The Energy and Petroleum Regulatory Authority (EPRA) has introduced a compensation arrangement for oil marketing companies importing additional petroleum products into Kenya as the country seeks to avert potential fuel supply disruptions.
In a letter dated Tuesday, October 27, EPRA Director General Edward Mwirigi Kinyua assured Oil Marketing Companies (OMCs) that they would qualify for advance sales compensation if they obtained petroleum volumes exceeding those factored into the current and subsequent fuel pricing cycles.
The regulator said the arrangement was intended to cushion oil marketers against additional expenses arising from differences between the actual cost of supplying petroleum products and the costs factored into monthly fuel price reviews, a situation commonly referred to as price lag.
“The Energy & Petroleum Regulatory Authority (EPRA) wishes to assure Oil Marketing Companies (OMCs) that where individual OMCs access volumes in excess of the volumes factored in the current and subsequent cycles, the excess volumes will be due for advance sales compensation,” Kinyua stated in the letter.
EPRA further clarified that the additional petroleum volumes and any related incremental costs would be processed on a first-in, first-out basis. The quantities supplied and the associated costs would also be verified using records from the Kenya Revenue Authority (KRA).
The announcement comes amid growing concerns over a potential fuel shortage, with independent petroleum dealers accusing oil marketing companies of selling petroleum products at wholesale prices above the maximum limits set by the regulator.
In a joint statement issued on Tuesday, the Petroleum Outlets Association of Kenya (POAK) and the Kenya Independent Petroleum Dealers Association (KIPEDA) urged independent petrol station operators to immediately stop purchasing fuel from suppliers allegedly charging more than the gazetted wholesale prices.
The associations warned that some independent outlets had already run out of fuel, while others risked shutting down because they could no longer afford to replenish their stocks at the allegedly inflated prices.
According to the dealers, the alleged breaches began on October 15, when the latest fuel prices came into effect. They accused oil marketing companies of disregarding the regulated wholesale price limits despite complaints lodged with EPRA and the State Department for Petroleum.
Under the October pricing cycle, EPRA set the maximum wholesale prices in Nairobi at Ksh211.80 per litre for Super Petrol, Ksh212.60 for diesel and Ksh204.79 for kerosene.
However, independent dealers claimed that some suppliers were demanding prices above the prescribed limits, putting pressure on their businesses and threatening the availability of fuel at retail outlets.
The dispute follows EPRA's decision to raise pump prices for the October 15 to November 14 pricing period. Super Petrol increased by Ksh12.93 per litre, diesel by Ksh9.90 and kerosene by Ksh28.49.
The increases came after the government suspended the fuel price stabilisation mechanism, which had previously helped shield motorists from rising petroleum costs.
With independent dealers reporting stock shortages and financial difficulties, EPRA's compensation arrangement seeks to address the additional costs associated with petroleum volumes supplied beyond those anticipated in the existing pricing cycles.
