Archive

Archive for the ‘Uncategorized’ Category

Will Safaricom Be Declared a Dominant Operator?

April 23, 2016 Leave a comment

 

lion

Last week, The Communication Authority said that their self-imposed March deadline to create clear guidelines on how it handles dominance of an operator had lapsed. This was occasioned by the failure to get a suitable international consultant to carry out a research study which would assist the Communication Authority in identifying and developing several key market interventions that would have assisted in managing the effects of a dominant player in the market. It is worth noting that the issue of dominance cuts across broadcasting, postal and telecommunications sectors. The finding of dominance must be based on the context  and circumstances of the relevant market and this is why the Communication Authority is engaging a consultant to study the market. They cannot go ahead and declare an entity as dominant or abusing its dominance without this study.

Is dominance a bad thing?

Before I answer that question, I would first like to define what is dominance. Unfortunately, because of a lack of local guidelines in place, there is no clear and detailed definition of what dominance is from a Kenyan perspective other than a brief mention in section 84W of the Kenya Information and Communication Act (KICA). However, internationally recognized definitions do exist.

The European Commission defines dominance thus: “A position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained in the relevant market by affording it the power to behave, to an appreciable extent, independently of its competitors, customers and ultimately consumers”. An operator can become dominant by virtue of a well implemented growth strategy and there is therefore nothing wrong being a dominant player. However, it is the abuse of this dominance that attracts attention from regulators. If an operator occupies a dominant position and is declared dominant by way of a gazette notice as per the KICA, several tests can be conducted to see if they are likely to abuse this position. One of the key tests is existence of barriers to entry of new operators into the market the operator is dominant, it could be that they are dominant because of high barriers to entry for new entrants to offer effective competition. It could be also that they are dominant because no other investor is interested in that market because they can get better returns elsewhere, this is despite low barriers to entry into the market the dominant player is in. The other test is if the operator possesses what is known as Significant Market Power (SMP). The European Commission recognizes SMP when an operator controls more that 25% of the market it operates in, this assumes a fully competitive market, In countries that are transitioning from a monopoly (like Kenya) this is usually set at 65% of market share (KICA section 84W however mentions 25% in relation to determining the dominance of an operator and not in explicitly defining if an operator has SMP). However, it should be noted that  SMP designation is simply a trigger for the application of behavioral or structural conditions by the regulator and not necessarily a prerequisite condition for dominance.

The abuse of dominance can only occur if the dominant operator engages in behavior that is anti-competitive as recognized by law. This abusive behavior should be harmful to competition or consumers or both.

Competition Authority or Communication Authority?

Mid last year, there was confusion on who between the Competition Authority and Communication Authority should deal with anti-competitive behaviors of a dominant operator in the telecommunications sector.  I did some research on this and came to a conclusion that its the Communication Authority’s mandate to deal with any ICT operator abusing their dominance. Below are my reasons for coming to this conclusion.

Whereas the Competition Authority deals with all commercial forms of competition across all sectors, their mandate can be said to forbear when it comes to telecommunications, postal and broadcasting. The main difference in how the Competition Authority and Communications Authority deal with competition is that the Competition Authority mostly acts on a retrospective basis on raised complaints of anti-competitive behavior (Ex Post regulation), on the other hand the Communications Authority behaves in a forward looking manner and tries to prevent anti-competitive behaviors by implementing government policy by use of regulations that modify the behavior of operators (Ex Ante regulation). Competition policy is typically aimed at preventing market participants from interfering with the operation of competitive markets while telecommunications, postal and broadcast regulation often manipulates market circumstances and operator behavior to achieve public goals. In short, Competition Authority controls the market for commercial interests while Communication Authority controls the market for public interest.

One point worth noting is that telecommunications, postal and broadcast operators in a regulated environment can use what is known as ‘the regulated conduct defense’ to not be under the control of the Competition Authority. In this defense, operators are regulated by regulations that are deemed to be in public interest and any activities they carry out within this regulated environment cannot attract liability under common competition laws. This defense is however not very applicable in situations where the telecommunications, postal or broadcast sector is highly competitive and the regulator forbears from regulation and lets market forces do most of the self regulation, in such circumstances, the Competition laws can be applied to telecom and broadcast operators as is the case in USA and EU.

An Analysis of Safaricom’s position in the market

As per the 2015 Q4  sector statistics, Safaricom controls 64.7% of mobile voice subscribers, 63% of mobile data subscribers and 71.7% of mobile money users. The first step in the process of determining if Safaricom is a dominant operator involves defining and looking at the market it operates in and if the same market possesses barriers to entry by others  that could have caused them to become dominant. The nature of our licensing regime means that Safaricom’s geographical and product market is the same as that of its fellow licensees in the same category of license. It is very clear from the figures above that Safaricom’s large market share triggers the need to analyze if it is dominant by evaluating if it  possesses Market Power, a key factor in dominance determination. Market power can be see in the following:

  • Profitability. Safaricom’s profitability is much higher than the rest of the competitors combined.
  • Pricing behavior. Safaricom’s prices are not the lowest in the market and they do not react to competitor price reductions, promotions or offers.
  • Vertical integration of its operations. Safaricom tightly controls nearly the entire value chain in delivering its products and services.
  • Bundling: Safaricom bundles both competitive and non competitive products, it also bundles its local loops and essential facility capabilities with its products (e.g. Selling Internet access (a product) via a Wimax/fiber network it owns and controls (local loop) and the inability of competitors to use this Wimax/fiber network to sell their internet services)
  • Barriers to market entry by competition to take advantage of their high prices. This is the point that I want to focus on below.

Barriers to Market entry

One of the key factors in determining if an operator is dominant is what happens if they increase prices of their products and services. If barriers to market entry are high, then no new entrant will easily come in and offer lower prices and take customers away from them. If barriers are however low, new entrants can easily come into the market and offer cheaper pricing and make them regret increasing their prices by loss of customers to them. In my analysis, barriers to market entry in Kenyans mobile telecommunication sector are very low especially with the advent of Mobile Virtual Network Operators  (MVNO’s) and the proposed infrastructure sharing regulations that are coming into place. This means that the Communication Authority has done a splendid job of making it easy for competition to be offered to Safaricom on voice, data and mobile money should an investor find it attractive to do so. This factor alone I believe is sufficient to prevent the regulator from declaring Safaricom dominant or even term some of their actions (like bundling) as abuse of their dominant position. The fact that end users can take advantage of Mobile Number Portability (MNP) and move to competition and enjoy lower priced  services makes it even easier for competition to overcome customer inertia and get customers to move to them. The big question is then why isn’t competition significantly eating into Safaricom’s market share?

The answer could lie in Safaricom’s extensive network coverage which is unmatched. But the new infrastructure sharing laws will poke holes into this answer as it will allow any other mobile operator to use Safaricom’s network in a national roaming agreement that will enable them offer affordable services across the country where there is Safaricom coverage, It will also allow competitors to use Safaricom’s local loops to offer service. This means that any operator competing with Safaricom will now be able to cover the country just like them. So there will be no excuse for any customer to not move to any competing operator for better or cheaper service should they wish to.

So with the availability of MNP, infrastructure sharing regulations, MVNO licensing, and many other playing field leveling regulations set by the regulator, I believe it will be very hard for the Communication Authority to declare Safaricom a dominant operator or one who is also abusing their position of dominance.

 Lion image (c) http://www.daler-rowney.com

Advertisements
Categories: Uncategorized

Is Universal Access/Service a Government or Operator Obligation?

March 30, 2016 4 comments

ruralSecond to creating a level playing field for all ICT operators, one of the widely accepted objectives of regulation of the ICT sector in developing countries is to promote universal access of basic ICT services. In developed economies, the objective changes from universal access to universal service. The difference is that access promotes the notion that every person should have reasonable means of accessing basic ICT services (like a phone booth at the local shopping center) while universal service is about promoting and maintaining availability of a variety of ICT services to individuals and households. Both these terms are combined into what is known as universality.

It is clear that that universal access definition has been overtaken by events based on the recent developments especially in the wake of mobile communication boom in many developing countries. To a very large extent, its no longer about ensuring access but ensuring that a variety of services are delivered to the end user.

The need by governments to make universality a reality stems from increasing evidence that access to ICTs improves the overall socioeconomic well being of its citizens. However, with the wave of privatization of ICT services such as telecommunications, the operation of telecoms moved from social welfare minded government ministries to profit minded private entities. When privatization took place in the early 1990’s new entrants focused on providing services to profitable market segments based on geography, disposable income and population density (which improves economies of scale and scope). The result is that regions or populations that were not profitable were at the risk of being left our in the ICT revolution. To prevent this from happening, regulators were quick to include mandatory service obligations (MSOs) in the licenses issued to new entrants. These obligations mandated the operators to extend their networks (and in effect their services) to areas where the cost of providing the services and maintaining the networks was higher than the revenues realized from the same areas. This seemed to be the only practical solution to connect the ‘unprofitables’. Other solutions were available and open to use by the operators such as cross-product subsidies (which haven’t worked well due to the fact that on the other hand the regulator enforces cost-based pricing making cross-product subsidies difficult to implement). It is worth noting that the definition of Universal Service varies from country to country, in Finland for example, universal access includes the right for every individual to access 1Mbps of broadband internet in addition to other services.

In addition to the measures above, the regulator in Kenya also developed a Universal Service Fund (USF) framework which according to them on page 1 of the framework draft document was to “to complement private sector initiatives towards meeting universal access objectives”. The document title and the aim I have quoted above are conflicting to a keen eye.

If indeed the aim of the USF was to complement private sector, why is the same private sector being obligated by regulatory instruments to fund it?

The International Telecommunications Union (ITU) lists many way in which USF can be funded,  one of the more popular ways is by budgetary allocation from the government. Other ways are by use of Access Deficit Charges (ADCs) and the levying of  a percentage of monies collected by operators in their business operations towards the USF kitty. The ITU states that should a regulator go the revenue levy way, it must not place a unfair burden on the operator on how these levies can be collected. For example the regulator cannot say that it will levy a percentage for every call minute  or every MB of data used by subscribers, this would make accounting difficult and hence the approach of levying the total revenues of the operators which is easier and more transparent.

Several countries have implemented USFs that are beneficiaries of government budgetary allocations. Such countries include Chile and Peru. Incidentally the same countries are hailed as success stories of how universality has improved lives of its citizens. This is because the desire to offer universal service or access is a social obligation of the government and not private firms. Its in the governments interest to connect these otherwise unprofitable regions/people and it can easily do it from budget.

Chile’s approach has been an interesting case study of how, if done right, the USFs can work to meet government objectives. The regulator there took the concession path by having operators bid to provide services on a concession basis. The regulator would then pick the lowest bidder. The results were that most of the bids were 50% below the budgetary allocations meaning that the approach was financially efficient. Proper policies were put in place to define the penalties, rights and obligations of each winning concessionaire to ensure they delivered.

This is the approach the Kenyan regulator should take. Instead of levying operators a percentage of their hard earned revenues. The operators, through the ITU definition can claim that the regulator has placed an unfair burden on them from the perspective of them not being directly responsible for economic development of the citizens (whether through ICTs or other means). Universality is a social program and it therefore squarely falls on government arms. Profitability or lack thereof  from universality is a secondary consequence whose impact cannot be directly measured.

Proponents of operator-funded USFs argue that unseen benefits such as multiplier effect of connecting the unprofitable directly benefit the operators, if that is the case then this decision to connect these people should be a commercial decision by the operators and not a license requirement. An example of the multiplier effect is when for example I (being of better economic means and living in the city) can now use airtime (read revenues) to call my rural relatives who are now connected thanks to supposedly the implementation of universality. My act of calling them in addition to other people I normally call adds revenues to operators. The operator should therefore connect my rural relatives because I will call them and not because they will call me. This is a straightforward  commercial decision.

Obliging ICT operators to fund the USF is unfair because social economic benefits accrued from connecting the population are felt across several fronts such as improved health, education and increased commercial activities and not just by way of improved profits by operators if any. Universality’s key outcome is not purely an ICT one and making only ICT players fund it is tantamount to the unfair burden on the operators mentioned by ITU.

It is my opinion therefore that the current approach to universal service funding should be re-looked at and if possible a new method of funding it through direct government budget allocation be adopted.  This is already happening in providing roads, hospitals and schools.   The regulator needs to revisit this because of the following reasons:

  • The current market structure where one operator is making most of the revenues is unfair to this operator as they will be contributing the most to this fund. There are no clear guidelines on how these funds will be utilized leaving room for abuse.
  • Failure for the law to accommodate ICT industry players in the Universal Service Advisory Council meaning they have no say on monies they contributed. This technically makes it a tax.
  • Already, operators are extending their networks to seemingly unprofitable regions without the need for government to push them. Advancement in technology and convergence is making what universality defines as unprofitable now seemingly commercially viable because its now much cheaper to build and scale networks. USF objectives need to be reviewed or done away with altogether

Should the regulator be adamant about maintaining the USF due to various unreasonable and political ends, then operators have recourse at the international courts as Kenya is a signatory to the WTO  General Agreement on Trade in Services (GATS) especially the agreement on basic telecommunications

Why Is Kenya Power Dumping Pre-paid Meters?

May 19, 2015 9 comments

meter2Recently, the country’s only power utility company announced that it was slowing down the roll out of the prepaid metering system that they launched about 6 years ago. The reason given for this about turn was that the company is losing revenues as it is now collecting less from the same customers who are now on prepaid metering than they did before when the same group of customers were on post paid metering system.

According to the Kenya Power records, about 925,000 out of the 3.17 Million customers are on prepaid meters. Before the 925k moved to prepaid, they were collecting about four times more than what they currently collect from the same customers. The Kenya Power MD stopped short of accusing customers with prepaid meter tampering as his explanation of the reduced revenues. With the reduction in revenues, Kenya power has decided to classify this reduction as ‘unpaid debts’ in their books. Meter tampering would be across both pre and post paid users if he still holds the opinion that prepaid users are tampering with meters. In fact there are lower chances of a prepaid user tampering with the meter than a post paid user doing the same.

My little accounting knowledge tells me that it is every company’s dream to convert all their customers to prepaid. This shifts the cash flow position to a very favorable one of positive cash flow, you have the money from customers before they consume your service/product. With a prepaid metering system, Kenya power was heading to accounting nirvana but the recent revelations about the accumulating ‘debts’ from prepaid customers was a shock to many. First and foremost, if you do not buy prepaid meter tokens, you cannot consume power on credit and pay later, so how is this reduction in  revenues from prepaid meter consumers classified as a debt as opposed to an outright reduction in collected revenue?

Faulty meters?

There are two main brands of power meters used by Kenya power, Actaris and Conlog. The later brand was found to be defective 3 years into the roll out, the meters were erroneously calculating remaining power tokens especially after a power outage, you could be having say 30Kwh’s remaining on your meter and after a power blackout, the meter reads -30Kwh or some other random negative value. This is what consumers would notice, we cannot for sure say that the same meters also under bill on the same breath. Of course if it under bills, very few consumers would complain or even notice, they would however be quick to notice a negative token value because they would lose power. Could faulty meters be the problem here? Could Kenya power be suffering from substandard meters? Here is a blog link to one affected consumer who complained in 2012 about the faulty meters. Kenya power attempted to replace some Conlog meters but I still see some in the wild in use.

Reality of estimate billing?

We have all been there, where you receive an outrageous bill from Kenya power. This is because more often than not, they estimate power consumed and never get to read the meters in your house. When was the last time you saw a Kenya power meter reader on a motor bike in your estate if you are on postpaid? According to Kenya power books, one post-paid domestic customer consumed 12 Kwh of electricity and on average paid Sh1,432. And each prepaid customer consumed an average 23 Kwh and paid roughly Sh756 to the power company. This can only mean two things:

  • The postpaid customers are over billed due to poor estimation methods as meters are seldom read. I noticed this on my water bill too. When my bill is say 600/= and i overpay 2000/= when settling the 600/= bill, my next bill will be in the regions of 2000/= (estimated from my last payment). So i make sure i pay the exact amount on the bill these days to deny them room to estimate and over bill me.
  • The prepaid meters are spot on accurate. This is the most plausible reason and I will explain below.

Prepaid meters are accurate?

Unlike the old school postpaid meters that measure total ‘apparent’ power consumed, the new prepaid meters assume an efficient electricity grid and measure effective or real power consumed by the customers appliances.  In a situation where the power distribution grid is inefficient, the voltage and current are not in phase. This leads to a lot of ‘wasted’ power. In postpaid, consumers pay for the grid inefficiencies, in prepaid, they do not. This is why there has been a drastic reduction in revenues because consumers are now paying for what they consume and not the wastage on the grid. Perhaps this is what Kenya power sees as ‘consumed but unpaid for power’ by the prepaid meter users? Could be, this is because its not possible to consume more than what you have paid for on a prepaid meter. apparent power is consumed but not measured by the meters. This is especially true if you have appliances with electric motors in them such as washing machines, water pumps and air condition systems.  Read more about power factor by clicking here

You can read older articles on my blog touching on Kenya Power by clicking the links below:

  1. How Kenya can enjoy lower electricity tariffs
  2. Kenya is ripe for a Demand Response Provider
  3. Kenya Power Needs To Be Penalized For Blackouts
  4. There is need to end the Kenya Power monopoly

Why the push to digital TV?

November 12, 2012 5 comments

There has been a lot of attention in the local media on the push by the government to have Kenya migrate its TV signals from analog to digital.  The governments push has left many wondering what its stake in all this is.

In 2006 Kenya participated in the The Regional Radiocommunications Conference-2006 (RRC-06) which was hosted by the International Telecommunications Union (ITU). In this conference, it was agreed that all nations need to migrate to digital TV by 2015. Kenya set an ambitious cut-over date of 2012 as the date by which all TV broadcast in Kenya will have been migrated to digital. The Communications Commission of Kenya (CCK) has formed a digital migration secretariat to co-ordinate this migration. This secretariat is the one stop center for all matters related to this migration.

Many a bystander will ask, other than the government ratifying the RCC-06 agreement, what is the government’s stake in asking its citizens and broadcasters to change the way in which they receive their TV signals. With majority of TV services being run by private entities, shouldn’t the decision to change from analog to digital be done by these entities in the same manner in which a mobile operator decides to roll out 3G or 4G based on a business case and not by regulatory conditionality?

CCK recently expressed fears that over 40% of TV sets in Kenya are black and white and this could signal a stumbling block because owners of black and white TV sets tend to be those who are economically disadvantaged and cannot easily afford a digital set-top box.  With the deadline to switch over fast approaching, TV stations stand to lose 40% of their viewers if these viewers do not manage to upgrade to digital TV. This is a big threat to their market base and I would have expected a flurry of activity from TV operators seeking the indulgence of the government to subsidize the set-top boxes to consumers or better offer them for free as was the case in USA when they did their migration  in 2009.  If the American TV viewer who is by all means better off than the Kenyan counterpart got help from the government, one wonders what will happen to the Kenya viewer if he is not helped by the government to acquire a set-top box. The high cost of set-top boxes and poor planning of the migration project has made the government postpone the migration deadline to 2013 from the earlier mid 2012 deadline.

However, far from that, the main reason why the government (and many other governments) stand to benefit from this migration is revenues. The government is the biggest beneficiary in the digital TV migration because it will draw revenues from:

  1. The license fees from signal distribution companies: In Digital TV, all TV stations are to give their signal to a central signal distributor who will then transmit this signal on their behalf. The signal distributor pays a license fee to the government which is an additional revenue source. There is also the revenue that was to be gained from tax on the set-top boxes, there has been a push to zero-rate the boxes so as to make then more affordable to users. Even with zero rating, the importation process is poised to benefit the economy in one way or the other.
  2. With the migration of analog TV signals away from the 800Mhz band, the band will be available for auction to telecommunication operators for use in operating 4G-LTE networks.

4G-LTE networks and your TV

The 4G-LTE network can use either the 800Mhz or the 1900Mhz band for transmission, the 1800Mhz band is not preferred because it is less efficient to use than the 800Mhz band. The fact that 1800Mhz is higher frequency means that physical barriers such as building walls might impede its transmission and make it less effective for high-speed data transmission. Transmitters and detectors of higher frequency communication (4G phones in this case) tend to cost more compared to lower frequency transmitters and detectors.

The most desirable characteristic of lower frequencies is that they can travel longer distances without losing their ability to carry information. This means that a 4G-LTE network at 800Mhz will require fewer base stations than the same network at 1800Mhz. This therefore makes building and operating a 800Mhz network cheaper than one on 1900Mhz range.

The use of the 800Mhz band in analog TV transmission therefore means that mobile operators are only left with 1800Mhz  to roll out 4G-LTE. Much of the pressure to migrate TV from analog to digital is therefore informed by the fact that the government can auction the 800Mhz band to mobile operators for millions of shillings and empower them to roll our cheaper-to-run 4G-LTE networks. The by-product of this migration to TV viewers is that they get a clearer TV signal with many value additions on the digital signal such as the ability to  get descriptions of programs on TV, auto schedule TV programs of their interest, and also pay-per-view services.

How Social Media changed a blind man’s fortunes

January 26, 2012 5 comments

The advent of social media such as twitter and Facebook has changed the way we communicate and interact. Through social media, communication is now instant and border-less and harnesses the power of collective action without the need to physically meet. This has also led to the democratization of information and interaction to the point where anyone is able to acquire the knowledge they may want and to connect to anyone he or she wishes to. This has had profound consequences in the way we live as humans today.

Allow me to exemplify the above fact with the story below as I digress from my normal “boring” technology posts.

The high school I attended used to be integrated, by that i mean there used to be both blind and perfect vision students in the same classes. in my year we had two blind students. One of the students was called Samuel Wambua. After high school we all went different ways and Wambua managed to secure admission to Kenyatta university for a degree in special education.

Late last year, I happen to spot Wambua standing at the junction of Muthithi road and Chiromo lane in westlands. with him was a small box crammed full of assorted items such as plastic necklaces, handkerchiefs, sweets and bangles. In the box was also a harmonica and a small radio which he said was for his entertainment. Wambua was a hawker. A  blind hawker. The fact that he was blind meant that he could not see that most of his merchandise was already old and dirty due to the months of handling for he rarely made any substantial sales.

After several meetings between him, Abel Masya and I at his hawking spot to fact find on what happened and how he can be helped, Wambua narrated how he dropped out of campus and resorted to hawking after failing to secure sponsorship for his education. He had completed two academic years with the second year fees being a loan he took from a friend. He was now hawking to repay the loan and raise money to go back to university. Considering it is not yesterday that we completed high school, Wambuas’ dream of going back to university was slowly dying. “I still believe i can go back” he said even though his tone betrayed the fact that he lost hope. He was now 34 years old, single, living alone in a single mabati room in Githurai. (How he manages to locate the Chiromo lane spot everyday from Githurai is beyond me)

As 2011 ended, a twitter hashtag #peopletobethankfulfor started trending then one person tweeted and said “#peopletobethankfulfor  the blind guy at the corner of Chiromo lane, he is always there come rain or shine”  That tweet was retweeted by Sunny Bindra. I replied and asked them to hear his story if they get time.

later, it dawned on me that Wambua, who does not even have the concept of social media or the internet for that matter just got mentioned on twitter because of his resilience. What if the same platform can be used to help him? So with the help of very resourceful people like Abel Masya and Mwema Mwalimu, started a campaign on twitter and Facebook to marshal friends and former classmates to return Wambua to university. A Samuel Wambua education fund  Facebook group was formed and people invited, tweets and twitter DM’s were exchanged and Mobile money transfer platforms were used to raise money for Wambua. Within two weeks friends responded overwhelmingly,  Fee’s for that semester was raised and paid, shopping for disposables and some clothes done, his braille machine repaired, braille paper rims bought and Wambua reported back to university to continue with his education. As I write this, Abel Masya (the ad hoc treasurer) has an appointment in Westlands to pick a bank deposit slip for 43,000/= from a well-wisher (the one whose tweet was re- tweeted by Sunny Bindra)  towards Wambua’s fees. The presiding priest Catholic church at KU also pledged 20,000/=  towards Wambua’s education.

When I visited Wambua in campus a few days ago, it was hard to explain to him how all this social media business works or how people tweeted and exchanged DM’s and formed a Facebook group about his education. “I think this is a miracle,” he said. Indeed, it’s the miracle of Social media to raise money and send him back to university without physically meeting to do so.

Friends and well-wishers are now organizing a fund raising meeting to raise the balance of the money needed to enable him complete his education. If you wish to assist in the organization or contribution, please contact me (me (at.) tommakau.com) or our treasurer Abel Masya (abelmasya (at.) gmail.com) for further details. For those who have already made a contribution, thank you and God bless your efforts.

Update on Feb 2014

Wambua graduated with a 2nd upper class degree in December 2013 and is now working as a special teacher employed by TSC. Because he is physically challenged and employed as a special teacher, his salary is much higher than ordinary teacher and benefits are tax free.

Categories: Uncategorized Tags: , ,

KPLC rebrands; but more needs to be done.

June 23, 2011 7 comments

Yesterday Kenya Power and Lighting company re-branded to Kenya Power in what many brand experts believe is a long overdue effort to reinvent itself as a modern corporate. There is a joke going around that they removed the words lighting from their name so that they will not be held responsible for power blackouts.

KPLC by all means was much better run than most power companies in Africa (Including Eskom of South Africa) and this means that Kenya enjoys better power supply than many countries in Africa. in Nigeria for example, the local power company is a backup to the personal generators people own instead of the generators being the backup to the mains power.

One of the reasons why Kenyans enjoy a more stable power supply is because we also pay one of the highest tariffs in Africa. This has had the effect of making the country hostile to major manufacturing companies some of whom have shifted base to lower tariff countries such as Egypt and South Africa. Just to give you a glimpse of how high the tariffs are and how they can impact business, Bamburi cement pays over KES 90 Million in electricity bills per month. Mumias sugar even started generating its own electricity to subsidize what they buy from KPLC.

There has been a concerted campaign by stakeholders to reduce the cost of power in the country. One of they ways was to reduce the operating costs of KPLC by outsourcing most of its O&M services to third parties who are now responsible for grid extension and maintenance (if you have the prepaid meter in your house, it was installed by a third party non-KPLC employee)

They have also deployed prepaid metering which converted their negative cash flow into  positive and at the same time reduced the cost associated with manual post paid metered billing, these costs included postage of bills, fuel and salaries for the meter readers and their motorbikes roaming the country to read meters.

These are commendable efforts by KPLC (now Kenya power) to reduce operating costs and have a positive cash flow.

I however think that they should now embark on deploying a smart grid system and work on improving the efficiency of the Kenya transmission network.

In my university days, my lecturer in advanced electric power generation was also the immediate outgoing  director at KIRDI and he stated something very profound that KIRDI had researched on. he said that if KPLC could improve the efficiency of the Kenyan grid by just 1%, Kenya would save up to KES 7 billion annually on energy that goes to waste due to inefficient grid system. That is money you and me pay in our monthly bills.
The conversion f the grid into a smart grid could also significantly reduce wasted energy used in reactive load forecasting as the load put on the system would automatically adjust the generation capacities in real-time. Right now the load forecast systems are archaic and manual worked out on an excel sheet. The smart grid would:

  • Better facilitate the connection and operation of generators of all sizes and technologies hence allowing small scale generating companies and homes participate in the generation of electricity and feeding it into the national grid. If a solar panel in a house not using electricity during the day is on, it feeds the power into the national grid for use by other people around the country and the owner gets some money out of it instead of it going to waste;
  • It would allow consumers to play a part in optimizing the operation of the system;
  • Provide consumers with greater information and options for choice of supply e.g. rate of consumption;
  • Significantly reduce the environmental impact of the whole electricity supply system;
  • Maintain or even improve the existing high levels of system reliability, quality and security of supply;
  • Maintain and improve the existing services efficiently(c) Above points are from Wikipedia with my additions.

The smart grid would also be very versatile and like a TCP/IP network with very fast fault recovery times in case of a line break.

They new company should also either adopt air cooled transformers and replace the oil cooled ones which are prone to vandalism for the oil or de-gazette the trading and use of transformer oil which according to the laws of Kenya only KPLC can transact or use transformer oil. They can change this law and avail it in retail outlets and this will stop transformer vandalism. India is an example of a country that has deployed the air cooled transformers with success.

Categories: Uncategorized