Power bills hit 5-year high amid investments in cheaper sources

Increased usage of thermal power plants in electricity generation drove consumers’ power bills to a five-year high last month, new data shows.

The upward trend is despite several attempts by the Government to bring down the cost of power in the country, including a new pricing structure as well as increased power production from greener and cheaper sources.

According to the Energy and Petroleum Regulatory Authority (EPRA), the sharp rise in power bills last month was largely due to the cost passed on to consumers by producers when using heavy fuel oil in generating electricity.

EPRA said in a notice the Fuel Cost Charge (FCC) component stood at Sh3.75 per unit of electricity last month from a low of Sh2.50 in August last year when the Government announced a new power tariff.

The component has, however, eased marginally to Sh3.70 this month, meaning if you use 200-kilowatt hours (KWh) or units of power, your monthly bill will come to around Sh4,750 compared to Sh4,390 in August last year when the new tariff came into effect.

It was even lower at about Sh4,122 in July just before the new power tariff was announced.

“Notice is given that all prices for electrical energy… will be liable to a fuel energy cost charge of plus 370 cents per KWh for all metre readings to be taken in June 2019,” said EPRA in last Friday’s Kenya Gazette notice.

Despite the marginal drop in FCC this month, it has pushed power bills to the highest level since August 2014. At the time, consumers paid Sh25 for a unit of power compared to Sh23.79 today.

The money is used to compensate power producers using heavy fuel oil or diesel in power production.

Waning competitiveness

The higher power costs are despite the addition of two new plants powered by wind and solar, touted as cleaner and cheaper for consumers.

The two plants in Marsabit (wind) and Garissa (solar) with a combined generating capacity of 360 megawatts, increased the country’s installed power generation capacity to 2,711 megawatts (MW) as of December last year.

Power from the two plants is priced at about Sh8 (wind) and Sh5 solar per unit – which is the cost before other components are loaded to electricity – and comparable to geothermal at about Sh7.

They were expected to play a major role in reducing reliance on the costly thermal power generators.

Thermal plants had an installed capacity of 807MW, second only to hydro at 826MW.

They are usually a fall back plan in instances where the other power generation sources cannot produce adequate electricity to meet the country’s demand.

This includes a reduction in the output by hydroelectricity dams owing to long dry spells.

The poor rains experienced over the March-May long rains season might see a further reliance on thermal power in the coming months, translating to even higher power bills for consumers.

A drastic rise in electricity costs in the recent past has been blamed for the waning competitiveness of Kenyan goods in the regional markets, with firms operating in the Economic Processing Zones (EPZs) registering a major spike in their operational costs last year.

According to the EPZ Authority Chairman Paul Gacheru, power costs registered the highest rise over the period, rising 22.7 per cent mainly on the back of a prolonged dry spell. This resulted in high reliance on the costly thermal electricity generators.

Cumulatively, firms operating in different EPZs across the country, Mr Gacheru said, paid Sh947 million for power last year, compared to Sh772 million in 2017.

Following the commissioning of the Lake Turkana Wind Power plant, the amount of wind power feeding the national electricity grid has shot up and is now the third largest power source in the country.

According to data by the Kenya National Bureau of Statistics (KNBS), electricity using wind accounted for 15 per cent of power consumed in the country. Out of the 965.9 million units of power consumed in January this year, 147 million were from the wind.

Geothermal remained the largest power source, with the Olkaria plants producing 417 million units of electricity translating to 45 per cent of power consumed in the country, with hydro coming in second at 282 million units or about 28 per cent.

Hydroelectricity took a hit following power rains during the short rains season between October and December last year, resulting in a drop in its share of the power mix and compares to 400KWh produced in July accounting for 44 per cent of the power consumed in the country during the month.

Following the commissioning of the Turkana wind as well as the Garissa solar plants, the country’s installed capacity rose to 2 711MW, according to the Kenya Economic Survey 2019. This is against a peak demand of 1 800MW.

“Total installed capacity increased by 13.7 per cent to 2,711.7 MW in 2018. This was mainly due to the injection of 310 MW and 50 MW wind and solar capacity in the main grid respectively, from Lake Turkana Wind Power Plant and Garissa Solar Power Plant,” said the survey. “Similarly, geothermal installed capacity increased by 1.7 per cent to 663.0 MW in 2018. Thermal installed capacity also increased from 806.9 MW in 2017 to 807.7 MW in 2018.”