Kenya Revokes Special Electricity Tariff for Olkaria-Kedong SEZ

Kenya has cancelled the special electricity tariff for the Olkaria-Kedong SEZ, which was KSh 5 per kWh, aiming to lower production costs for industries. The termination may discourage investments as the current rate is now KSh 10 per kWh, reflecting a uniform rate set by EPRA. This change could lead to higher operational costs for businesses within the zone, adversely affecting production and investment decisions.

Kenya has terminated the special electricity tariff for companies within the Olkaria-Kedong Special Economic Zone (SEZ) in Naivasha, which is likely to hinder investment in this pioneering SEZ. This decision was reflected in a gazette notice from the Energy and Petroleum Regulatory Authority (EPRA), which repealed the KSh 5 per kWh tariff that had been an experimental measure since its introduction in 2020.

The revoked tariff was significantly lower than the standard industrial rate, priced at KSh 10 per unit in other SEZs and for large enterprises. Established to decrease production costs for industries and to enhance Kenya’s appeal as a competitive manufacturing hub, the Olkaria-Kedong SEZ’s low tariff aimed to evaluate how electricity prices could influence investment attraction.

A key factor for the subsidized power rate was the SEZ’s proximity to geothermal power sources, which considerably lowered electricity transmission costs. Additionally, its closeness to the Standard Gauge Railway (SGR) presented an advantageous logistical benefit for large industries, facilitating the transport of raw materials and finished goods.

In 2023, EPRA standardized the electricity pricing at KSh 10.00 per kWh for all consumption, alongside an Off-Peak Energy Charge of KSh 7.42 per kWh. Consequently, the abolishment of the lower tariff will likely result in increased electricity costs for businesses in the area, impacting their production expenses and investment choices.

The revocation of the specially discounted electricity tariff in the Olkaria-Kedong SEZ represents a significant shift in Kenya’s energy policy, potentially discouraging investment in a vital economic zone. With energy costs now aligning with higher standard rates, the effects on production expenses and investment strategies could be profound. The move illustrates the challenges faced by special economic zones in maintaining competitive advantages and fostering industry growth.

Original Source: kenyanwallstreet.com