Kenya Power has kept thousands of customers in the dark even after they forked out Sh12 billion for their homes and business to be connected to electricity, an audit report reveals.
Some people have waited as long as 11 years to be connected and they are still on the waiting list, despite having paid the requisite fees.
Darkness has been the portion of these families, despite forking out fees.
One can infer their fury from how Kenyans vented at Kenya Power and concerned government officials after a recent nationwide blackout.
President William Ruto reportedly read the riot act to energy sector players, warning that the “embarrassing” nationwide outages would not be tolerated.
“I would like to inform you today, the embarrassing power blackouts that have been experienced across the entire country severally since the year began are not going to be acceptable going forward,” the head of state said.
“All stakeholders must play their roles to ensure it does not happen again,” the President said.
Some 8,506 projects worth Sh14.3 billion were also found to behind their execution schedules, having been outstanding for between three to 13 years.
The KPLC Customer Service Charter provides that electricity connections are to be carried out between seven and 28 days, depending on the type of connection.
Auditor General Nancy Gathungu has called out Kenya Power for ignoring this basic rule. “Management continues to hold customer electricity connection fees in form of capital contributions amounting to Sh12,079,656,000,” she said in a new report.
Some of the projects are 21,231 new connections whose works are yet to start despite the applicants paying Sh966 million.
“The projects were yet to start. Some, in respect of two customers, were created and paid for 11 years ago,” Gathungu adds.
“Delayed connection of these customers denies them electricity and at the same time denies the company revenues.”
In what puts on the spot the new management of chairperson Joy Brenda Masinde and CEO Joseph Siror, the dossier reveals that Kenya Power had been warned about nationwide outages as a result of a system deficiency.
KPLC, it emerges, was advised to have a cost-effective power stabilisation mechanism to mitigate the outages.
Gathungu, in her review of KPLC books as of June 30, 2023, also details massive infractions at the utility.
The report reveals that managers paid some ‘ghost’ suppliers more than Sh488 million without the requisite documents to corroborate the transactions.
In unexplained circumstances, a committee that was appointed to vet and verify the invoices recommended payment without the documentation.
“A payment of Sh488 million was subsequently made,” Gathungu states in her report.
The Auditor General said there were no framework agreements, professional opinion, valid contracts, performance bond, LPOs and good received notes for the payments.
A supplier, who was not among the seven the committee appointed to verify its claims for payment, was paid Sh11.6 million.
“The inclusion of this supplier in the committee report and the subsequent payment is therefore irregular and its validity could not be confirmed,” the audit report said.
Gathungu said a review of the vendor accounts in the accounting system did not have evidence the invoices were posted prior to the payments.
“This makes their existence doubtful,” the auditor noted, concluding taxpayers got no value for money in the Sh488.7 million payments.
Kenya Power has also been accused of irregularly paying former CEO Bernard Ngugi Sh26,820,648 as final exit payment after he abruptly resigned on August 3, 2021.
As per the report, taxpayers could be losing billions in payments for mistakes by the management, with possibilities of customers being fleeced.
Gathungu has called out Kenya Power, citing failure to prudently manage power losses, electricity connections and pass-through costs.
On the new connections, the report shows there were 10,745 applications that had waited for metering for more than one year at the time of the audit.
Further scrutiny revealed the referenced meters had been collected from the regional stores, raising questions of their whereabouts.
“Notably, some meters booked and issued in 2018 were yet to be installed,” Gathungu said.
In the same vein, it was established that 349 customers’ projects worth Sh321 million were connected without the customers paying the required fees.
“They had no corresponding capital contribution by the customers, an indication of connecting customers without payment of the required connection fees,” the auditor said.
Some 21,734 projects with payments of Sh3 billion had no costs attributed to them as evidence that the projects have been undertaken.
The projects, however, have been closed in the system and indicated as complete, but no materials from the company were used to complete them.
Gathungu queried how projects paid for by customers could be completed and closed in the system without the company using any materials to connect electricity for the customers.
On the outages, the audit said the company is “heavily impacted by variable renewable energy sources that are unstable”.
The audit established that the renewable sources had high levels of instability or intermittency during dispatch of power.
Kenya Power was asked to consider a cost-effective stabilisation mechanism for the variable sources that are connected to the grid.
The auditor further recommended regulations be put in place to ensure that all renewable energy generation sources are installed with their stabilisation mechanisms as part of the contracting agreements.
“In the circumstances, the effectiveness of the measures implemented to mitigate against power outages could not be confirmed,” Gathungu said.
A review of the system revealed that there was no means of monitoring progress, hence, project delay risks were not identified and mitigated in time.
A project management office established in 2020 also failed to develop a database of capital projects.
Kenya Power projects are thus not coordinated, resulting in duplicated, delayed or abandoned projects, causing avoidable additional losses.
The auditor further recommended that regulations be put in place to ensure that all renewable energy generation sources are installed with their stabilisation mechanisms as part of the contracting agreements.
Kenya Power has further been called out over loan deals that are costing taxpayers billions in foreign exchange fluctuations.
The company, despite being broke (made loss of Sh4.4 billion) and in the red with a negative working capital of Sh51 billion, was exposed to Sh23 billion foreign exchange losses.
Kenya Power holds loans of about $1 billion, of which 30 per cent are power purchase obligations.
“The company currently bears the difference between the actual forex rate used for payments and the Central Bank of Kenya mean rate,” Gathungu said.
She added that Kenya Power has no forex compensation mechanism to cushion it from the fluctuating market rates.
Most power purchase agreements are based on foreign currencies, leaving the power firm to bear the cost of the fluctuations.
With the shilling falling against the US Dollar lately, the amount could go higher in the next financial year.
The report further reveals Kenya Power could be irregularly charging customers for excess power bought from sources.
In the year under review, KPLC bought 13,290 units of power and sold 10,234 units, leading to a loss of 3,056 units – 23 per cent, which customers paid for.
The regulator, the Energy and Petroleum Regulatory Authority (EPRA) approved KPLC’s recovery of as much as 19.5 per cent of the deemed losses.
Gathungu said the excess of 3.5 per cent loss above the allowed limit constituted inefficiency power loss, which is to be borne by KPLC.
The Auditor said the losses, if analysed properly, could be paid for by the respective power producers and distribution schemes under Rural Electrification and Renewable Energy Corporation (Rerec) and Ketraco.
Some 729,732 accounts with debts of Sh1.8 billion were found active despite disconnection orders being raised against them. Another Sh74 million was lost in preloaded units.
The company also paid Sh1.1 billion penalties for overdue invoices.