How KPLC lost Sh50 million in five hours

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

14 December 2008

There was a major electricity outage last week that lasted about five hours. It affected the highest power consuming regions of the country, namely, Nairobi, Mombasa, Mount Kenya and the Rift Valley. These account for about 80 percent of all power consumption. As I contemplated what to do with the extra time in my hands I wondered how much money was lost due to the blackout.

Since the power was off, the meters stopped moving thus the Kenya Power & Lighting Company (KPLC) was not selling anything in the affected regions. We can estimate this direct loss by looking at the company’s financial report.

In the 2007/2008 financial year, KPLC sold electricity worth Sh24 billion (excluding taxes and levies). Assuming that consumption is uniform throughout the year, this comes to about Sh 66 million per day or Sh2.7 million per hour.

Thus, if there was a five-hour nationwide blackout, the KPLC would lose Sh13.5 million. But in the recent case, only 80% of the consumption was off, so the company lost Sh10.8 million.

Note that this figure does not include any money that may have been spent on spare parts that were used in fixing the problem…we may guess that to be about Sh1.2 million just to get a nice rounded amount of a Sh12million loss.

Now all electricity charges attract VAT at the standard rate of 16%. Thus in the five hours of darkness, the Kenya Revenue Authority lost Sh1.7 million in unrealized taxes from the KPLC. I have calculated this using the Sh10.8 million sales figure since the tax on spare parts was collected at the point of entry into the country…and that’s all:

Many factories in the affected areas had to switch on their generators in order to continue with their production processes. How much diesel did they consume? To find out, we need to pieces of information: first, the total amount of electric energy they would have consumed and, second, the average consumption of diesel by a generator.

According to the figures in the KPLC annual report, industrial and commercial customers consumed at total of 3.1 billion units (kilo-watt-hours) of electricity in the past financial year. Thus in the five-hour blackout, they needed 1.77 million units. They got that power from stand-by diesel generators.

A one 1,000 kilo-watt generator (quite common with industrial consumers) operated at 75 percent of the rated capacity consumes about 200 litres of diesel per hour. In five hours, it will have taken 1,000L and generate a total of 3,750 units of electricity.

How many generators were needed the produce the 1.77 million units? The answer is about 470. Thus in total, they all consumed 470,000 litres of diesel. At Sh85  per litre, the industries spent Sh40 million in the five-hour blackout. This brings the total loss to sh54.3 million…but that’s not all….it is only the direct loss.

There were many small businesses that did not work during the blackout – the jua-kali artisans, posho mills etc. How much did they lose by closing down? We shall try to work it out another day.