Delay in lowering electricity costs bad for investment

-Editorial

A plan to increase electricity generation four-fold within the next 40 months will not be met and Energy and Petroleum Cabinet Secretary Davis Chirchir must explain why this is happening to existing and potential investors.

Even ordinary consumers deserve to know what has changed between the time the promise was made and now.

The Government’s seemingly unilateral revision of the date when it would generate the extra 5,000 megawatts promised earlier, brings into question other major projects, including the million-acre irrigation project in Tana County that was supposed to kick-off sometime this year.

To be sure, the two key projects have had more than their fair share of critics and one did not have to be a declared skeptic to doubt the government would deliver on its promises. The talk then that the government might have been over-reaching itself appears almost prescient now.

Investors need fresh assurances that  plans by KenGen to commission a 280MW geothermal plant in Olkaria next year are on schedule. Similarly, assurances that the Lake Turkana Wind Power Company’s plans to start the construction of the 300MW wind plant would be in order.

The two projects would help in de-commissioning the costly thermal generators which produce slightly over 600 MW. Consumers in Kenya are paying three times the global average for electricity. This is particularly ruinous to heavy industrial users for whom the cost of power accounts for almost a third of their entire production cost. 

Assurances were given at the time of their introduction that thermal generators would be de-commissioned once the water levels in the dams used to generate hydro-power returned to normal. But that never happened. Instead, more companies entered the now obviously lucrative business.

A second look

The real challenge facing the entire government is to take a second look at the promises it made slightly over six months ago and determine what it can deliver, when, and then communicate this to the local and international publics.

This would allow the business community to revise its investment plans, too. But even as the government sorts out the country’s electricity power needs, it also should pay attention to other issues that are restraining companies interested in investing in the African — and by extension local — market.

A study by technology firm, IBM, found out that African senior business executives are putting regulatory concerns and people skills before market, technology and macro-economic factors as their priorities over the next three to five years.

The study titled “The Customer Activated Enterprise” also revealed that chief executives of companies operating in the region are worried about frequent changes in regulatory regimes in the respective countries they operate in.