Stakeholder engagement Retail Tariffs 2023 REVIEW.pptx

schedule of tariffs and rates discussion with stakeholders

1. SENSITIZATION ON RETAIL TARIFFS 2022/23 – 2025/26 Prepared by Peter K. Wambua Manager Commercial Cycle 11th April 2023 1

2. TABLE OF CONTENTS Legal Framework Billing Concepts Summary of Changes during the Retail T ariff R eview Time of Use (TOU) 3-Months Moving Average Consumption Algorithm Classification of Postpaid customers April 2023 Impact of Retail Tariff Review on bills – Ordinary accounts Summary of Retail Tariff Characteristics Summary of Approved Tariffs for the FY2022/23-2025/26 Way Forward 2

3. 1.0 LEGAL FRAMEWORK 3 Legal Framework guiding Review & Implementation of Tariffs: Energy Act, 2019 – Section 165; Retail Tariffs Review Policy, 2005; The approved Tariffs cover Period (2022/23 – 2025/26)

4. 2.0 BILLING CONCEPTS ` 4

5. BILLING COMPONENTS Cont ` 5 Components of Base Retail Tariff

6. 3.0 SUMMARY OF CHANGES ON TARIFF REVIEW Split of Lifeline Tariffs DCL and SC1 into two bands hence Introduction of a Bulk Tariff for Small Commercial customers consuming between 1,000-15,000units Introduction of a Bulk Tariff for Commercial and Industrial Customers (CI1 to CI5) 4. Introduction of two additional customer categories under CI’s with TOU provision 5 . Introduction of E-mobility tariff EM for maximum of 15,000units with TOU terms 6. Provision of Time of Use Tariffs (TOU) with Terms as in Section 4 below for Retention of TOU for Commercial and Industrial Customers (CI1-CI5) Introduction of TOU for the new CI6 and CI7 Introduction of TOU for SC3 customer category 6 Tariff Description CI6 Commercial & Industrial at 220KV CI7 Special Economic Zone (SEZ)

7. 4. TIME OF USE (TOU) TARIFFS 7 Applicable during off-peak period ONLY Existing SC3 and CI customers meet their Monthly Energy Consumption Threshold ( ie MEST ) then any units above that threshold are billed at the discounted TOU Tariff subject to off-peak period where MEST = 6-Months Consecutive Average Monthly Consumption* 106% New SC3 and CI1-CI7 customers, where MEST =3-Months-Consecutive Average Monthly Consumption * 106% Existing SC3 and CI1-CI7 customers, operating at 100% production capacity during on peak and off-peak, will be 5% discounted on the applicable Energy Rate for the off-peak consumption upon confirmation that their production is 100% TOU rate = 50%*Hi – Rate (SC3,CI1-CI5, EM); TOU rate > 74.2%*Hi – Rate (CI6/7); Off Peak hours Day Start (Hrs .) End (Hrs .) Weekdays 00:00 06:00 22:00 00:00 Saturday/Holidays 00:00 08:00 14:00 00:00 Sunday 00:00 00:00

8. 5. 3-MOVING AVERAGE CONSUMPTION ALGORITHM 8 Both new and the outgoing domestic & small commercial tariffs have an inbuilt inter-base tariff band movement capability facilitated through the 3-months moving average consumption algorithm The capability makes domestic and small commercial tariffs makes them dynamic The inter-tariff movement threshold was/is based on the preceding months 3-months moving average units and current-month-inclusive 3-months moving average units for previous and new tariffs respectively The preceding months 3-months moving average consumption has been a source of revenue-under-billing due even with correct readings due to inconsistent readings.

9. 3-MOVING AVERAGE CONSUMPTION ALGORITHM Cont 9 5.1 Old tariffs: P receding months 3-months moving average units Description Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Month Units 54 88 73 87 130 97 50 21 16 13 Case 1 2 3 AV Tariff Preceding months 3-months moving average 18 47 7 2 8 3 97 10 5 92 56 29 (*1) 54 18 DC1 Tariff Band <= 30 Kwhrs <= 30 Kwhrs (*1) 30 < Kwhrs <= 100 (* 2) 30 < kwhrs <= 100 30 < Kwhrs <= 100 30 < kwhrs <= 100 100 < kwhrs (*3) 30 < kwhrs <= 100 30 < kwhrs <= 100 <= 30 Kwhrs (*2) 54 88 47 DC2 Applicable billing tariff DC1 DC1 DC2 DC2 DC2 DC2 DC3 DC2 DC2 DC1 (*3) 87 130 97 105 DC3 Case (*1) = ROUND ((0+0+54)/ 3 ,0) = 18: hence DC1 Case (*2) = ROUND ((0+54+88)/ 3 ,0) = 47: hence DC2 Case (*3) = ROUND((87+130+97)/3 ,0) = 105: henceDC3 Incoming consumption NOT included in average’s computation

10. 3-MONTHS MOVING AVERAGE CONSUMPTION ALGORITHM Cont 10 5.2 New tariffs: Current-month-inclusive 3-months moving average Units Description Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Month Units 54 88 73 187 130 97 50 21 16 13 Case 1 2 3 AV Tariff Current-month inclusive 3-months moving average 18 47 72 116 130 138 92 56 29 17 (*1) 54 88 47 DC1 Tariff Band <= 30 Kwhrs <= 30Kwhrs (*1) 30 < Kwhrs <= 100 (*2) 100 < kwhrs (*3) 100 < kwhrs 100 < kwhrs (* 3) 30 < kwhrs <= 100 30 < kwhrs <= 100 <= 30 Kwhrs <= 30 Kwhrs (*2) 54 88 73 72 DC2 Applicable billing tariff DC1 DC2 DC2 DC3 DC3 DC3 DC2 DC2 DC1 DC1 (*3) 88 73 187 116 DC3 Case (*1) = ROUND ((0+54+88)/ 3 ,0) = 47; hence DC2 Case (*2) = ROUND ((54+88+73)/ 3 ,0) = 72; hence DC2 Case (*3) = ROUND((88+73+187)/3 ,0) = 116; hence DC3 Incoming consumption included in average’s computation

11. 6.0 CLASSIFICATION OF POSTPAID CUSTOMERS 11 DESTINATION TARIFF ORIGNAL TARIFF Domestic Lifeline (DC1) Domestic Ordinary (DC2) Small Commercial (SC1) Small Commercial (SC2) Total Domestic Lifeline (DC1) 904,731 5,779     910,510 Domestic Ordinary (DC2) 400,998 28,143     429,141 Domestic Ordinary (DC3) 34,917 234,130     269,047 Small Commercial (SC1)     132,286 1,229 133,515 Small Commercial (SC2)     53,473 9,269 62,742 Small Commercial (SC3)     6,030 91,202 97,232 Total 1,340,646 268,052 191,789 101,700 1,902,187 Shaded GREEN means movement to Higher value base tariff Shaded YELLOW means movement to a lower value base tariff Shaded BLUE means no movement change of tarif

12. 7 . IMPACT OF RETAIL TARIFF REVIEW ON BILLS FY2022/23 ` 12 7 .1 D omestic Mar-23 Apr-23 DCL DCO DC1 DC2 DC3 %change Billing Concept Life line (<= 30Kwhrs ) Ordinary (>100 Kwhrs ) Lifeline (<=30 Kwhrs ) Ordinary (30< Kwhrs <= 100 ) Ordinary (> 100 Kwhrs ) Lifeline (<=30 Kwhrs ) Ordinary (30< Kwhrs<= 100 ) Ordinary (> 100Kwhrs) Energy cost 7.7 12.6 12.22 16.3 20.97                                                 Effective Unit cost ( Ksh ) 21.9946 27.9236 21.1615 26.0983 31.7490 -3.8% 18.7% 13.7%

13. IMPACT OF RETAIL TARIFF REVIEW ON BILLS Cont 13 7 .2 Small Commercial Mar-23 Apr-23 SC1 SC2 SC1 SC2 SC3 %change Billing Concept Life line (<= 30Kwhrs ) Ordinary (>100 Kwhrs ) Lifeline (<=30 Kwhrs ) Ordinary (30< Kwhrs <= 100 ) Ordinary (> 100 Kwhrs ) Lifeline (<=30 Kwhrs ) Ordinary (30< Kwhrs <= 100 ) Ordinary (> 100Kwhrs) Energy cost 7.7 12. 4 12.22 16. 40 20. 18                                                 Effective Unit cost ( Ksh ) 21.9946 27.9236 21.1615 26.2193 30.7931 -3.8% 19.2% 10.3%

14. IMPACT OF RETAIL TARIFF REVIEW ON BILLS cont 14 7 .3 Street Lighting Billing Concept Mar-23 Apr-23 % Change Energy cost 7 .5 9.22 Effective Unit cost ( Ksh ) 21.7526 17.5315 -19.4%

15. 8 . SUMMARY OF RETAIL TARIFF CHARACTERISTICS ` 15 Category Previous Tariff Current Tariff Limit Metered at KVA TOU BULK Domestic DCL ( Upto 100Units) Lifeline DC1 <= 30 Units 240/415V NO Except for A1-5/6 NO NO Ordinary DC2 30<Units<=100 DCO ( Upto 100Units) Ordinary DC3 100<Units <= 15,000 Small Commercial SC1 ( Upto 100Units) Lifeline SC1 <= 30 Units Ordinary SC2 30<Units<=100 Ordinary SC2 (>100Units) Ordinary SC3 100<Units <= 15,000 YES except for SC-Bulk E-Mobile New EM <=15,000 SC-Bulk Supply New SC-Bulk Supply 1000<Units <= 15,000 YES Street Light Street Light Street Lighting N/A NO Large Power Commercial & Industrial CI1 15000<Units 415V YES YES CI2 11KV CI3 33KV CI4 66KV CI5 132KV CI6 220KV Special Economic Zone ( SEZ ) N/A   NO

16. 9. APPROVED BASE TARIFF STRUCTURE GAZETTE NO. 3899 OF 24/03/2023 ` 16

17. 10. IMPLEMENTATION CHALLENGES ` 17 Metering Technology for TOU : ( i ) Only 30% of SC customers smart metered (ii) SC3 and EM customers desiring to move to ToU tariff to pay for the smart meters Complex dynamic current-month-inclusive 3Months Moving Average Consumption Algorithm for DC & SC customers’ inter-base tariff movement particularly in prepaid with the risk of drop-offs during vending. Bulk supply tariff for SC : D evelopment of a policy to govern implementation Proper categorization of customers falling under Special Economic Zones Delayed submission of monthly variables : A significant number of vends processed using the preceding month’s variable rates . Inter-base tariff movement for New DC and SC customers: To be governed by the preceding months’ - 3 Months Moving average.

18. 11. WAY FORWARD ` 18 Internal engagement with: General Managers Regional Managers County Business Managers- County Commercial Engineers/Customer Experience/Commercial Services & Sales-Central Office *Customer engagement through: National Contact Center Media platforms and KPLC website County business units Management Continuous engagement with Regions/Counties going forward

19. 19 Thank you

20. Energy ACT 2019, Section 165 ` 18