Move to stabilise energy cost good
Tuesday, April 6th, 2021
There is light at the end of the tunnel after Kenya Power moved to stabilise the cost of electricity in the short term and curtail a surge in energy tariffs countrywide.
This relief was announced by Kenya Power chair Vivienne Yeda as the board mulls other options, such as deepening debt collection, as a substitute for raising already high tariffs.
The loss-making utility firm had tapped the Energy and Petroleum Regulatory Authority for an increase in electricity tariffs which would have seen electricity costs surge, hurting consumers.
Speaking last week during the power utility firm’s Annual General Meeting, the chair observed that if Kenya Power pushes tariffs up, it will not augur well with the difficult economic times currently hounding Kenyans.
An earlier move by President Uhuru Kenyatta to set up a team to review power purchase agreements signed over the years by Kenya Power also gives consumers hope for lower energy costs in the medium term.
The high electricity charges are being attributed partially to idle capacity charges that forces Kenya Power to compensate generating companies for electricity produced but never utilised.
In a typical power purchase agreement, power producers get paid for any electricity generated, therefore, even if Kenya Power is not able to sell power to consumers due low demand or excess capacity, they must pay according to the purchase agreement.
All eyes will be on retired judge Aaron Ringera, former PricewaterhouseCoopers executive Anne Ooga Eriksson and James McFie as part of a 16-member committee led by banker John Ngumi, hoping they will turn around the pricing structure of power in the next six months.
The good news, however, is that during that period no new contracts will be signed.
Apart from State-controlled Kenya Electricity Generating Company, Kenya Power has contracted numerous independent power producers including Lake Turkana Wind Power, which bank on purchase agreements before securing funds to set up generation plants.
Reports to the National Assembly that private producers sold electricity to Kenya Power at Sh23 per kilowatt-hour, while KenGen offered the same at Sh0.50 is mind-boggling, and reason enough to peel the mask off such agreements.
To rescue the loss-making utility from collapse and cushion Kenyans from unaffordable electricity, cartels that leverage the sector’s supply chain must also be brought to book.
The broom must sweep the whole house if only to attain sanity in this otherwise lucrative sector, otherwise, it will be difficult to stop the surge in the cost of electricity in Kenya.
In the meantime, kudos to Kenya Power for smelling the coffee by abandoning plans to raise electricity tariffs for consumers.