Firms get Sh9b pay-off to end costly power deals

Energy CS Charles Keter (left) and PS Joseph Njoroge when they appeared before Senate Energy Committee at Parliament Buildings yesterday. [Boniface Okendo, Standard]
The Government will spend Sh9 billion to pay off the owners of three diesel-fired power plants in the latest bid to retire the costly electricity production method.

It is hoped this will help to cut electricity costs for consumers as the State upscales other cheaper and more efficient sources of energy such as geothermal and wind.

However, the flipside is that it will be yet another painful pinch for the taxpayer, with similar previous attempts having had minimal impact on bringing down electricity prices.

Three plants are not the only thermal power producers and the Government would have to pay off the others that produce the bulk of the country’s electricity needs using the more costly heavy fuel oil or diesel.

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Terminating the contracts of the other power plants – seven in total – would cost the country a staggering Sh67 billion.

Energy Cabinet Secretary Charles Keter said yesterday terminating the contracts that the other plants had with Kenya Power would be more costly and it would be more prudent to let them run their course.

“Instead of paying them, we would rather leave them to operate for the contract period and only buy power from them when we need it. Paying for power that they generate during the period would be cheaper,” Mr Keter told the Senate Energy Committee at Parliament Buildings.

However, he said it would be cost-effective to terminate the power purchase agreements the three plants have with Kenya Power at Sh9 billion. Keter added that the termination would be done after the Cabinet gave its approval.

“We are working with the National Treasury on the task force report and then take it to the Cabinet for approval. After that we can make a decision to terminate,” he said.

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While the country can manage to produce electricity matching demand with minimal input from the thermal plants, it cannot terminate the contracts.

Due to the addition of 310MW of power from the Lake Turkana Wind Power project and another 55MW from the Garissa Power Plant, the country’s installed capacity has gone up to about 2,700MW.

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