Electricity tariffs to remain high despite onset of rains

Energy economists predict that the fuel charge will cross the Sh8 mark next month on increased use of thermal power to the national grid and the surging fuel prices.

“Obviously when petroleum prices go up, one can expect an increase in electricity prices,” said Mr Peter Nduru, a director at ERC, adding that the power cost could come down after “two months of continuous rainfall.”

Already, private power supplier Aggreko is expected to inject more thermal power into the national grid in the coming weeks.

In mid August, KenGen, on behalf of the Government, contracted Aggreko to provide an additional 140 megawatts of emergency power to cushion the country against effects of the power shortfall.

The British firm has since injected a portion of the power to the national grid and is expected to add the remaining portion in the coming weeks, says sources at KenGen, adding that the contract could be terminated in December should the rains replenish the hydro dams.

Last month, KPLC bought 521 million kilowatts hour (Kwh) of electricity with thermal contributing 278 million Kwh, according to the Kenya gazette notice.

This means that thermal accounted for 53 per cent of total amount of electricity that KPLC bought from KenGen and Independent Power Producers (IPPs).

The fraction is lower than last months 59 per cent, but its impact on pricing was higher due to rising petroleum prices.

(Oil prices have risen by more than $12 per barrel since last month).

At 53 per cent, the contribution of thermal is way above past trends where it normally accounts for about 16 per cent of the country’s total generation capacity with the hydro sources providing 70 per cent of Kenya’s power needs.

But the lower than expected rainfall the country has witnessed over the past two years has cut the contribution of hydroelectric power by nearly half, leading to the closure of some plants such as Masinga due to low water levels.

Players in the power sector say the country must receive two months of continuous rains for the hydro power plants to operate at their optimal capacity.

With the country being heavily dependent on the rain-fed hydro power sources, power rationing was rolled out from August but it was withdrawn last week following the supply of emergency power from Aggreko.

The power shortfall has created a fertile business opportunity to private power generators as the state controlled power generator KenGen, which supply’s about 75 per cent of the country’s power needs, struggles to get financing to construct power plants.

The private investors including Aggreko, OrPower and Tsavo Power control half of the country’s power supply up from 25 per cent 2007 due to reduced contribution from KenGen which relies heavily on hydro power.