How Kenya Power cooked books to boost Uhuru’s re-election campaigns

Kenya Power Cooked Books: The Kenya Power and Lighting Co. Ltd (Kenya Power) is a byword for controversy. The company that supplies electricity to 6.2 million customers, private and corporate has now been revealed to be cooking its financial books in order to please Jubilee.

This cooking of books was prominent in 2017, when President Uhuru Kenyatta was seeking for reelection.

Apparently, Kenya Power went against International Accounting Standards (IAS) and wrongly reported sales, receivables, liabilities and profits. “The electricity distributor irregularly recognised unbilled fuel costs as revenue, setting off a process that saw it manipulate the reporting of other items in its books in the quest to avoid disclosing lower earnings,” says a report in the Business Daily.

Further, according to auditor general Edward Ouko, had Kenya Power reported its financial performance correctly, it would have made Sh. 366.6 million in pre-tax profit for the year ended June 2017, and not the Sh. 7.6 billion it reported.

“Accordingly, had the company complied with the principles of IAS 18, the profit before income tax for the year ended June 30, 2017 and the trade and other receivables (current assets) as at June 30, 2017 would have decreased by Sh. 7.2 billion; and the profit before income tax for the year ended June 30, 2018 would have increased by Sh. 5.5 billion,” Mr Ouko says.

Economist Robert Shaw further explains that in the revenue account in its annual report and financial statements for the year ended June 2017, Kenya Power showed Sh. 22 billion was billed for “fuel cost charges”. It then confirmed under note 7b (page 143) that “a recovery of Sh. 22 billion (2016, Sh. 12.5 billion) was made”. Yet in clause 20a, page 155, under “receivables” it showed Sh. 10.2 billion as recoverable fuel costs with a footnote stating, “the recoverable fuel costs, currently under a mitigation fund set up by the Energy Regulatory Commission (ERC), to be passed onto the consumers at a later date upon approval”.

The audited accounts also showed on page 160, clause 27b, an equivalent amount, Sh. 10.2 billion, under “current liabilities” as payable to electricity suppliers, including KenGen. This means that Kenya Power did not pass on the additional Sh. 10.2 billion fuel bill to consumers in FY2016/17, probably under instructions from the government and with the ERC’s knowledge.

Currently, Kenya Power is running a complicated billing structure that is made worse by 19 per cent technical and commercial losses on the LV network, around 25,000 outages and 250 transformer failures each month.

The report in the Business Daily further says: “Last year the company, acting on instructions from the government (which was seeking re-election in the August poll), suspended the collection of fuel cost charge on electricity bills, leading to a pile-up of uncollected cash. The fuel cost charge — which is used to compensate diesel power generators — was held constant at Sh. 2.85 per kilowatt hour (kWh) in the seven months to August last year despite a steep increase in the amount of diesel-generated power on the national grid. Consequently, the uncollected levy piled up to more than Sh. 10 billion, forcing the company to ramp up its recovery of the levy after the election, and causing a consumer uproar and litigation.”

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