Why Kenya’s Power costs are so high and what the World Bank found

Kenya's electricity costs have come under intense scrutiny from the World Bank, which identified governance weaknesses, opaque power purchase agreements (PPAs), and corruption within Kenya Power and Lighting Company (KPLC) as key factors driving up the price of electricity. According to the World Bank's November 2026 Kenya Economic Update, Kenya's electricity remains pricier than its regional and international counterparts, and problems with procurement, contract management, and the distribution system continue to plague the sector.

One of the most alarming findings concerns allegations of bribery involving certain Kenya Power employees. Audits and investigations by the Ethics and Anti-Corruption Commission (EACC), conducted since 2023, revealed that managerial and technical staff were demanding substantial bribes for illegal reconnections and manipulating prepaid/postpaid systems to siphon millions of Kenyan shillings.

The report also highlights the opaque and rent-generating nature of power purchase agreements as another significant contributor to the high cost of electricity. Conflicts of interest, lack of transparency in contract management, and non-competitive contracting have all been cited as issues within the power sector. These concerns are critical because power purchase agreements dictate the terms under which electricity is procured from private providers and supplied to the national grid.

The weaknesses in these agreements are linked to higher contract costs, which ultimately impact both commercial and private consumers. Kenya's electricity expenses are particularly high compared to selected peer countries, being more than double those in Vietnam and other Asian nations, and nearly 50 percent higher than in Uganda.

The World Bank also underscores persistent transmission and distribution losses, which have consistently remained above 23 percent, surpassing the Energy and Petroleum Regulatory Authority's (EPRA) target of 16.5 percent. These losses are attributed to a combination of underinvestment in electricity grids, the rapid expansion of rural access, and theft and billing anomalies resulting from collusion.

As electricity generated or purchased does not always translate into successfully delivered and billed power to customers, these persistent losses place additional strain on the financial and operational performance of the electricity system.

Furthermore, the World Bank points to controversies surrounding power purchase agreements and a seven-year moratorium on new agreements as contributing to a shortage of generation capacity. The resulting load shedding has created additional costs for households and industry. Beyond the financial implications, the World Bank argues that enhanced governance in the power sector could help reduce electricity costs, stimulate investment, production, and wages.

By modeling a permanent 10 percent reduction in electricity costs starting in 2026, the report estimates that Kenya's GDP could increase by approximately 0.27 percent relative to the baseline, private investment by 0.33 percent, and the real wage bill by 0.29 percent. These are modelled estimates, acknowledging that they do not guarantee actual outcomes or predict that electricity prices will fall by 10 percent.

In essence, the World Bank's findings underscore the need for transparency in power procurement, stronger oversight of electricity companies, reduced system losses, and action against misconduct as crucial steps to lowering Kenya's electricity costs. The debate surrounding Kenya's electricity costs is not merely about the price tag but also about the effectiveness of the institutions responsible for generating, purchasing, transmitting, and distributing electricity.