Kenya Power is facing a growing challenge in recovering electricity payments from government institutions after outstanding bills owed by national and county government entities increased to Sh7.35 billion in the financial year ended June 2026.

The latest figures, disclosed in the electricity distributor's annual report, show that government arrears rose by 9.5 per cent from Sh6.71 billion in the previous financial year. The increase continues a pattern of accumulating unpaid electricity bills that has persisted for several years.

In June 2024, outstanding government electricity bills stood at Sh5.34 billion, compared with Sh3.6 billion in 2023 and Sh2.72 billion in 2022. The latest balance therefore represents an increase of approximately 170 per cent over four years.

The growing arrears highlight a persistent challenge for Kenya Power, which must continue supplying electricity to public institutions while managing the financial consequences of delayed payments.

Government entities account for a significant portion of the company's outstanding customer balances. The Sh7.35 billion owed by public institutions represents approximately 17.7 per cent of Kenya Power's gross postpaid electricity receivables, which stood at Sh41.5 billion at the end of June 2026.

The company's credit management policy generally requires postpaid customers to settle electricity bills within 21 days. Where payments are delayed, Kenya Power can pursue recovery measures, including payment arrangements, follow-up communication and disconnection.

However, enforcing these measures against government institutions can be complicated. Some public entities with outstanding balances provide essential services, including healthcare, making electricity disconnections potentially disruptive to the public.

Hospitals and other critical facilities require reliable power to operate medical equipment, preserve medicines and maintain essential services. Disconnecting such institutions could therefore create consequences extending far beyond the recovery of unpaid bills.

This situation leaves Kenya Power balancing its commercial responsibilities against the need to maintain electricity supplies to public institutions.

The Office of the Auditor-General has previously raised concerns about the accumulation of government electricity arrears and called for measures to prevent further increases.

In its latest disclosures, Kenya Power said management was continuing to engage relevant government agencies in efforts to accelerate the recovery of long-outstanding balances.

The company has not provided a definitive timeline for clearing the Sh7.35 billion debt, leaving uncertainty about when the outstanding payments will be recovered.

The challenge extends beyond government institutions. Kenya Power's total postpaid electricity receivables increased from Sh39.03 billion in June 2025 to Sh41.5 billion in June 2026, indicating that delayed customer payments remain a broader financial concern.

To account for the possibility that some outstanding balances may not be recovered, the electricity distributor increased its impairment provisions to Sh14.89 billion from Sh13.33 billion a year earlier.

Such provisions reflect the financial risk associated with unpaid bills and can affect the company's reported financial position.

Kenya Power also disclosed a separate Sh35.35 billion balance owed by the government for recurrent losses associated with the Rural Electrification Scheme. This amount increased from Sh34.77 billion in the previous financial year.

The rural electrification obligation is distinct from the Sh7.35 billion owed for electricity consumed by national and county government institutions. Together, the figures illustrate the scale of financial obligations involving the government and the electricity distributor.

The outstanding payments are particularly significant because Kenya Power must continuously finance electricity purchases, maintain distribution infrastructure and invest in network improvements.

Delayed customer payments can create cash-flow pressures even when a company reports strong accounting profits, particularly where operating expenses must be settled before outstanding revenue is collected.

Despite the growing arrears, Kenya Power recorded improved financial performance during the year ended June 2026.

The company reported a 2.1 per cent increase in net profit to Sh24.99 billion, supported by an 8.6 per cent rise in electricity sales revenue to Sh238.24 billion.

The improved results also enabled Kenya Power to increase its dividend to Sh1.50 per share from Sh1 in the previous year. The higher payout raised total shareholder distributions from approximately Sh1.95 billion to Sh2.93 billion.

The government remains the company's largest shareholder, holding a 50.1 per cent stake, while private investors own the remaining 49.9 per cent.

The ownership structure creates an unusual financial relationship in which government institutions owe substantial sums to a company that is itself majority-owned by the State.

For Kenya Power, improving debt collection will be important in protecting cash flow and supporting continued investment in the national electricity network.

The company must also maintain sufficient resources to purchase power, respond to outages and expand electricity access as demand grows.

Although Kenya Power's profitability has improved, the continued accumulation of unpaid government electricity bills presents a financial challenge. Resolving the arrears will require coordinated action between the utility, national government institutions and county administrations to ensure that essential public services remain operational without allowing outstanding debts to grow indefinitely.