Kenya’s electricity market is entering a new phase with large power consumers no longer having to depend entirely on Kenya Power supplies.
Even so, key issues are emerging on who will shoulder grid maintenance costs, with legal and industry experts warning against passing the cost to consumers.
The Energy (Electricity Market, Bulk Supply and Open Access) Regulations, 2026, create a framework for eligible consumers to contract directly with generators and use Kenya Power and Kenya Electricity Transmission Company (Ketraco) networks to move the 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.
This is not the first time Kenya is mulling this shift.
Similar open-access provisions were contained in the 2024 regulations, but the World Bank noted that implementation remained incomplete, with consumers still facing significant barriers to accessing the networks.
However, the 2026 regulations now give the reform a stronger operational footing.
For decades, Kenya Power has effectively been the gateway between generators and electricity consumers.
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 the electricity through the national grid.
Energy and Petroleum Regulatory Authority (EPRA) will approve the applicable network charges and oversee the market.
This is set to create competition where there was previously little choice, with manufacturers likely to reap 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 roughly Sh23 to Sh30 depending on the tariff category.
KAM has previously documented the scale of the problem more starkly.
Electricity costs facing one steel manufacturer averaged Sh19.86 per kWh in 2023, with the company spending about Sh1.1 billion on power.
The manufacturer's lobby estimates that reducing the cost to Sh10 per kWh could cut its electricity bill by about 51 per cent, freeing resources for expansion, employment and investment.
Even so, 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 per cent 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 per cent a year earlier as other categories grew faster.
Kenya’s broader electricity demand is expanding rapidly.
Data by the Kenya National Buruea of Statistics (KNBS) data 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 per cent in three years.
The energy regulator recorded a new peak demand of 2,316.2 MW in February 2025, up 6.38 per cent from the previous financial year.
This growth makes competition even more important.
Peter Mong'are, an economist with vast knowledge in energy and petroleum says that 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 sweeping operation 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 worried 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 echoes 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 emphatic 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."
I'm 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 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 have challenged Epra to make competition and universal service reinforce, rather than undermine, each other.
