Depreciating billions of Kenya power is a risky game

From BUSINESS DAILY
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summary

• Kenya Power’s decision to write off Sh15 billion in unpaid bills bodes ill for the utility company’s future and risks undoing efforts to cut high electricity bills.
• One of the main factors identified as the cause of high electricity costs is system losses that have to be offset by customer bills.

Kenya Power’s decision to write off Sh15 billion in unpaid bills bodes ill for the utility company’s future and risks undoing efforts to cut high electricity bills.

One of the main factors identified as the cause of high electricity costs is system losses that have to be offset by customer bills.

Reducing these losses has been identified as one of the short-term measures to tame high bills, including by ensuring that those who use electricity pay for what they use.

As a result, an energy company that has abandoned the collection of outstanding bills has a poor image and is unlikely to induce other insolvents to pay.

Some households complain that the utility company has not read the electricity meters for years and that the estimated bills are the order of the day.

Nor is it good for a billions-writing company to be looking at Treasury bailouts and Treasury guarantees to borrow more debt to fund investments at the same time.

Because of this, we hope that the write-off will be an accounting issue only, and we expect that Kenya Power will continue to make every effort to recover the fees owed, even if it means taking debtors to justice.

The company can and should prevent further losses by rogue users by shutting them down. Efforts to move more customers to prepaid metering to reduce the risk of default should also be stepped up.

On the positive side, however, the company is using the services of debt collection agencies to hunt down the overdue payments.

At the end of the day, it is important to remember that the utility sells electricity which is largely generated by taxpayer-funded power plants and is therefore an important cog to ensure that the taxpayer is getting good value for money .

Its survival and efficient performance are also important to the overall economy, as the expensive electricity does not make Kenyan goods competitive with those of its African competitors.

Put simply, Kenya Power is unable to write off billions of shillings in unpaid bills at one time when every coin counts to regain good financial health.