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12th July 2017

PIDG supports local currency power pricing for Kenya

Funding for regulator as it pursues lower costs for homes and businesses

PIDG is to fund work by the Kenyan energy regulator as it seeks to price its electricity in shillings, a move which could reduce costs for consumers and boost local currency financing for power projects.

Currently all Power Purchase Agreements between national utility Kenya Power and electricity producers come with a fixed tariff in dollars. This can lead to unpredictable consumer prices as currency exchange rates fluctuate.

Encouraging infrastructure investment in local currency can help develop financial markets and recycle savings in-country, both of which contribute to wider economic prosperity.

“Any reduction in the consumer tariff will translate into more affordable power and deliver a sustainable advantage to consumers including businesses and industries in Kenya, particularly in the manufacturing sector, creating more employment and contributing to the growth of the economy,” said GuarantCo Executive Director Samuel Chasia.

Kenya’s Energy Regulatory Commission (ERC) will undertake a three month study to shape the plans, which is being funded by PIDG’s Technical Assistance Facility and implemented by its local financial market development firm GuarantCo.

The move away from dollar-denominated rates follows the success of similar moves in India and South Africa.  

ERC’s Acting Director General Pavel Robert Oimeke said the study was in line with the commission’s objective is to ensure adequate, quality, cost effective and affordable supply of energy through indigenous resources.

“One of the key challenges facing the energy sector is a lack of appropriate and affordable financing options and attractive incentives to mobilise investments in energy infrastructure. This study will help unlock the potential of the sector while reducing costs for the end consumer,” said Mr. Oimeke.