Price hike looms as State disowns cheap electricity promise

The Kenya Power offices along Harambee Avenue, Nairobi. [Jonah Onyango, Standard]

That “the cost of no electricity is more expensive than expensive electricity” is a tag that Kenyan authorities have used to justify the high cost of power.

It is one that David Ndii appeared to be holding onto last week when he threatened Kenyans with power outages if they were not willing to continue paying higher power prices.

The economist came under criticism from Kenyans on social media last Thursday when he told them that power prices were not going to reduce any time soon and that they had no option but to get used to it. Ndii, the the chairperson of President William Ruto’s Council of Economic Advisors, also made a bold denial that Kenya Kwanza had promised to bring down the cost of electricity.

His utterances were in contrast to his boss’ assurances that the government is working on reducing power costs.

This could also be the clearest pointer that power prices will go up beginning April, when Kenya Power proposals to hike the cost of electricity - currently under review by the Energy and Petroleum Authority (Epra) - are expected to take effect. 

Ndii said if Kenyans were not willing to pay the price, the country would deteriorate to the point where South Africa finds itself. South African businesses and households have to deal with blackouts lasting up to 12 hours daily in the country’s worst power crisis. In his social media post, Ndii also denied that the Kenya Kwanza government promised cheap power.

“On power bills, we have two choices. Costly power available (24 hours a day seven days a week), or cheap power available a few hours a day, like South Africa,” said the economist in a tweet.

“If you cared to peruse our manifesto, you would have noted that cheap power does not feature in our pledges on electricity.” The threat of blackouts was taken by many as a way of silencing Kenyans and even businesses that have been agitating against the high cost of power.

It could also be a way to mentally prepare Kenyans for a possible hike in the cost of power in the coming months.

After his statement on Twitter denying President Ruto’s promise of cheaper power, social media users would go on to retrieve the manifesto and highlight the areas that said the Kenya Kwanza government – then campaigning for the job – had promised to lower electricity costs.

In the manifesto, Ruto’s party promised to “improve (electricity) reliability” and “bring down the cost of electricity”. 

It went on to give a three-point plan on how it would “bring down the cost of power”. It said it would revamp the electricity transmission and distribution network and accelerate geothermal resources development.

It would also develop Liquefied Natural Gas (LNG) storage facility in Mombasa, with a view to phasing out heavy fuel oil (HFO) from the power generation portfolio. Power plants that use HFO to generate electricity have been cited as playing a key role in pushing up the cost of power. Ndii, however, dismissed the Kenyans that were pointing this out, claiming that they did not understand what they had read. 

“Bring down the cost here refers (to cost) of production. The listed are heavy medium term capital investments that will not bring down the tariff any time soon,” he said, adding that reduction in production costs did not imply that tariffs would go down. 

Other than contradicting the manifesto that he played a critical role in drafting, Ndii also appears to be contradicting his boss on the cost of energy matters.

In January, the President said his government had put in motion plans that will see power prices come down within the next year. The plan includes completion of power transmission lines that would enable the country to use power plants that are currently not in use due to lack of infrastructure. 

These include the Turkwell hydro power plant not fully utilised due to lack of transmission lines, according to President Ruto, and a number of geothermal wells that have been drilled but continue to lie idle. 

“We are going to spend Sh1 billion to sort out three transmission lines so that we can retire the plant that we have at Muhoroni which is producing energy at 52 US cents (Sh65)… we are getting power from our hydros at 4 US cents (Sh5). Can you compare between four US cents and 52 US Cents?

“This is because we have power at Turkwel and other hydros that we are not using because of lack of transmission lines,” said Ruto in the televised interview reviewing his three month-old administration at the time.

“I have instructed that we complete these lines within the next 10 months so that we make sure we bring down the cost of energy because we will retire some of these thermal plants that are causing this huge cost.”

“We have 400MW of capped geothermal and I have instructed that we should move with speed to unlock that potential.” The geothermal wells include those that the Geothermal Development Company (GDC) drilled in Menengai and handed over to private firms to develop power plants but for nearly a decade, the companies are yet to start building the power plants.

President Ruto said in the coming years, the government would juggle between using the resources that Kenya has efficiently while exploring how to retire the remaining thermal power producers. He said there was need to “have to have a candid discussion with our thermal energy producers” which he acknowledges are needed to meet power demand especially during peak hours but remained too expensive.

Different scripts

In all, Ndii and his boss appear to have been reading from different scripts. Ndii’s tweet did not sit well with many Kenyans, including the Consumers Federation of Kenya, which noted that Kenya Kwanza had been elected on among other things the promise of bringing down the cost of electricity. The consumer lobby also noted that bringing down the cost of power is key in reducing the cost of living.

Without bringing down power costs, Cofek Secretary General Stephen Mutoro noted, the government might not sustainably bring down the cost of living. “Whether Kenya Kwanza Alliance promised affordable energy for Kenyans is no longer the issue. What is crucial is reducing the cost of living highly premised on such costs of energy. It’s part and parcel of the their manifesto,” said Mutoro. He added that Ndii was misleading Kenyans about the country having only two options - of either paying more for power or having no power - noting that this was a simplistic answer to a very complex problem.

“It appears to me that Ndii is obviously playing a dangerous game - of testing the unpopular IMF conditions in which they want over-pricing of commodities, especially fuel and electricity,” he said. Mutoro said electricity system losses - which is the difference between what Kenya Power buys from generators and what it sells to consumers - stand at about 22 per cent. The larger proportion of this inefficiency is borne by consumers.

“Kenyans are resoundingly saying no to higher electricity tariffs. There is no justification...KPLC can never account for 22 per cent of the electricity it buys. That is significant. The global threshold is about 10 per cent.”

In the Kenya Power application that is being reviewed by Epra, Domestic Lifeline consumers - the subsidised consumers band - will see electricity cost nearly double to Sh14 from Sh7.70 up from the tariff published in January 2022 that led to a 15 per cent reduction in cost of power. 

This is the cost of energy before taxes, levies and pass through costs (fuel and forex adjustments) are loaded.

Ordinary domestic consumers will see their power prices increase to Sh21.68 (also before taxes and levies are loaded) up from Sh12.60 per unit in the tariff that was published last year January. The average cost of a unit of electricity across all consumer categories, including the commercial and industrial will increase. With the addition of taxies, levies and the pass through costs, some of the consumer segments will see their per unit cost of power increase to more than Sh30.

When the proposed tariff was being subjected to public participation, a senior Energy Ministry official explained the rationale behind the increase that Kenya Power was asking for.

Like Ndii, he noted that if Kenya Power and the industry failed to mobilise adequate resources to reinvest in power generation and transmission, Kenyans would easily find themselves where South Africans have found themselves. “We do not want to end where South Africa is at the moment, where while the demand kept growing, the investments were curtailed by suppressing growth in tariffs, which in turn led to under investment in generation and transmission.

“Eskom (the country’s electricity utility) has been left without adequate capacity,” said the official.

“If there are no investments in the sector, we are going to go down. Then we will not be talking about high prices but a crisis of darkness. The cost of darkness is more expensive than expensive power.”

South Africa’s power sector is said to be too old and prone to failure, with some reportedly being unavailable 50 per cent of the time.

The sector also failed to invest especially over the last three decades and the country now has to grapple with higher demand for power that its power production capacity cannot meet.

Successive governments refrained from increasing power costs and at some point even offered electricity free of charge to households using 50 units of power per month. Kenyan authorities – including Ndii – are now singling out the consumer friendly tariffs as the cause of the crisis in South Africa.

However, numerous reports show that corruption within South Africa’s power sector has robbed the industry of resources to plough back into power generation and transmission.

Reports say systemic corruption and mismanagement at Eskom over the years are largely to blame for the crisis that the country is experiencing today. A recent commission of inquiry on corruption in South Africa’s public sector recommended criminal prosecution of Eskom’s former board of directors for overseeing an era of graft. The Presidential Taskforce on Review of Power Purchase Agreements in 2021 noted that corruption in Kenya’s electricity sector “remains a distinct challenge”.

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