ENERGY

Why Kenya Power will continue struggling

Kenyans to wait longer for cheap electricity

In Summary

• Kenya Power continues to struggle with costly power purchase agreements (PPAs) with generating capacity in the country at 2,800MW against a demand of 1,926.

• Most of the energy was projected for Vision 2030 projects, which are yet to come in place, leaving the country with high power production that is not fully utilised.

Kenya Power technicians install electricity in a village in Lamu East
Kenya Power technicians install electricity in a village in Lamu East
Image: CHETI PRAXIDES

It could take up to four years before Kenya Power is able to operate on fair capacity charges and possibly lower electricity costs for the consumers in the country.

This will be driven by increased interconnection in the region and far South, which will allow Kenya to trade its surplus energy, hence reduce the costs incurred in costly power purchase agreements for under-utilised energy.

According to energy experts, the current capacity charge is 90 per cent of the tariff revenues, as Kenya Power, which enjoys a monopoly, continues to struggle with costly power purchase agreements.

Most of the energy was projected for Vision 2030 projects which are yet to come in place, leaving the country with high power production which is not fully utilised.

“What we have is a lot of capacity that is being paid for but consumption is still low. It is quite a burden for Kenya Power because even though it's not taking the power, the cost has to be met,” David, a Nairobi based energy consultant told the Star.

The country has a generating capacity of over 2,800MW with a demand of about 1,926, the highest, recorded in February this year before Covid-19 interrupted the economy.

In its financials released to investors yesterday, through the Nairobi Securities Exchange, Kenya Power reported a net profit for the year ended June 30, of Sh262 million, a drop from Sh3.3 billion the previous year.

This, as investors continue to miss out on dividends as the company has already issued a profit warning for the year ended June 2020.

“The directors do not recommend payment of a dividend to shareholders,” the financial results, signed by company secretary Imelda Bore, stated.

The drop in profit is mainly attributed to increased non-fuel power purchase costs which rose by Sh18.1 billion to Sh70.9 billion, from Sh52.8 billion in a similar period in 2018.

This was propelled by the commissioning of two power plants with a combined generation capacity of 360MW.

The costly purchases eroded gains made on revenues from electricity sales which grew by Sh16.9 billion to close at Sh112.4 billion.

However, households are reeling with high costs of power, which average Sh10 per unit for consumers of less than 100 kilowatts per month.

“It is very difficult to plan on electricity bills nowadays. There is a variance in every token I purchase. A lot of taxes, which continue going up. Electricity in Kenya is a costly affair,” Bernard Ndwati, a Nairobi resident said.

In August, fuel index went up by 1.24 per cent, the Kenyan National Bureau of Statistics indicates.

“This was mainly attributed to an increase in the cost of electricity and kerosene by 0.52 per cent and 27.38 per cent, respectively,” KNBS said in its monthly statement.

Power interconnections between Kenya, Uganda, Ethiopia, Tanzania, South Africa, is however expected to enable the exchange of electricity easily, with the reduced operational cost of energy production expected to ease household budgets.