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How power system loss inflates your bill

Utility firm Kenya Power loses up to Sh10 billion annually through system losses during transmission and distribution of electricity to consumers, People Daily can reveal.

The amount, which is equivalent to Sh10.9 billion profi t before tax posted by the fi rm last year, reveals how system losses chop off a considerable chunk of revenue, a burden which is shouldered by consumers.

The gap between electricity bought by Kenya Power from power producers against actual units sold to consumers is what is referred to as system losses.

Technical and commercial losses, combined, make up system losses which averaged 18 per cent in the last five years against a global average of 11 per cent, currently at 18.9 per cent, down from 19.4 per cent in the 2015/16 fi nancial year. The fi rm posted 18.6 per cent system losses in 2014/15 and 17.5 per cent in 2013/14.

Tackling the loss is a tall order despite billions of shillings being spent to reduce the scourge, especially when consumers collude with dishonest Kenya Power staff to bypass meters.

It is estimated that managing system losses to more effi cient levels can save the Nairobi Securities Exchange (NSE)listed electricity distributor and retailer, an equivalent of Sh1 billion for every percentage point saved.

The fi rm’s sales revenue rose to Sh121 billion in 2016/17 financial year having paid Sh79 billion to power producers. However, system losses gobbled up 18.9 per cent of which 6.1 per cent was lost on non-technical leakages.

Going by the 10,205GWh of energy bought from producers in 2016/17 fi nancial year and working with Sh17 cost per kWh, Kenya Power lost about Sh10.2 billion through the 6.1 per cent non-technical leakages.

Also known as commercial losses, tackling these leakages will save the utility fi rm billions of shillings by targeting flats, highrise buildings and commercial premises where metering installations are tampered with to tap power illegally.

Also contributing to commercial losses are faulty meters and inaccuracies in meter reading.

Kenya Power can also save consumers high bills by deepening effi ciency during transmission of electricity to bring down technical losses, which is the direct cost of power lost during transmitting and distribution to consumers.

Speaking on the side lines of the 14th edition of the annual Energy Management Awards last Friday, various stakeholders said continued investment and tighter security measures will deepen performance of the network, and improve quality and reliability of power supply.

They noted that if the utility fi rm manages to reduce system losses to single digits like is the case elsewhere in the world, or even hit 10 per cent as outlined in Kenya Power’s strategic plan, the fi rm can save in excess of Sh11 billion in revenue, money that can be passed on to customers by making the cost of electricity cheaper.

World Bank estimates reveal that Singapore incurs two per cent system losses annually, China, from whom Kenya imports most of her electrical equipment is recording five per cent, Kazakhstan (seven per cent), South Africa (eight per cent) and Egypt (11 per cent).

An International Finance Corporation (IFC) report estimates that about 40 per cent of commercial losses in Kenya are attributed to manipulation of metering installations, whose meter boxes and service lines were found unsecured and easily accessible to the customers or third parties.

The reports say these losses are exacerbated in cases where the unsecured meter installation is located within the customers’ premises and the utility firm’s staff have limited or no access.

“The third source of commercial losses is attributed to direct connections, mostly illegal,” says IFC.

The IFC report warned that total technical energy losses at the utility firm are slightly above the target of 5.2 per cent but still below the maximum tolerated level. However, commercial losses are at least three times higher than commonly tolerated levels while transmission losses are above the tolerated level.

Elimination of losses will not be a one-off exercise because as the network grows the inherent technical losses that come with new infrastructure are added onto the network, said Kenya Power. The firm agrees that customers have continued to be shrewder in the theft of electricity, adding that it is increasing resources to tackle the menace.

To ease the losses further, last year the firm tapped the services of IFC to help improve the energy balance, reduce energy purchase costs and consequently increase revenues.

New capital projects to mitigate the technical losses include the construction of extra high voltage transmission lines and substations to reduce technical losses experienced through long distance power transmission.

“The amounts allocated to tackle system losses vary from year to year and ranges between 15 and 20 per cent of the annual capital spend,” said Kenya Power in response to People Daily queries.

Kenya Power’s financial report for 2017 indicates the firm received Sh1.3 billion on behalf of Rural Electrification Scheme (RES) for system losses. your “We also continue to improve on protection by using modern technology and enhancing inspections of metering infrato reduce technical losses,”

Kenya Power, adding that it has migrating large power who account for more 50 per cent of revenues to smart that offer real time consumpmonitoring.

“We intend to roll this out to the commercial industries and to domestic customers ,” said firm, which has connected 6.5 customers who consume billion kilowatt hours of elecThe firm spent more than Sh41 bilon system improvement projects enhanced service delivery to imrevenue last year.

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