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Government to reduce cost of electricity for SMEs

Government to reduce cost of electricity for SMEs

Small and Medium Enterprises are set to benefit from reduced electricity costs, following a presidential directive.

President Uhuru Kenyatta directed the Cabinet Secretary for Energy Charles Keter to review electricity cost for SMEs and come up with a sustainable plan to ensure the cost of power to small and medium-sized enterprises is brought down.

Speaking at the SME conference, the President said there is an urgent need to address the issues affecting the SME sector which he admitted government has neglected.

“I am embarrassed to even read my speech because of the neglect of the SMEs sector. We have to start dealing with the issues through moving and implementing the issues as a fast as possible”, the President said.

In August this year while announcing harmonised electricity tariffs, Energy Regulatory Commission (ERC) said that commercial and industrial consumers would benefit from a 4.4 per cent reduction in costs in addition to the 50 per cent discount in off-peak tariffs, and the proposed Special Economic Zone tariff.

“The economic policy objective of retail tariff reviews is to achieve efficient resource allocation within the economy with consumers only paying for the costs prudently incurred by the utilities,” said Robert Oimeke, ERC Director General.

But the Kenya Association of Manufacturers put ERC on the spot on the basis that the Fixed Charge Costs (FCC) was expected to come down anyway, from Ksh4.8 ($0.047) per kilowatt hour (kWh) to Ksh2.5 ($0.024) kWh after improved generation from hydro, and thus should not be considered a reduction.

“The energy charge for industrial consumers has increased by more than 30 per cent. The increased energy tariff erodes the benefit that consumers expected from the lower FCC,” said KAM Energy Manager, David Njugi.

He added that the fixed cost charge that has been removed is an insignificant component for industrial consumers and as such does not lead to lower costs.

SME’s contribution to Kenya’s economy has risen from 13 per cent in 1993 to nearly 30 per cent in 2016

The President promised that there will be a convening after two months to evaluate the strides made from the matters arising from the conference.


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