The paradox of Kenya's ever-rising power bills

The cost of electricity has gone up in recent months, while all indications are that it should have gone down or at least held steady.

Key among the factors that were billed to drive down the cost of power was the recent rains that were expected to increase water levels at key hydro dams and increase power generation from hydro plants.

This would then reduce electricity offtake from the costly thermal power plants.

Power prices for households have gone up to Sh33.50 per unit this month from Sh21.90 in August last year.

The biggest hike was seen in March this year following the implementation of a new tariff that effectively scrapped the one implemented early last year, which lowered prices by 15 per cent.

The result is that a household consuming 200 units per month saw its power bill go up to Sh6,700 in June from Sh6,350 in April.

This is in comparison to Sh5,125 that the same household paid in February this year before the new tariff had kicked in.

While the continued weakening of the shilling has been among the factors that have contributed to the high power prices, reliance on thermal power plants due to lower water levels before the onset of the recent long rains also resulted in higher prices.

However, even after the rains, the Fuel Cost Charge (FCC) component of the power bill has been on the rise in recent months. The Energy and Petroleum Regulatory Authority (Epra) increased the fuel component of the power bill this month to Sh4.49 per unit, up from Sh4.38 per unit in May.

It stood at Sh3.90 per unit in April. The fuel cost is also a pass-through cost that compensates thermal power producers for costs incurred in acquiring the heavy fuel oil used in power generation.

The rise in the fuel cost charge is despite data from the Kenya National Bureau of Statistics (KNBS) showing that there has been reduced reliance on thermal power plants this year, which power sector players noted could be due to imports from Ethiopia displacing electricity generated by thermal power plants.

KenGen said while the recent rains had resulted in higher water levels at the hydropower dams, the water levels did not get to the anticipated levels.

Before the rainy season, KenGen said, water levels at Masinga Dam - the largest water reservoir for the seven forks cascade - had reduced to 1,036 metres above sea level.

Bridge supply

This has risen to 1,044 metres, an improvement, but way below the capacity of 1,056 metres above sea level.

It is an indication that the country might not be out of the woods yet as far as reliance on thermal power plants to bridge supply from hydro plants is concerned.

Responding to a query by Financial Standard, the power producer, however, said it has increased output from geothermal to take care of the shortfall from the hydro dams, ensuring minimal use of thermal power plants.

EPRA had not responded to our request for comment about the continued rise in power bills by the time of going to press.

According to KNBS data, power production from geothermal increased 46 per cent over the first quarter of this year to 1.5 billion kilowatt hours (kWh) from 1.025 billion kWh last year.

This is even as production from hydro plants tumbled, dropping by 50 per cent to produce 424 million units of power over three months of this year from 807 million units last year.

Despite the rising fuel cost charge, output from thermal plants has been on the decline. The thermal power plants, which burn heavy fuel oil to produce electricity, generated a combined 416.53 million kWh over the first quarter this year, down from 600 million kWh last year over the same period.

KNBS numbers also show a sharp increase in electricity imports from Ethiopia, with Kenya buying 241 million units of power from Ethiopia Electric Power over the first quarter of this year.

This is up from a negligible 1.48 million units that Kenya imported last year. Imports from the northern neighbour, which generates electricity largely from hydro, are cheaper when compared to local thermal power. Other than increased production from geothermal power plants, the drop from thermal has been attributed to the dropping of two power plants from the electricity generation mix after the lapse of their power purchase agreements (PPAs).

Imports from Ethiopia, which kicked in late last year, have also helped reduce reliance on costly thermal power plants.

Kenya Power Chief Executive Dr Joseph Siror said the use of thermal is expected to further decline as PPAs of another two thermal plants - Kipevu 1 and Muhoroni Gas Turbine - are set to expire soon, and they too will be retired. This is in addition to Tsavo Power and Iberafrica, which have recently been retired.

"The recently commissioned imports from Ethiopia hydropower have reduced thermal contribution to the energy mix to below 10 per cent," he said.

Consistent increases

Dr Siror added that Kenya Power is putting in place mechanisms that will tame frequent hikes in power prices in the coming months, against a background of consistent increases in retail costs over the last nine months.

The power firm said among the areas that it is working on that will stop further rise in electricity bills is a Sh40 billion investment in stabilising its electricity distribution network, with the expansion and maintenance works set to start next month.

The company also said that it is working with other electricity sector players to complete transmission infrastructure, allowing the increased dispatch of power from cheaper plants and stepping up power imports from Ethiopia, which sells cheaper hydropower to Kenya.

"Some of the initiatives that the company has deployed to achieve this target (to supply competitively priced electricity) include network investment to ensure that the power we supply is of good quality and that it is reliable," said Dr Siror when he addressed participants at the Africa Energy Forum held in Nairobi last week.

"With a stable network, we will sell more and, therefore, lower capacity charges per unit sold, lowering the overall cost of power. To ensure a stable power network we have committed Sh40 billion towards strategic network expansion and maintenance in the next financial year, starting July 2023."

He added that the company is working with other energy sector agencies to complete key transmission projects.

These include transmission lines that will dispatch of power from cheaper generation sources to the grid. Some of the transmission lines include the Turkwell-Ortum-Kitale 220kV line, which will enable electricity from the Turkwell hydropower plant to be transmitted to parts of western Kenya.

Others include the completion of the Mariakani 400/220kV substation and Narok-Bomet 132kV line, which will enable ease of transmission of power produced at the Olkaria geothermal fields to the Coast and South Rift regions.

Dr Siror added that Kenya Power is increasingly deploying technologies such as smart metres to curb power theft.

This is expected to reduce system losses that currently stand at 22.4 per cent, with an ambition to bring them to 14 per cent.

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