Kenya Power, the nation's leading electricity distributor, is facing a formidable financial challenge as unpaid customer bills surged by Sh16 billion in the fiscal year ending June 2023.

This surge, one of the steepest in recent years, has driven customer defaults to Sh35 billion, hindering the company's efforts to reduce dependence on Treasury support.

The financial implications of this surge have been stark, resulting in Kenya Power reporting a net loss of Sh3.19 billion during the mentioned period.

Financing costs and increasing customer defaults have compelled the company to seek financial assistance from the Treasury and development partners.

State and county government agencies constitute a significant portion, approximately 33 per cent, of the unpaid bills, with the African Development Bank (AfDB), a key financier of Kenya Power, urging these entities to settle their debts promptly.

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AfDB's latest assessment highlights the impact of outstanding bills on Kenya Power's ability to maintain operations.

"State agencies are among the leading contributors to outstanding electricity bills, presenting significant challenges for the Kenya Power & Lighting Company PLC (KPLC) in maintaining its operations," noted the AfDB.

As of June 2023, parastatals, national government, and county governments collectively account for 30 per cent of the overall electricity customer debt.

AfDB emphasizes the urgent need to address unpaid bills and explore additional revenue streams for the sustainability of Kenya Power.

In response to this financial crisis, Kenya Power revealed a three-year plan to phase out post-paid meters in rural areas, favouring pre-paid meters.

This strategic shift aims to enhance revenue collection upfront and mitigate the escalating issue of customer defaults.

Despite disconnecting customers failing to pay within 21 days after billing, Kenya Power's efforts to recover outstanding bills have faced challenges.

The company enlisted debt collectors to aid in the recovery process, particularly from disconnected customers, but the surge in unpaid bills underscores the limited success of this initiative.

Kenya Power's customer base reached 9.2 million as of June, driven by 318,217 new connections and with numerous projects underway to electrify more homes and institutions, the company anticipates continued growth in its customer numbers.

To address the anticipated surge in customer defaults, Kenya Power increased provisions for impairment of electricity receivables to Sh17.28 billion in the fiscal year ending June 2023, up from Sh14.9 billion in the preceding year.

In September, Kenya Power sought Treasury intervention to recover arrears owed by large consumers with government stakes.

However, financial troubles faced by these consumers have hindered their ability to settle outstanding electricity bills, exacerbating Kenya Power's financial challenges.