Kenya Power wants the Government to pay for the extra cost of generating electricity from the expensive diesel-fired thermal generators to cushion consumers from higher bills.
Dry weather conditions have seen the hydroelectric component of Kenya Power’s energy mix halve in two months and subsequently the amount of thermal power double.
Power from the diesel component is now at 21 per cent, up from 11 per cent while hydropower has gone down from 40 per cent to 29 per cent. Geothermal, which is not affected by the weather, has remained stable at 44 per cent.
“We believe the cost can be contained in the short-term, but we are talking to the Government to come in and cushion the industry,” said the utility firm’s acting Managing Director Kenneth Tarus in Nairobi on Thursday.
He spoke at a consultative meeting with the Kenya Manufacturers Association (KAM) where he committed to double efforts to bring the cost of power down to boost manufacturing.
Prevailing dry conditions that have seen water levels in the country’s major hydro dams plummet to worrying levels have sparked fears of a possible power cuts and inflated power bills for consumers.
Hydroelectric power remains the country’s power source, accounting for 35.73 per cent of total effective capacity. Mr Tarus, however, ruled out power rationing, saying none of the manufacturers had complained of rationing even under the prevailing circumstances.
Kenya power’s Fuel Cost Charge (FCC) has gone up from Sh2.21 per kilowatt hour to Sh2.84 per kilowatt hour in the last two months.
This is a pass-through cost, meaning it is passed on to the consumer by dividing it with all the units generated from hydro and geothermal before billing clients.
Mr Tarus said the slight jump will not affect customers’ bills adversely at the moment, adding that the power distributor does not expect the cost to hit historical highs of Sh7.27 per kilowatt hour.
He was, however, quick to add that if the drought situation persists through to July, the cost may be substantial and will, therefore, require the Government to pick the tab or risk transferring the additional cost to consumers.
The situation is compounded by the rising cost of fuel as global oil prices recover. The cost of diesel, which powers thermal generators, went up by Sh5.03 this month as a result of a 20 per cent global increase in crude prices when the cargo was procured in December.
The landed cost of diesel increased by 12.07 per cent at a time when the shilling shed 1.44 per cent to Sh103.88 against the dollar. Kenya Power has said it plans to import additional electricity from Ethiopia, although it will not be added to the national grid until 2019.
Ethiopia has a 53 per cent reserve margin of entirely hydropower, hence cheaper and double that of Kenya at 27.2 per cent. Ethiopia’s power also retails at five US cents per kilowatt hour against Kenya’s 16 US cents per kilowatt hour.
Kenya Power has installed 600 megawatts in three years to put Kenya’s installed capacity at 2,327 megawatts up from 1,677 megawatts.
Effective generation capacity after factoring in power lost during production, however, stands at 2,254 megawatts against a demand of 1,640 megawatts. In three years, Kenya Power customers have increased from 2.2 million to 5.6 million, with 63.4 per cent of the country having access to electricity. The MD said the utility firm was negotiating with financiers to have 40 per cent of its supplies produced locally. Kenya Association of Manufacturers Chairlady Flora Mutahi said manufacturers have set sight on increasing production to 15 per cent of the GDP, up from the 10 per cent where it has stagnated for years.
Among the initiatives Kenya Power has undertaken to improve service to industrial customers is introduction of the Automatic Metering Reading Systems (AMR) and Smart Metres for commercial customers which ensure there is real time monitoring of consumption, hence accurate billing.
Last year, the firm introduced the Live Line Power Maintenance programme that allows maintenance of distribution lines without switching off supply. This will reduce downtime for industries and cut losses resulting from loss of production time.
The manufacturers, however, asked the firm to pay suppliers promptly to encourage them to support the Buy Kenya Build Kenya initiative.