Threat of high electricity cost real as Adani bags Ketraco deal

President William Ruto and Mama Miriam Njeri, a beneficiary of the last mile electricity connectivity project in Kirungu village, Murang'a county. [File, Standard] It is now an open secret that Kenyans may soon face rising electricity cost following the government's recent Sh95 billion ($736 million) agreement with Adani Energy Solutions. This deal is aimed at developing and maintaining critical transmission lines and substations across the country. Reports from Indian media have sparked concerns among consumers and industry experts about the potential for increased utility bills, echoing a troubling trend seen in regions where Adani operates. During an assembly session, Gujarat State Energy Minister Kanu Desai revealed that the price of electricity purchased from Adani Power in Gujarat rose by a staggering 102 per cent between 2021 and 2022. Specifically, the price per unit surged from Rs3.58 to Rs7.24, which, based on current exchange rates, is an increase from approximately Sh5.51 to Sh11.14 per unit. If this steep rise were to be replicated in Kenya, it raises alarms about the future cost of electricity in the country. Some observers are concerned that Adani may have the upper hand in negotiating terms favourable to itself, potentially at the expense of Kenyan taxpayers. Kisii Senator Richard Onyonka, a vocal opposition leader, has openly criticised Adani's attempts to expand into various sectors. He believes the secrecy surrounding the deals is intended to exploit taxpayers and has called for greater transparency, urging that Kenyans be involved in the process at every level. "The systems in Kenya are designed to fail so that people can grab public resources," he stated. Onyonka highlighted that the cost of electricity purchased from Adani Power by the Gujarat government rose significantly without any tariff adjustments from the state, suggesting a worrying precedent for Kenya. Under the agreement, Adani is set to manage the constructed transmission lines and substations for 30 years, after which all assets will be transferred to the Kenya Electricity Transmission Company Limited (Ketraco) in good condition and free of encumbrances. Adani is also required to pay the Kenyan government a success fee of Sh1 billion ($8 million), calculated as one per cent of the total project cost. The deal is structured as a Public-Private Partnership (PPP), with Adani planning to build a 400-kilovolt transmission line spanning 208.73 kilometres from Gilgil through Thika to Konza. The project will also involve new substations in Gilgil, Thika, and Malaa. Additionally, a 220-kilovolt line will stretch 99.98 kilometres from Rongai to Keringet and Chemosit, and a 132-kilovolt line will cover 89.89 kilometres from Menengai to Rumuruti, including a substation along its route. Adani also plans to construct a 132/33-kilovolt substation in Thurdibuoro, Kisumu County. Ketraco has stressed the importance of timely project completion, requiring Adani to finalise developments within 24 months of signing the agreement. Should the company fail to meet this deadline, Ketraco retains the right to enforce performance security or terminate the agreement. Funding for the project will be a combination of debt and equity in a 70:30 ratio. Energy Cabinet Secretary Opiyo Wandayi has assured the public that the government will not bear any financial burden from this initiative. However, past experiences raise doubts about the deal's potential benefits. In Gujarat, the cost of electricity from Adani Power increased from Rs2.83 (approximately Sh4.23) in January 2021 to Rs8.83 (about Sh13.26) by December 2022. Despite these significant hikes, the Gujarat government purchased 7.5 per cent more electricity from Adani in 2022 compared to the previous year, increasing purchases from 5,587 million units in 2021 to 6,007 million units in 2022. Over two years, the Gujarat government spent Rs 8,160 crore (Sh131.7 billion) on electricity from Adani Power, covering both fixed charges and per-unit costs. This spending came despite a 2007 agreement allowing Adani to supply power at rates ranging from Rs2.89 (approximately Sh4.33) to Rs2.35 (about Sh3.52) per unit for 25 years. Rising coal prices and Adani's reliance on imported coal from Indonesia limited its ability to generate electricity, prompting the Gujarat government to approve rate increases and sign supplementary agreements. Experts in India have expressed concern over how the Gujarat government plans to manage escalating costs related to purchasing electricity from private producers such as Adani Power. Local media predict that the government may adjust Fuel and Power Purchase Price Adjustment (FPPPA) charges, which are part of residential consumers' bi-monthly electricity bills. While officials claim that electricity tariffs remain stable, incremental increases in FPPPA charges paint a different picture. Mohammed Hersi, a prominent figure in Kenya's tourism sector, commented, "Adani must feel at home in Kenya," alluding to the 102% rise in electricity costs purchased from Adani Power in Gujarat. As of March 2024, electricity in Kenya costs $0.222 (Sh24.65) per kilowatt-hour (kWh), significantly higher than the global average of $0.136 (Sh15.10) per kWh. These charges include power generation, distribution, and taxes, with several key charges contributing to the high bills. Among these are a 16 per cent Value Added Tax (Sh3.94), a Fuel Energy Charge (Sh3.97), a Forex Charge (Sh0.77), a Regulatory Authority Charge (Sh1.16), a Water Resource Management Authority Levy (Sh1.60), a 5 per cent REP Charge, and an Inflation Adjustment of Sh18.19. For commercial users, electricity costs $0.170 (Sh18.88) per kWh, compared to a global average of $0.124 (Sh15.10). Consumers currently pay Sh26.57 per kWh. Rwanda ranks highest in Africa for electricity costs at $0.259 (Sh28.76), followed by Cape Verde at $0.255 (Sh28.32), and Mali at $0.232 (Sh25.76). "We have consistently raised concerns and remain firm that the Adani deal must be carried out in accordance with the law. Kenyans must get value for money from these projects. Transparency, accountability, and responsiveness are our clarion call," Senator Onyonka reiterated. In March 2021, then-President Uhuru Kenyatta established a task force to review Power Purchase Agreements (PPAs) between Kenya Power and electricity generators. This followed concerns that Kenya Power was buying more electricity than it could sell, leading to high capacity charges for idle plants. The review revealed that consumers are paying Sh31 more per dollar due to a weakening shilling compared to the rates when contracts were signed at Sh72 to the US dollar in 2001. The task force recommended renegotiating, suspending costly deals, and terminating ongoing negotiations.

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