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Raise power tariffs as a last option

By The Standard | Published Sun, January 8th 2017 at 00:00, Updated January 7th 2017 at 22:48 GMT +3
Masinga power station where there is a drop in water levels. (Photo: Edward Kiplimo/Standard)

It is now quite likely that consumers of electricity will have to pay more for power as a result of the falling water levels at the seven folks dams, and its main reservoir in Masinga. The Ministry of Energy says electricity generation from the more costly thermal-fired plants will increase as generation from hydro sources decline owing to inadequate rains during the October-December precipitations.

In recent weeks, water levels at Masinga Dam have dropped to the lowest levels in eight years, and if the lingering drought persists, reliance on electricity from thermal sources is expected to go up beyond the months of January and February.

Obviously, the Ministry of Energy has not done enough to reduce the country’s reliance on hydroelectricity even though sustained efforts have been expended to exploit geothermal energy with the drilling of more wells in the Ol Karia station. Although the government says it has scaled down generating electricity from hydros—from 45 per cent to 35 per cent—the reliance on thermal plants has increased in recent months and they now account for 18 per cent of the power generated, up from 11 per cent. If the dry weather persists, this might go up to well beyond 24 per cent.

The anticipated rise in electricity tariffs is coming at a time when more households are connecting to the national grid under the last mile rural electrification programme. The concern is that a rise in tariffs may dampen the enthusiasm of more consumers to tap into the national grid and derive the attendant benefits.

 So while we agree that the rise in cost of generation is inevitable under these circumstances—the rise in costs is triggered by the Forex adjustment component which is related to the fluctuation of major currencies against the local currency—other avenues may need to be explored to reduce the cost of power generation and transmission.

High electricity tariffs are bad for business. It is bad enough that local tariffs are higher than that of other regions in Africa, resulting in the migration of investors—particularly manufacturers—from Kenya to these countries. Firms such Eveready and Cadbury have taken their businesses elsewhere where electricity tariffs are much lower when compared to Kenya’s.

In Egypt and South Africa, for example, the low electricity tariffs, especially when compared to Kenya, have allowed this country to attract foreign direct investment at a much larger scale than Kenya because the cost of doing business is much lower. The Ministry of Energy says it is considering raising the fuel charge from Sh3 to Sh3.52 per unit. This is likely to raise the cost of business in Kenya.

The impact of cost of doing business cannot be over-emphasised. Therefore, more deliberate discussions by key stakeholders may have to be considered before the cost of power tariffs is increased. Let us explore all options before electricity tariffs are increased.