Why power prices are up despite State pledges

Long term: Government seems unable to terminate expensive agreements with independent producers
Kenyans might have to live with the reality that the cost of power might never come down. This is despite numerous promises of cheap power by authorities and investments worth billions of shillings.

In the past year alone, the cost has gone up 15 percent to about Sh4,760 in May for a household consuming 200 units of power per month, compared to Sh4,122 for a similar amount in July last year.

The recent surge has been on the prolonged dry spell experienced last year but also the new tariff announced in August 2018 that had the effect of pushing up costs for some electricity consumer segments, including the mid-tier domestic consumers.

The price increase over the last year is consistent with the trend in recent years. In 2013, consumers paid Sh3,373 for 200 units per month on average, according to data by the Kenya National Bureau of Statistics (KNBS), and this has risen to Sh4,269 in 2018.

With the cost of everything going up including that of supplies in the market, and the power industry working within the same environment as other Kenyan businesses, why would power bills go down?

Several factors come to mind but top on the list is because cheap electricity was one of the things that President Uhuru Kenyatta used to get the buy-in of industry and that of the common folk. In the initial months of his term, he said the Government would pump in billions of shillings into the energy sector, which would substantially cut power bills.

The investments, the President said, would “lower electricity prices by at least 50 per cent” by 2016.

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Other factors as to why Kenyans would expect cheaper power are the investments that have gone into the power industry. The Government and private sector have pumped in billions, with the most recent and highly visible projects being the 55 megawatts (MW) Garissa Solar Plant and the Lake Turkana Wind Power project in Marsabit County.

Energy Cabinet Secretary Charles Keter said while the cost of power may have gone up for some customers, the Government has made attempts to protect the low-income segment.

"For many people, the cost of power is low, consumers using one bulb and use it between 7 pm and 8 pm,” he said, referring to the people on the lifeline tariff.

Households consuming an average of 100 units per month enjoy a discounted rate of Sh10 per unit. The lifeline band covers 5.7 million power users, according to the Electricity and Petroleum Regulatory Commission. Fitting into the band, however, requires one to use 100 units of power or below for at least three consecutive months.

It is the other consumers that have to grapple with the possibility that power prices may never come down.

"We have been working on modalities to bring the cost down but it is progressive and cannot happen in one day. We have PPAs (power purchase agreements) with power producers and they are long term. What we are doing is what will be coming to the grid must be cheaper,” said Mr Keter.

So far, what the Government has done has failed to work and worse, it is comparing itself with markets whose citizens have much stronger spending capabilities than Kenyans.

"The cost of power is relative. Even if you reduce to the cheapest ever, people will still want it cheaper,” said the CS. "We have analysed the cost of power and we are still cheaper than many countries such as Germany, Japan or the US.”

"Some countries subsidise their power such as Egypt and Ethiopia and that is why they might be cheaper. South Africa tried but you can see that Eskom (the South African power utility) is collapsing and when that happens, they may start experiencing power rationing. We do not want our utilities to go that direction.”

Other factors that have kept up the power prices are thermal power plants. The Government, while publicly pushing the idea that it is phasing out the diesel-fired power plants, has failed to find a way out of the PPAs that they have with Kenya Power, with the likelihood that the Government will just let the contracts run their life.

Some of these contracts go way past the year 2030.

The installed capacity of thermal plants went up last year to 807.7MW compared to 806.9MW in 2017, despite the commitment to do away with the plants.

Keter said the Garissa solar plant and Marsabit wind farm came in handy during the dry weather that persisted early this year. While Kenyans experienced the high cost of power, he said, it could have been worse had the two plants not come into play.

He said the renewable energy had the impact of reducing reliance on thermal plants, even though the latter’s contribution to the power generation mix rose to 20 per cent, up from about 10 per cent when the country experiences normal rains in a year.

Solar power contributes two per cent of the power generation mix while wind injects between 15 and 18 per cent to the mix.

“Without the two plants over the last few months when our hydros were low, the cost would have been higher. We have been able to subsidise with the wind and solar, otherwise our generation mix of the thermals would have gone up to 30 per cent but we managed to keep it at 20 per cent,” the CS said.

An ageing power transmission infrastructure and new developments that have failed to keep up with the needs of the country are also partly to blame for high power costs.

Thus a region like Western Kenya has to rely on the gas turbine at Muhoroni and imports from Uganda as a dilapidated line connecting the region to Olkaria’s cheap geothermal power would be too costly to run and might result in more losses than gains.

“We are working on transmission lines. The Olkaria-Lessos-Kisumu line is 75 percent complete, we should be able to complete to be able to evacuate more power from Olkaria to that region without running the 60MW Muhoroni thermal power plant,” said Keter.

“Uganda is giving us about 50MW to the western region and without it, we would have been rationing power in the area.”

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Power pricesKenya powerElectricity rationing