MPs want more SEZs roped into State's cheaper power plan

The Energy and Petroleum Regulatory Authority (Epra) might be required to lower the cost of electricity for firms operating in other Special Economic Zones (SEZs) to be at par with those operating at the State-owned Naivasha SEZ.

The energy industry regulator will also be required to increase the number of hours for the off-peak tariff to enable firms to increase production during nighttime. 

Industries setting up at the Naivasha SEZ, located at Mai Mahiu in Nakuru County, pay Sh5 per unit of electricity they consume. This is unlike other SEZs where the power users pay Sh10 per kilowatt hour of electricity.

In a new report, the National Assembly’s Departmental Committee on Energy has recommended that in coming up with the next power tariff, Epra should standardise the costs that firms operating across all SEZs pay.

The Committee said Epra should come up with a “transparent mechanism of setting SEZ tariff prices with a view of introducing nearly uniform preferential tariffs for Special Economic Zones in the next tariff review, in order to attract new investment, with the current cheaper tariff of Sh5 per kWh (kilowatt-hour) only applying to the Naivasha Kedong SEZ.”

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The recommendation by the committee is contained in a report done after a lengthy inquiry into the high cost of electricity in the country. The current tariff took effect on April 1 last year. The next tariff is expected to kick in in 2026.

In the current tariff, SEZs pay Sh10 per unit of electricity. This is, however, higher compared to the Sh5 per kWh that investors at the Naivasha SEZ pay for power.

Epra introduced the Sh5 per unit tariff for the Naivasha SEZ in a pilot in 2019 as it sought to lure investors to the SEZ. It retained the rates in last year’s tariff review.

In addition to the lower electricity rates, companies operating in SEZs also enjoy lower taxes and in some instances special infrastructure to enable them to produce more and employ a large number of Kenyans.

In the report, the House committee also wants Epra to review the off-peak tariff, which gives manufacturers producing at night a 50 per cent discount on meeting certain thresholds.

The review should look into increasing the number of hours covered by the off-peak tariff. Currently, it covers electricity consumed between 10pm and 6am.

It recommended, “that, within six months upon adoption of this report, Epra institutes a review of the time-of-use tariff modalities to cover all night consumption and lock in the rate for each facility, in order to encourage better use of the electricity capacity in the night-time”.

The time-of-use tariff was aimed at spurring electricity consumption at night when consumption dips significantly and leaves power infrastructure idle. To benefit, however, firms had to meet stringent conditions, including exceeding their six-month average consumption.

Epra has in the recent past said it plans to review the tariff to enhance adoption and utilisation. The energy industry regulator said it is working together with the Energy Ministry and Kenya Power to rethink the thresholds that firms have to meet to benefit from the tariff.

This is aimed at getting more firms onboard in using the tariff. The revised time-of-use tariff will also consider Kenya Power, whose revenues could be hit should the tariff make it easier for firms to shift their production to the periods covered by the tariff.

The number of manufacturers benefitting from the discounted tariff surged 56.6 per cent to 2,241 by the end of the year to June 2024 up from 1,431 the previous year, according to Epra data.

The increase was on account of opening up the tariff to small and mid-sized manufacturers in April last year when the new tariff took effect.

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.