German Consultancy Firm to Help Cut High Energy Costs for Manufacturers in Kenya

The Energy Regulatory Commission (ERC) has hired a German consultancy firm Lahmeyer International to compile electricity consumption data from manufacturers, paving the way for cheap off-peak tariffs.

Lahmeyer International has already teamed up with its local associate, Feradonto, to gather the energy data, raising hopes that manufacturers will start getting discounts on their electricity bills later this year.

The off-peak power plan will see industrialists shifting their peak consumption to hours between 11 pm and 5am — when demand is low — to enable the country to cut the use of expensive diesel-fired generators.

The ERC said it would sanction the discounted rates after doing a test-run to establish the project’s success.

“This will inform the discount that the commission will consider on the relevant tariff,” said director-general Joseph Ng’ang’a.

The government came up with the off-peak tariff plan 10 years ago but the failure to agree with manufacturers on the discount rates has delayed its kick-off.

Manufacturers have been demanding discounts of up to 50 per cent on their electricity bills before shifting their production to late night shifts, but Kenya Power said the cut could push it into losses. Kenya Power has only been willing to offer a 10 per cent discount.

The industrialists have maintained that the incentive must be adequate to compensate for the additional costs that come with operating at night such as expensive labour, security and transport.

Earlier, the Kenya Association of Manufacturers (KAM) asked the government to peg the discounts on the level of production to encourage industries to ramp up output without necessarily accruing higher costs.

“There should be a sliding scale, the more power a manufacturer uses to produce goods during night time, the more discount they should get,” said chairman Pradeep Paunrana earlier.

The ERC, however, maintains that the discount offered to manufacturers ought not to eat into the margins of Kenya Power.

The shift by manufacturers to night-time production is expected to ease demand pressure during peak hours which often force Kenya Power to switch on the more expensive diesel generators to stabilise the supply.

Ministry of Energy officials reckon that the country consumes less than half the peak power demand between midnight and 5am.

The peak time stretches from 9am and climaxes at between 6pm and 9pm when Kenyans return home from work switching on house lighting, cooking appliances and TVs.

Shifting industrial production to night shift is one of several options the government is pursuing to lower the cost of production that will ultimately reduce the cost of consumer goods and make Kenyan products competitive in the international market.