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Outages only tell half the story of rot at Kenya Power

FINANCIAL STANDARD
By XN Iraki | Jan 18th 2022 | 4 min read
By XN Iraki | January 18th 2022
FINANCIAL STANDARD

Kenya Power engineers and technicians repair a collapsed high-voltage power line pylon in Nairobi. [David Gichuru, Standard]

Covid-19 made working from home a reality and power outages more disruptive and costly. 

This came to the fore last week due to what Kenya Power said was the collapse of towers supporting a high-voltage power line linking Nairobi to Kiambere hydroelectric dam.

I happened to be a victim of the outage that affected most parts of Nairobi. The blackout cut me off from online meetings. 

The reason given - that power supply was affected by the collapse of pylons supporting the crucial line - was the least expected.

Had I not seen Kenya Power, or is it the Kenya Electricity Transmission Company (Ketraco), replacing old posts with new concrete posts? How had they forgotten the critical pylons?

Power lines are critical infrastructure and sabotage should not arise.  Some wonder why the outages started soon after the gazettement of the new tariffs. What do the recent boardroom changes in Kenya Power mean for the energy sector? Maybe I am overthinking. 

The recent outage brings out a few issues on power generation, distribution and utilisation. I have the basics of this after studying electrical technology in high school.  

Power generation in Kenya has many players. The biggest is KenGen followed by Geothermal Development Corporation and independent power producers (IPPs).

They compete to sell electricity to Kenya Power. This market has been contentious because producers have to make money. Ideally, Kenya Power should hold auctions and buy from the cheapest supplier. But instead of auctions, the economic route to better prices, they use the legal route by getting into supply contracts that lock in the price and market.

Why are IPP contracts not public? Is Kenya Power not listed and by extension subject to disclosure of such important information? 

The utility firm then distributes that power to consumers after it is transmitted in bulk by Ketraco. Therein lies the problem: There is a monopoly in transmission and distribution. We know how monopolies behave, and Kenya Power is no exception. 

It’s another question if things would be better or worse if Kenya Power were still generating, transmitting and distributing power.

This unbundling was meant to bring competition but did not go far enough.

As far as generation is concerned, Kenya Power faces competition from other sources, including solar, batteries and non-electrical sources like wood or paraffin in rural areas.

In transmission and distribution, there is more to be done in creating competition. What does the Competition Authority of Kenya have to say about this? 

The pylon accident shows that transmission infrastructure needs renewal. Is preventive maintenance not one of the hallmarks of technology-based firms?

Did I hear that a 20 per cent system loss is allowed? Who pays for it? Why is it so hard to give Kenya Power a competitor just like with phone networks? Kenya Power’s monopoly status has led to strange power bills that charge you for fuel, inflation and forex.

Why don’t they charge for water used to generate hydropower? I have checked power bills from South Africa, the US, Canada and Australia and did not find such adjustments.

Why are other services not that “protected?” I would be very happy if my salary was indexed to inflation. 

Using Kenya Power’s argument, then matatus should charge for petrol beyond the ordinary fare, while hotels should also charge for the electricity used to cook food. 

A bill from the UK does not show details like forex, inflation and fuel adjustments. In Australia, electricity bills are purely about power, and one has the choice of which firm to buy from.

Interestingly, in the US, in the state of Massachusetts, for instance, charges include renewable energy and electric car charge. The state plans to build charging stations as it shifts to electric cars.

In South Africa, power is still unbundled from generation to distribution by the country’s electricity public utility — Eskom. But no charges like fuel and forex are included in the bills.

In Rwanda, the bill is not broken down, just like with the pre-paid bill here in Kenya. In California, the bill is equally simple with charges well explained and excludes fuel, forex and inflation charges.  

In one of my Kenya Power bills, fuel cost, inflation and forex adjustment make up 20 per cent of the total cost. 

What, then, should we look forward to beyond blackouts and the cryptic bills?  

Reduce costs

The whole country loses when power generation, transmission and distribution are not efficient. If economies of scale could not reduce costs when Kenya Power did everything from generation to distribution, why not use competition to reduce the costs?

And why are prepaid meters so hard to get, yet they are the sure route to more efficiency in power distribution? 

If Kenya Power used auctions in buying power from generating firms, efficiency should be a key consideration in awarding bids. Why not introduce competition in distribution too? Once Ketraco transmits power, anyone else can distribute it. Distributors can share posts, build more power lines, with some being buried underground.

This would give customers choice and improve quality. One Kenyan living in Canada told me he has never experienced a blackout for the seven years he has been there. 

We are on the verge of becoming a developed country, and power demand will go up. Expensive power slows down the economy. Competition increases efficiency and lowers costs. The energy sector is no different. Why not let the invisible hand of the market do its work?

If ICU prices are not regulated, why power tariffs? We need a real market for energy from generation to transmission and distribution, with more citizens now connected to the national grid. Let’s shift the focus to efficiency and reliability.

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