The government has rejected a push by telecommunication companies for special power tariffs, saying the energy sector stands to lose Sh20 billion should the request be granted.
The telcos had asked the Energy Ministry to consider removing steep thresholds to be met for them to enjoy lower power tariffs as the sector is largely electricity-driven.
Appearing before the Senate Information and Communications Technology Committee on Thursday, Energy Principal Secretary Alex Wachira said the firms already benefit from the Time of Use (ToU) tariff that offers industrial and commercial power users a discount of 50 per cent for use of electricity during off-peak hours (10 pm and 6 am) on weekdays.
“They should take advantage to benefit from the tariff because if we give further discounts then someone somewhere has to pay for it,” said Mr Wachira. “It will be important to understand the impact of a reduced tariff for a specific sector on other sectors and on revenue raising.”
Energy and Petroleum Regulatory Authority (Epra) Director-General Daniel Kiptoo told the committee chaired by Trans Nzoia Senator Allan Chesang’ that they are not convinced the ICT sector needs a preferential tariff as it will lead to massive revenue loss.
“In our computations, if we accede to the calls, then there will be a big revenue loss and we estimate this to be Sh20 billion for the sector. Who will plug this revenue hole?” asked Mr Kiptoo.
He said that as much as investors need to be compensated for the risks they have assumed, it is important to consider the interests of consumers so that they are not overcharged.
“As a regulator, we balance the interests of the consumers and the investors as well as those of the government. When it comes to issues of preferential tariff, the question is whether that benefit is passed on to consumers or it goes to improve the bottom line of a private entity,” he said.
The telcos had complained that they hardly benefit from discounted night-time power tariffs under the ToU tariff. The tariff was introduced in December 2017, with firms required to exceed their normal power consumption to benefit from the cheaper rates.
If a firm, for instance, has been consuming 1,000 kilowatt hours (kWh) per day, it has to exceed this, with the additional units attracting a 50 per cent discount.
Safaricom Head of Operations James Langat said the requirement that firms exceed their average monthly power consumption over a period of six months to qualify for the off-peak tariff has made it difficult for them to benefit.
“But even if I do that, the benefits will only be given for units that are over and above the set thresholds. Like today, the benefits only reflected 1.8 per cent while on paper, the benefit is said to be 50 per cent,” said Mr Langat.
He argued that if the thresholds are removed, telcos will potentially help the national grid in terms of load management by deflecting some of their loads from peak period to off-peak.
However, Mr Kiptoo said it will be difficult to step down the thresholds because that is how the tariff has been fashioned to operate.
“The regulator is already considering removing the 6 per cent incremental growth threshold to make it easier. The other thresholds will be a bit of a challenge,” he said. “The Time of Use was to benefit from geothermal and wind power available at night that we have already paid for but is not being utilised. So it is an issue of financial sustainability over utility.”
Safaricom’s acting Chief Corporate Officer Fred Waithaka told the committee that the ICT sector is largely power-driven hence the push for the reductions.
For instance, he pointed out, Safaricom boosters, which drive communication on a day-to-day basis, comprise more than 10,000 base stations across the country, hence a large percentage of their operations costs is power.
“The cost impact of this is that 46 per cent of our network operating cost is power, which in this case is electricity. This excludes what we put in through the diesel generator sets. This is why this issue is emotive for this industry,” said Mr Waithaka.
Nandi Senator Samson Cherargei asked the telcos if they would also reduce their call or money transfer charges should their wish is granted.
“If we give you preferential tariffs, will you be able to cut on phone charges or money transfer charges?” asked Mr Cherargei.
The firms were non-committal, only saying that any cost-benefit they get is passed to the customer in one way or the other.
“It could go into cushioning the mobile call charges or expanding the infrastructure to make us more competitive,” said Mr Waithaka.
