(NAIROBI, KENYA) – Kenya’s electricity market is entering a new phase after large power consumers gained the right to buy directly from independent generators, ending a decades-long arrangement in which Kenya Power acted as the sole gateway between producers and consumers.
The Energy (Electricity Market, Bulk Supply and Open Access) Regulations, 2026, allow eligible consumers to sign power purchase agreements with generators and use the networks of Kenya Power and the Kenya Electricity Transmission Company to move electricity to their premises. Consumers must have a load of at least 1 MVA on the distribution network or 10 MVA on the transmission network.
The reform is not new. Similar open access provisions appeared in the 2024 regulations, but the World Bank noted that implementation remained incomplete and that consumers still faced significant barriers to accessing the networks. The 2026 regulations are seen as giving the reform a stronger operational footing.
Under the new model, an industrial company can negotiate a power purchase agreement directly with a generator while paying a regulated wheeling or use of system charge for transporting electricity through the national grid. The Energy and Petroleum Regulatory Authority will approve the applicable network charges and oversee the market.
The change is expected to introduce competition where there was previously little choice, with manufacturers likely to secure lower electricity costs. Kenya’s industrial power prices remain a major competitiveness problem. A 2026 Kenya Association of Manufacturers report puts industrial electricity tariffs at between $0.18 and $0.23 per kilowatt hour, equivalent to about KES 23 to KES 30 depending on the tariff category.
The manufacturers’ lobby has documented the scale of the problem more starkly. Electricity costs facing one steel manufacturer averaged KES 19.86 per kWh in 2023, with the company spending about KES 1.1 billion ($8.5 million / GBP 6.7 million) on power. KAM estimates that reducing the cost to KES 10 per kWh could cut the company’s electricity bill by about 51%, freeing resources for expansion, employment and investment.
The energy regulator is yet to publish a definitive wheeling charge, meaning the final cost of a direct supply contract will depend on the generator’s price, network charges, losses, balancing costs and other applicable charges.
Large commercial and industrial consumers accounted for 5,620.71 GWh, or 49.6%, of Kenya’s electricity consumption in the year to June 2025. Their consumption has also been rising, even as their share of total demand fell from 51.9% a year earlier as other categories grew faster.
Kenya’s broader electricity demand is expanding rapidly. Data from the Kenya National Bureau of Statistics shows domestic electricity consumption rising from 10,008.4 GWh in 2022 to 10,320.6 GWh in 2023, 10,751.7 GWh in 2024 and 11,785.5 GWh in 2025. This translates to an increase of about 18% in three years. The energy regulator recorded a new peak demand of 2,316.2 MW in February 2025, up 6.38% from the previous financial year.
Peter Mong’are, an economist with knowledge of energy and petroleum, said cheaper and more predictable electricity can lower factory operating costs.
“It can improve the competitiveness of Kenyan exports, encourage investment and ultimately create jobs,” he told the Star in a phone interview. “The savings can also work their way through supply chains into cheaper goods and services.”
Despite the operational changes, Kenya Power will still have to maintain much of the infrastructure used by those customers even when they buy electricity from another supplier. Energy experts are concerned that once high value industrial customers migrate from the traditional system, the utility could lose part of its revenue base while retaining substantial network obligations and legacy power purchase commitments. The World Bank has echoed those concerns, warning that poorly managed competition could weaken Kenya Power because of these long term obligations.
Law experts at EMS Law LLP raise the biggest question: who pays for the grid when the biggest users increasingly buy power elsewhere? They are clear that the answer cannot be to push those costs onto households and small businesses.
“Kenya’s Constitution requires equal protection and benefit of the law and places a duty on the State to address the needs of vulnerable groups,” they said.
In a detailed analysis, they argue that open access should therefore be judged not only by how cheaply factories can buy power, but by whether it produces a more efficient electricity system for the entire economy. According to the law firm with a global network, if competition lowers prices without undermining the financial capacity of the network, Kenya could finally turn electricity from a cost burden into a competitive advantage.
“If the biggest consumers escape the system while households inherit more of its fixed costs, liberalisation could simply redistribute the problem,” they said.
They have challenged the Energy and Petroleum Regulatory Authority to make competition and universal service reinforce, rather than undermine, each other.