Power blackouts: State now mulls privatisation of power transmission

Staff from KPLC and Ketraco repaired one of the four electricity towers along the 220kv Loyangalani-Suswa line that clashed in the Longonot area of Naivasha cutting off electricity power supply to the national grid. [Antony Gitonga, Standard]

The crippling power outages that the country has experienced in recent months appear to have made a case for the privatisation of power transmission lines.

Different players within the government agree that the firm charged with the construction and maintenance of power transmission lines, the Kenya Electricity Transmission Company (Ketraco), has failed in delivering on its mandate. 

The largely accepted reason why Ketraco cannot keep up with the power transmission demands is that it relies on exchequer funding and ends up being broke most of the time.

The result has been several major blackouts that are directly attributable to overloaded or dilapidated power lines. 

The latest outage, which happened on December 10, has sparked outrage not just among households and industries but also within the government, with President William Ruto directing the Ministry to “comprehensively deal with the challenge of power failure.”

The outage, according to the Energy Ministry, was due to an overloaded Kisumu-Muhoroni transmission line.

The line designed to carry 80 megawatts (MW) was transmitting some 129MW and further demand saw this surge to 149MW, which saw the line trip and affected the entire grid.

It took power sector agencies more than 12 hours to restore electricity across the country. The Ministry said it had restored power to 60 per cent of the country by 1am on December 11, but it was only at 9.29am that power was fully restored to the rest of the country.

President Ruto, who chaired the Cabinet meeting last Wednesday, said frequent power outages were affecting business and the country’s investment image.

A solution to the frequent outages is the unbundling of the power transmission system. According to a communication by State House, the matter was discussed extensively during the Cabinet meeting and it “resolved that the transmission line system should be unbundled so that power failure in one part does not affect the entire country.” This is expected to see power being transmitted through different routes and ensure that an outage on one end of the country does not affect the entire system.

However, to deal with the lack of funds for the maintenance and construction of new power transmission lines, the government is already looking at bringing on board private sector players.

These are expected to construct, operate and maintain power transmission lines.

The Energy Ministry said it is looking at Public Private Partnerships (PPPs) in the construction and maintenance of power transmission lines. Cabinet Secretary Energy Davis Chirchir noted that the major challenge that the country has been experiencing is the under-investment in the maintenance of power transmission infrastructure.  “There are interventions to relieve constraints on the network by ensuring that we do not carry a load that cannot be carried by those lines,” he said, adding that the challenge has been a lack of investment in the transmission network.

“The challenge with Ketraco is that it is fully funded by the government and at times like now when the government is a bit constrained, and this has been the case for a while in the last several years, we have not invested much in the transmission network.

“We are now bringing in the PPPs to build some of the networks. We are giving out Gilgil-Thika-Malaa-Konza,.. We are giving out several networks to be built by private capital. This will relieve Ketraco from looking for funding from the government.”

Energy Principal Secretary Alex Wachira said the ministry has reviewed two proposals that are now being looked at by investors, who are expected to come back to the government with a way forward.

The two are out of five transmission lines that the government plans to undertake through the PPP framework. 

Mr Wachira noted that the country needs to invest $5.3 billion (Sh811 billion ) in power transmission infrastructure to bring it up to date and eliminate the constraints being experienced.

Kenya Power pays a wheeling charge to Ketraco—a fee for the use of its transmission lines to transport electricity from power producers, which is determined by the Energy and Petroleum Regulatory Authority (Epra).

In the year to June 2023, Kenya Power paid Sh2.72 billion to Ketraco as wheeling charges. In its disclosures, Kenya Power said it still owes Sh2.59 billion. 

It is not clear how the private players in the power transmission sector would be paid, but it should be higher since unlike Ketraco, which is state-funded, the firms will be employing their own funds.

The moment that the power transmission subsector faces at the moment mirrors what the generation side of the industry faced in the late 1990s and early 2000s when the government was trying to fill the power generation gap. 

This saw Kenya Power sign Power Purchase Agreements (PPAs) with Independent Power Producers that have been a subject of controversy and blamed for the high cost of electricity.

Other than the requirement to pay the producers even in instances where they do not supply electricity to Kenya Power - costs which are passed to consumers - the contracts have been criticised as being unnecessarily long, lasting on average 20 years, appear to have left power consumers with the short end of the stick, while Kenya Power appears to have little room to renegotiate the contracts.

The PPAs have been so problematic that the Jubilee administration tried to look for a way out of the contracts on several occasions as part of recommendations by the Presidential Task Force on the Review of the PPAs.

One of the major recommendations was that Kenya Power renegotiate the PPAs. The task force noted instances where the IPPs had not met their end of the bargain as required by the PPAs, saying that Kenya Power could use this as leverage to force the power producers to the negotiation table. Kenya Power and the Ministry were however unsuccessful in getting the IPPs to agree to the negotiations. Kenya Power recently said it is still looking to renegotiate the PPAs 

In its annual report for the year to June 2023, the firm said one of its pillars for business transformation is the “reduction of power purchase costs,” adding that “this entails the renegotiation of power purchase agreements geared toward the reduction in the end-user cost of electricity.” Power players have justified the structure of the PPAs, noting that Kenya Power is the only customer for the electricity producers and hence the need for certain guarantees.

These include the requirement to pay what is termed as capacity charges, which is money power plant owners earn whether they supply power to the grid or not as long as their plants are available to push power to the grid. It is in addition to money paid whenever they supply electricity to the grid.