State’s power generation exit could up tariffs

By JAMES ANYANZWA

KENYA: Key power projects are likely to grind to a halt due to what Energy and Petroleum Cabinet Secretary Davis Chirchir attributes to under-funding by Treasury.

The funding shortfall has seen government transfer the responsibility of generating power to Independent Power Producers (IPPs).

 The arrangement undercuts promises to lower costs of energy in the country.

Kenyans could also face a future of higher power tariffs if the government transfers a bulk (80 per cent) of its generated power to the IPPs.

Power costs

Most IPPs rely on diesel or heavy fuel to generate electricity — a fact that adds to the high cost of power. The fuel cost adjustment component in the monthly electricity bill has also been a major cause for concern for power consumers.

It accounts for as much as 40 per cent of what power consumers pay for electricity.

Several projects have already been handed to IPPs including the construction of Coal Power Plant in Lamu, which is earmarked to generate between 900MW to 1000MW of power.

Others include the generation of 700MW to 800MW of power using liquefied natural gas at Dongo Kundu in Mombasa and production of 900MW to 1000MW of Coal power at Mui Basin in Kitui Country.

Mr Chirchir yesterday said the arrangement would see up to 80 per cent of the proposed 5,000MW of power in 40 months generated by the IPPs.

The government’s role will now be limited to financing the evacuation of power from source and distribution to homes and business premises.

Chirchir said the cutting of his ministry’s budget from Sh20.3 billion in 2012/2013 to the current year’s allocation of Sh9.7 billion has affected implementation of projects, particularly those of the parastatals under the ministry.

According to Chirchir, Treasury mainly provided counter-part funding for projects whose financing agreements have been executed between the Government and the respective development partners.

As a result, Chirchir’s implementation of key power projects during the current fiscal year (2013/2014) is under threat without additional funding.

“This reduction will adversely affect implementation of the planned projects,” Chirchir told a parliamentary committee on Energy, Information and Communication in Nairobi last week.

 He said additional funding amounting to Sh6.17 billion is required for immediate implementation of over 5,000 MW projects.

These include Menengai-Lanet (15km), Menengai-Rongai (25km), Silali-Rongai (150km), Dongo-Kundu-Mariakani (50km) and Lamu-Kitui-Nairobi East.

Additional funds

Chirchir said his ministry requires an additional Sh31.86 billion from the exchequer to fund the operations of seven parastatals that are critical in the government’s plans to produce 5,000MW of power in 40 months.

He said the utility firms   under his watch, which are severely underfunded, include the Kenya Electricity Transmitting Company  (Ketraco) and Geothermal Development Company (GDC). Others are Kenya Nuclear Electricity Board, Energy Regulatory Commission, Kenya Power, Rural Electrification Authority and KenGen.

 Of the additional funding requirements the lion’s share (Sh10.28 billion) would go to Ketraco, which requires counter-part financing from the government to secure loans for new projects.

Some of these projects, which are being implemented by Ketraco, include The Eastern Electricity Highway (Ethiopia-Kenya-686km) and Lessos-Tororo (127km), Olkaria-Lessos-Kisumu (300km).

Others are Machakos-Konza-Kajiado-Namanga (155km), Torkwel-Ortum-Kitale (90km), Sondu-Homa Bay-Ndhiwa-Awendo (100km) and Nanyuki-Isiolo-Meru (90km).

GDC requires Sh6.8 billion additional cash for drilling services and drilling materials.

Funding shortfall

Kenya Power and Rural Electrification Authority require Sh6.4 billion and Sh6.44 billion respectively.

KenGen also requires an additional Sh1.8 billion from the exchequer to settle part of the Sh5.85 billion owed to them by GDC for drilling services rendered in Olkaria Geothermal fields.

The Kenya Nuclear Electricity Board requires Sh57 million to procure a consultant with international experience to carry out detailed analysis for nuclear power plant sites.

The Energy Regulatory Commission requires an additional Sh66 million to achieve its regulatory mandate and objectives.

During this year’s budget parastatals in the Ministry of Energy and Petroleum received an accumulated Sh8 billion of Exchequer allocations with KenGen missing out completely.