In February, the Energy and Petroleum Regulatory Authority published the Draft Energy (Electricity Market, Bulk Supply, and Open Access) Regulations 2024. The proposed regulations seek to govern the generation, importation, exportation, transmission, distribution, and retail supply of electrical power in Kenya.
The regulations were developed after engagements with energy stakeholders to allow open access to power transmission and distribution. Opening our energy sector to private players is a key milestone. It gives the private sector a platform to make the power sector more efficient and competitive. It also enables an expanded opportunity to mobilise private capital into other areas of the electricity value chain besides generation.
When the proposed regulations are gazetted, private investors will be able to participate in the power generation, transmission, and distribution infrastructure business. This will enable them to supply bulk electricity to private retail vendors, who will, in turn, oversee last-mile connectivity and billing to consumers.
Once in place, the new regulations will open cross-border energy trade among the East Africa Community members, creating a regional power market with the potential to link the East African and South African power pools.
Various countries will be able to take advantage of excess capacity within their network to facilitate the trade of electric power among the members. In addition, the move is expected to fast-track the digitalisation of our electricity transmission.
Ultimately, opening our energy sector and widening the options for power distributors is likely to trigger increased competition on the wholesale tariffs, with the ripple effects leading to potential significant price cuts for consumers.
Allowing private players to import or export power will create a wider and more vibrant market and create elbow room for national power utilities to offer more competitive rates.
In essence, the new regulations will introduce the wheeling of electricity, which holds the potential to unlock new investment opportunities, enhance grid reliability, and ultimately deliver more excellent value to consumers who can enjoy lower power bills, fewer frequent outages, and more choices in electricity suppliers.
The silver lining in the introduction of the new regulations is that they facilitate accelerated industrialisation, which Kenya badly needs. Access to affordable and efficient energy is crucial for industrialisation, economic growth, and development in Kenya.
The Kenya Vision 2030 identifies energy as an enabler to achieving the economic, social, and political pillars of the vision.
Affordable electricity will spur the opening of factories, turn our economy into a manufacturing hub and a net exporter of commodities, and attract more local and foreign private investors into the country.
Despite the government introducing electricity subsidies in the past, they have not fully addressed the issue of affordability. Consumers continue to face high prices, and subsidies create financial burdens for the government and are not sustainable in the long term.
The Proposed Regulations signify a significant step towards promoting transparency, competition, and efficiency. By requiring entities involved in the transmission and distribution of electricity to provide non-discriminatory open access to their transmission or distribution system, the proposed regulations will enable other licensees or eligible consumers to use the systems.
This creates new revenue streams from the existing and new distribution and transmission infrastructure, enabling constant modernisation to make them more efficient.
As a result, consumers will be free to select their preferred retail suppliers in accordance with the guidelines under the proposed regulations.
The writer is Sector Head, Energy & Infrastructure: Corporate & Investment Banking Division, Stanbic Bank Kenya.
