Kenya’s electricity sector is heading toward a potentially historic transformation after Kenya Electricity Generating Company signaled plans to sell electricity directly to consumers, challenging the long-standing dominance of Kenya Power and Lighting Company in the retail power market.
The proposed shift follows new regulations introduced by the Energy and Petroleum Regulatory Authority (EPRA), which open the door for electricity producers to compete for large customers through direct supply arrangements.
If approved, the move could fundamentally alter Kenya’s single-buyer electricity model and reshape how businesses purchase power.
Why the KenGen Power Plan Matters
For decades, Kenya’s electricity system has operated under a single off-taker structure where independent power producers and generators sold electricity exclusively to Kenya Power.
Under that framework:
- KenGen generated electricity
- Kenya Power distributed and sold it
- Consumers had no supplier choice
The new regulatory approach changes that model significantly.
KenGen now wants transmission and distribution licences that would allow it to directly serve customers within its Green Energy Park in Olkaria, a major geothermal hub in Nakuru County.
The company published the notice in MyGov ahead of a formal application scheduled for June 2, 2026.
How Kenya’s Electricity Market Could Change
The proposed reforms stem from the Energy (Electricity Market, Bulk Supply and Open Access) Regulations, 2026.
The rules allow:
- Power producers to sell directly to large consumers
- Shared use of existing transmission infrastructure
- Competitive electricity pricing
- Open-access energy distribution
This means generators such as Kenya Electricity Generating Company may either:
- Build their own distribution infrastructure, or
- Use networks owned by Kenya Power and Lighting Company and Kenya Electricity Transmission Company through wheeling agreements.
What Are Wheeling Charges?
Wheeling charges are fees paid by electricity producers to use another company’s transmission or distribution infrastructure.
Under the proposed model:
| Function | Responsible Entity |
|---|---|
| Electricity Generation | KenGen/IPPs |
| Transmission Infrastructure | KETRACO |
| Distribution Network | KPLC |
| Retail Supply | Multiple suppliers possible |
This structure resembles liberalized electricity markets seen in parts of Europe, South Africa, and some US states.
Why KenGen Wants Direct Customers
KenGen’s strategy centers on its Green Energy Park in Olkaria, where industrial and manufacturing firms increasingly seek reliable geothermal energy.
Direct electricity sales could help KenGen:
- Increase revenue margins
- Reduce dependency on KPLC
- Improve payment certainty
- Attract industrial investors
- Expand green manufacturing ecosystems
The geothermal-rich Olkaria region has become increasingly attractive for energy-intensive industries seeking cleaner and potentially cheaper electricity.
Pressure Mounts on Kenya Power
The reforms could place substantial pressure on Kenya Power and Lighting Company, which has historically controlled electricity retail distribution nationwide.
Potential Risks for KPLC
If large industrial customers migrate to direct supply agreements, Kenya Power could lose some of its most profitable clients.
That could weaken:
- Revenue stability
- Grid investment capacity
- Debt servicing ability
- Cross-subsidization for residential users
Large industrial consumers often subsidize broader grid operations through higher consumption volumes.
Could Electricity Prices Fall?
Supporters of the reforms argue competition could improve efficiency and lower power prices over time.
Potential benefits include:
- More competitive tariffs
- Better service quality
- Increased renewable energy use
- Faster industrial growth
- Improved power reliability
However, outcomes remain uncertain.
World Bank Warned About Higher Costs
The World Bank previously cautioned against rapidly dismantling Kenya Power’s monopoly structure.
According to the lender, introducing multiple electricity retailers could:
- Increase operational complexity
- Duplicate infrastructure costs
- Raise wheeling expenses
- Push electricity prices higher
Electricity costs in Kenya have already risen sharply over the past five years, affecting households and manufacturers alike.
What MPs Previously Proposed
Kenya’s National Assembly Energy Committee had earlier proposed broader market liberalization measures.
Lawmakers recommended:
- Allowing Independent Power Producers (IPPs) to sell directly to consumers
- Reducing electricity tariffs
- Benchmarking IPP prices against KenGen tariffs
- Expanding consumer choice
Under such a model, businesses could select electricity suppliers based on price competitiveness and reliability.
Kenya’s Geothermal Advantage
Kenya remains Africa’s largest geothermal power producer, giving KenGen strategic leverage in the energy transition.
Geothermal energy offers:
- Stable baseload power
- Lower carbon emissions
- Reduced fuel import dependence
- Long-term pricing advantages
This makes Kenya increasingly attractive for industries seeking green energy access.
Risks to Consider
Despite the optimism surrounding open-access electricity markets, several challenges remain.
Grid Stability Concerns
Managing multiple electricity suppliers within a shared national grid can increase operational complexity.
Regulatory Uncertainty
The transition will require clear rules on:
- Pricing
- Infrastructure access
- Consumer protections
- Dispute resolution
Financial Pressure on KPLC
If Kenya Power loses high-volume customers too quickly, retail electricity prices for ordinary consumers could eventually rise.
What Happens Next
KenGen is expected to formally submit its licence application to EPRA on June 2, 2026.
If approved, Kenya could enter a new era of electricity market competition where generators directly negotiate supply agreements with industrial consumers.
The reforms may also encourage additional private investment in renewable energy infrastructure, especially geothermal and solar projects.
For manufacturers, the biggest question remains whether competition will genuinely reduce power costs or simply redistribute existing expenses across the sector.
Conclusion
The KenGen Power Plan represents one of the most significant proposed changes to Kenya’s electricity market in decades. By seeking the right to sell power directly to consumers, KenGen is challenging the traditional structure that placed Kenya Power at the center of electricity distribution and retail supply.
Supporters believe competition could drive efficiency, attract industrial investment, and improve energy access. Critics warn the reforms may destabilize the sector and increase costs if poorly implemented.
What remains clear is that Kenya’s energy market is entering a new phase — one defined by competition, renewable energy expansion, and growing pressure to deliver affordable electricity to businesses and consumers.
Read Also: List of Government-Owned Enterprises in Kenya in 2026
