Treasury warns Counties as debt to Kenya Power hits Sh3.5billion

The outstanding debt by the 47 counties to Kenya Power and Lighting Company (KPLC) hit Sh3.49 billion on September 24, 2023, the National Treasury has revealed, signaling the financial strain on the utility firm.

The debt has been piling over the years with Nairobi County having the largest outstanding bill of Sh2.17 billion—an equivalent of 62.17 percent of pending bills by the counties to Kenya Power.

“Consequently, the National Treasury has issued a circular to County Governments reminding them to settle debts owed to KPLC and ensure that these pending bills are included in their budgets and repayment plans in line with the Public Finance Management Act, 2012 and in order to avoid disrupting operations and other financial obligations of the company,” Treasury Cabinet Secretary Njuguna Ndung’u said a draft Budget Policy Statement for 2024.

Kenya Power Managing Director Joseph Siror said in September that the company had also reached out to the National Treasury to help it recover arrears owed to it by large consumers in which the government has a stake and has since run into financial headwinds rendering them unable to settle obligations for power consumed.

It said it is looking to get the Exchequer’s assistance in recovering at least Sh1.5 billion from entities that have since collapsed, notably sugar millers in the Western region sugar belt and one player in the country’s horticulture sector.

In the full year ended June 2022, Kenya Power’s total overdue debt owed by consumers stood at Sh19.7 billion, having decreased by eight percent compared to the prior year.

This means that Kenya Power took a hit of as much as 13 percent of its annual total sales in overdue debt by consumers. Kenya Power reported a net loss of Sh3.19 billion for the year ended June 2023 following a sharp rise in financing costs on its hard currency obligations due to the weakening of the shilling in the forex market.

Prof Ndung’u said that most of the County Governments also owe money to the various pension funds including LAPTRUST, LAPFUND, and County Pension Fund which have accumulated over the years.

Treasury data showed that as of August 31, 2023, the pension pending bills submitted by the different pension schemes to the Retirement Benefits Authority stood at Sh. 73.4 billion.

“However, some County Governments are not reflecting these pension liabilities in their pending bills stock hence posing a great risk that these liabilities may not be prioritised for payment. There is a need for the County Governments to take stock of all the pension liabilities and ensure proper recording in the stock of County pending bills” he said.

“In addition, Counties should prioritize the settling of these liabilities to ensure County staff do not retire without a pension”

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