President Uhuru Kenyatta orders talks to lower cost of power

President Uhuru Kenyatta meets controversial blogger Robert Alai as Energy Cabinet Secretary Charles Keter looks on during the Energy Summit at State House, Nairobi. [PHOTO: MAXWELL AGWANDA/STANDARD]

NAIROBI: President Uhuru Kenyatta has directed the termination of lopsided contracts with Independent Power Producers (IPPs) to reduce the cost of power.

He said it was unfair for Kenyans to continue struggling with high cost of power because of skewed deals with IPPs operating thermal generators.

IPP contracts, the President said, should be pegged on performance to ensure Kenyans have access to reliable power at affordable rates.

“If there is any unfair deal between the country and the IPPs, I urge that the contracts be legally terminated in the shortest time possible so that we can save the country from exploitation," said the President.

He was speaking at the State House Energy Summit, which brought together players in the energy sector - heavy power consumers, small-scale consumers and independent power producers – senior Government officials, ordinary Kenyans and the media.

Whereas Kenyans stand to benefit from the latest directive with prices of electricity going down, they will shoulder high charges due to a tight agreement the Government has with these independent producers.

The IPPs will be entitled to a fixed-capacity charge of $0.04 (Sh3.47) per kilowatt-hour throughout their remaining contract period, which is normally long-term and runs between 20 and 25 years.

This means the country could still face higher power tariffs in the medium-term as electricity-distributing firm Kenya Power passes the fixed capacity costs to consumers.

But even so, past calculations have indicated such a move could help the State lower the cost of power in the country by Sh7.81, a huge relief if passed on to consumers who have been grappling with high costs of power.

"We have made huge strides as a government to expand power across the country; we want to broaden the supply far and wide because apart from reaching more people, it was also important that there is equitable distribution including areas that are off the grid," the President added.

The Head of State stressed that the private sector was a partner in widening access, but that costs would have to be checked.

"As we go forward, yes, we want to encourage private sector participation in power generation but it must be done in a transparent manner to ensure Kenyans get maximum benefit," he said.

Uhuru challenged power producers and manufacturers not to transfer their inefficiencies to consumers and to let Kenyans enjoy reduced costs of electricity.

"Why should the prices of basic commodities continue to rise while the cost of power has significantly reduced?" he posed.

SEVEN CONTRACTS

According to the Energy Regulatory Commission (ERC) data, the country currently has seven 20-year contracts with IPPs operating thermal generators.

The contracts compel the country to pay their maintenance fee, which continues to drive up the cost of power.

ERC information indicates the first of the nine thermal power plants could be knocked off the national grid in 2019; that is, if no new deals are re-negotiated as has been the practice.

In the past, the country has appeared to put the burden on the shoulders of Kenyans by signing two-decade-long contracts despite recent successes in geothermal energy generation.

Energy Cabinet Secretary Charles Keter said Kenya was committed to connecting more Kenyans to the grid, through the Last Mile Project, and had covered nearly all primary schools countrywide.

"We have connected over 22,000 primary schools and recently we asked the Ministry of Education to supply us with additional details to ensure we capture all schools," said Mr Keter.

Keter said the connections would be done openly and without prejudice, so that all Kenyans could have equal chances of access.

"Every Kenyan will be connected as a matter of right and not because of who they know (for favours) in the sector. We are working to deliver on our mandate and will not be distracted from delivering power to all Kenyans," said Keter.

KPLC Managing Director Ben Chumo said thousands of Kenyans within 600m of the 5,000 transformers in the Last Mile Project would be connected to power.

"In Phase I, we are targeting 314,000 households for connection, after which there will be Phase II, III and probable IV because we have many investors willing to join the project. We want to set a record for Africa so that ours will become a case study," said Dr Chumo.

The President said the Government was working with the World Bank to expand off-grid power to ensure access in areas not served by the national grid.

"We are aggressively pushing this programme because we want to ensure that Kenyans – regardless of where they are – have access to power," he said.