Kenya Revokes Special Electricity Tariff for Olkaria-Kedong SEZ

Kenya has revoked the special electricity tariff for the Olkaria-Kedong SEZ, which was set at KSh 5 per kWh since 2020, intended to attract investment while lowering production costs. The Energy and Petroleum Regulatory Authority implemented a new uniform rate of KSh 10.00 per kWh, resulting in higher electricity bills for businesses, which may deter future investments.

Kenya has recently annulled the specially discounted electricity tariff for industries situated in the Olkaria-Kedong Special Economic Zone (SEZ) in Naivasha. This decision may adversely affect investment opportunities in one of the country’s pioneering SEZs. The Energy and Petroleum Regulatory Authority (EPRA) officially nullified the KSh 5 per kWh tariff previously implemented as a pilot program in 2020.

Originally, this tariff offered significant reductions as it was lower than the prevailing industrial rate, and was half the KSh 10 per unit rate applicable in other SEZs and large industries. The establishment of the Olkaria-Kedong SEZ aimed to minimize production costs for companies and elevate Kenya’s status as a competitive location for manufacturing.

The special tariff was intended to evaluate how electricity prices impact investment attraction, particularly given the zone’s advantageous location near geothermal power fields, thus lowering electricity transmission costs. Additionally, its proximity to the Standard Gauge Railway (SGR) was considered beneficial for industries by streamlining the transport and logistics of raw materials and finished goods.

In 2023, the EPRA introduced a uniform electricity rate of KSh 10.00 per kWh for all consumption, alongside an Off-Peak Energy Charge of KSh 7.42 per kWh. With the cancellation of the special tariff, businesses within this zone will face increased electricity costs, which could influence their production expenses and investment choices.

The revocation of the discounted electricity tariff for the Olkaria-Kedong SEZ may dampen industrial investment and production efficiency in the region. The previously favorable rate was designed to attract businesses by reducing operational costs and enhancing logistical advantages. However, the implementation of a uniform higher tariff could counteract these incentives, potentially impacting future economic prospects for industries located in the SEZ.

Original Source: kenyanwallstreet.com