The decision by the Energy and Petroleum Regulatory Authority (EPRA) to operationalize direct electricity trading under the Energy (Electricity Market, Bulk Supply and Open Access) Regulations, 2024 marks a significant structural shift in Kenya’s electricity sector, progressively dismantling the single-buyer framework historically dominated by Kenya Power. The move introduces a more liberalized market structure where large consumers can directly procure electricity from licensed generators while paying wheeling charges for the use of Kenya Power’s transmission and distribution infrastructure.
The implications of this transition are particularly significant when viewed against Kenya Power’s FY’2025 audited financial performance. During the period, the utility served approximately 9.8 mn customers and generated Kshs 231.3 bn in electricity revenue, including revenue from the rural electrification program (REP). Notably, the Commercial and Industrial segment remained the largest contributor, generating Kshs 106.5 bn and accounting for 46.0% of total electricity revenue. Domestic consumers contributed Kshs 68.2 bn, equivalent to 29.5% of total revenue, while Small Commercial customers contributed Kshs 41.7 bn, representing 18.0%. The revenue composition underscores Kenya Power’s heavy reliance on large commercial and industrial consumers, who now become the primary beneficiaries of direct purchase agreements with electricity generators.
The introduction of direct trading is therefore likely to gradually weaken Kenya Power’s control over its most valuable customer segment. As large industrial and commercial users increasingly access alternative suppliers offering potentially more competitive pricing and flexible supply arrangements, Kenya Power could experience declining electricity sales volumes and pressure on its revenue base. This is particularly important because high-consumption commercial and industrial users contribute disproportionately to profitability relative to residential customers.
In addition, the transition risks weakening the existing cross-subsidization framework that has historically supported lower domestic electricity tariffs. As large consumers migrate to direct procurement arrangements, Kenya Power may become increasingly dependent on residential consumers, who generate relatively lower revenue compared to the fixed costs associated with maintaining and expanding transmission and distribution infrastructure. Given the largely fixed nature of network costs, reduced consumption from high-value customers could compress operating margins unless tariff structures and wheeling charges are adjusted to align with the evolving market structure.
While the reforms could enhance market efficiency, increase competition, and improve electricity pricing flexibility for large consumers, they also introduce long-term sustainability concerns for Kenya Power’s revenue model and raise the possibility of upward pressure on household electricity tariffs as the utility seeks to recover fixed network costs from a narrower and lower-consuming customer base.
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