliament.
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