Kenya Revokes Special Electricity Tariff for Olkaria-Kedong SEZ

Kenya has revoked the special KSh 5 per kWh electricity tariff for the Olkaria-Kedong SEZ, previously aimed at attracting investment. The tariff’s cancellation will increase energy costs for industries, likely affecting production expenses and investment decisions. EPRA has since set a uniform tariff of KSh 10.00 per kWh for all electricity consumed.

Kenya has discontinued the previously established special electricity tariff for the Olkaria-Kedong Special Economic Zone (SEZ) in Naivasha. The Energy and Petroleum Regulatory Authority (EPRA) made this announcement, revoking the KSh 5 per kWh rate that had been introduced as part of a pilot initiative in 2020, aimed at fostering investment by offering reduced electricity costs for industries.

Initially, the tariff was set below the standard industrial rate, which is KSh 10 per unit in other SEZs. The intent behind the Olkaria-Kedong SEZ was to decrease operational costs for businesses and enhance Kenya’s attractiveness as a manufacturing hub. The pilot program was evaluated to understand how lower electricity rates could influence investment flows.

The termination of the special tariff is concerning, as it will result in increased energy expenses for the businesses located in this zone. The proximity of the SEZ to geothermal fields previously allowed for reduced transmission costs, and its location near the Standard Gauge Railway was beneficial for logistical efficiency. In 2023, EPRA standardized electricity pricing, applying a uniform rate of KSh 10.00 per kWh for all usage, with off-peak energy charges set at KSh 7.42 per kWh.

The decision to revoke the special electricity tariff for the Olkaria-Kedong SEZ may hinder economic growth in the region by elevating operational costs for businesses. This change reflects a shift in energy policy that could detract from Kenya’s appeal as a manufacturing destination. Moving forward, stakeholders will need to evaluate the broader implications of these increased costs on investment and industrial productivity.

Original Source: kenyanwallstreet.com