Kenya’s shocking electricity bill

WHEN UGANDA AND TANZANIA WERE COMPELLED to introduce loadshedding last year, businesses and retail clients in Kenya were relieved to learn that the country’s electricity utilities would not follow suit.

That relief has all but evaporated, thanks to a nearly 100 per cent increase in electricity tariffs effective from July. According to the Kenya Power and Lighting Company, the huge rise in the tariffs is accounted for by an actual rise in the cost of electricity of about 25 per cent, as well as levies for generator fuel, the rural electrification programme, the Energy Regulatory Commission, forex adjustments and VAT.

The bottom line, however, is that consumers will have to pay more for electricity at a time when the accent is on reducing the costs of doing business. The fact that all countries in region are facing similar power crises underlines the gravity of the problem.

At the core of East Africa’s electricity woes is low public investment over the years in generation capacity, transmission and distribution. Weaknesses in the latter mean that paying customers, for example, have to compensate for equipment-related transmission losses and theft through illegal connections.

The shortfalls in generation are telling. With a population of about 100 million, Kenya, Uganda and Tanzania jointly generate just over 2,000MW. Compare that with South Africa’s 40,000 MW for a population of 48 million.

This has meant that the region is bridging power shortfalls through expensive power purchase agreements with independent power producers (IPPs), whose contracts were negotiated during times of crisis. Needless to say, many of the agreements are exploitative and, in this era of stratospheric fossil fuel prices, unsustainable.

What East Africa’s power woes indicate is that there is a need to rethink the power sector’s reform agenda to focus it on the cost to the customer. Proper cost-benefit audits of such players as IPPs must be conducted, and the wisdom of splitting utilities into ever-smaller bodies with expensive independent executives questioned.

Elsewhere, governments in the region must again engage with the power generation sector to reconfigure the mix towards more cost-effective and sustainable solutions such as geothermal, solar and wind energy.

The current situation in Kenya, where consumers are made to pay for expensive imported fossil fuels even as the country sits on more than 2,000MW of geothermal potential, is simply shocking.