The local liquified petroleum gas (LPG) sector is set for a major regulatory overhaul in a raft of proposals by the Energy and Petroleum Regulatory Authority (Epra).
The changes are largely hinged on enhancing safety in a market where a steady growth in demand means that more consumers are exposed given the vast black market and legal gaps that rogue dealers capitalise on.
Dealers will be required to invest more cash to meet the stringent rules as the government clamps down on middlemen all too keen to cash in on the growing demand.
How big is the LPG market in Kenya and what are the future prospects?
The market for cooking gas in Kenya has steadily grown over the past five years. Last year, homes, businesses and institutions consumed 414,880 tonnes of LPG, a jump of 27.1 percent compared to 326, 230 tons in 2020.
Consumption is expected to grow significantly from this year on the back of a combination of factors meant to spur use of LPG as the number one cooking fuel.
These include removal of three taxes on the commodity and more private players setting up facilities to handle imports of LPG, lowering the handling fees which will in turn reduce retail prices. Kenya Pipeline Company is also setting up a common user facility that will enable the government to regulate prices of LPG.
What does the law currently require from dealers seeking approval from the energy regulator?
Currently, the law requires dealers seeking regulatory approval from Epra to have at least 5,000 standard cylinders of either a capacity of 0.5, one, three, six or 13 kilogrammes.
This minimum threshold will now jump six-fold to 30,000 cylinders upon the gazettement of the Petroleum (Liquified Petroleum Gas) Regulations of 2024.
Dealers with less than 30,000 cylinders at the time these regulations are gazetted will be required to grow this stock to the new minimum requirement within three years.
What are some of the key concerns behind the latest changes in regulation of the LPG sector?
Despite the growth in the country’s LPG market, a thriving black market where rogue dealers illegally refill and sell gas from other brands without their consent.
It is estimated that more than 30 percent of the market is in the hands of black-market players, operating in city estates, informal settlements and far-flung areas away from the eyes of Epra.Rogue dealers also continue to deny licensed players billions of shillings in revenues by illegally refilling their cylinders.
The black market has been blamed for catastrophic accidents at refilling plants or involving their trucks. In a bid to end this market, Epra undertakes random inspection checks every month. For example, between January and July last year, Epra shut down over 32 illegal LPG refilling stations.
How will the changes impact dealers and consumers?
Consumers will enjoy more protection in the form of a mandatory insurance for dealers. The cover, dubbed Public Liability Insurance will insure customers and third parties against fatalities, injuries and damage to property caused by defective LPG cylinders.
On the other hand, dealers will require more capital given the higher minimum threshold of 30,000 usable cylinders and the compulsory PLI.
Brand owners will also be required to ensure that their cylinders are re-validated every eight years in a bid to ensure there are no defective cylinders for sale. They (dealers) will be compelled to keep a record of all seals supplied by Epra. The seals will be open to scrutiny by Epra and consumers.
Customer deposits for cylinders
For the first time, Epra has set out deposits for the various cylinders that customers will pay as security and for the restitution of a portable LPG cylinder. The minimum deposit will be Sh200 for the 0.5-kilogramme pack while the maximum will be Sh2,000 for the 13-kilogramme container.
Dealers who charge clients higher deposits than the gazetted rates will face a fine of Sh500 per cylinder, besides refunding the difference.
What are some of the major incidents involving LPG players and how has the government responded?
Kenya has not witnessed many major incidences of gas explosions at refilling plants or involving transport trucks.
Three people were killed and more than 300 others injured last year when an explosion occurred at an unlicensed refilling plant in Embakasi.
Besides this, there have been a number of cases where defective gas cylinders have exploded at illegal refilling plants and homes.
When did the current LPG regulations come into effect and when are the Petroleum (Liquified Petroleum Gas) Regulations of 2024 likely to be gazetted?
The current regulations came into existence in 2019 and marked the first time that Epra (then Energy Regulatory Authority) moved in to regulate the LPG sector, enhance consumer safety and place higher responsibilities on players seeking to enter the sector, either in the bulk or retail markets.
