Cheaper electricity on the way as State cuts thermal deals

The government has terminated part of a contract for emergency power supply, giving rise to hopes of cheaper electricity following improved rainfall.

At least 60 megawatts of emergency power provided by Aggreko will be withdrawn from the national grid after two weeks, offering relief to power consumers who have seen power bills rise by 60 per cent over the past year.

The surge in power bills is attributed to the increased use of thermal power after poor weather cut the contribution of least cost hydro power to national grid, prompting the government to hire expensive temporary suppliers in August.

The weatherman announced that the country was entering a season of adequate rainfall to run from this month until May, which is expected to replenish the generation dams.

“The water levels at Masinga have improved and we anticipate it will improve further. We had already retired 40 megawatts of power generated from thermal sources by December and we intend to retire a further 60 megawatts by end month leaving us with a balance of 190 megawatts,” Mr Joseph Njoroge, the managing director of Kenya Power and Lighting Company (KPLC) told NTV in an interview on Wednesday.

This means that consumers should expect lighter bills from May.

A drop in hydro-power’s contribution to the national grid has in the past year seen electricity bills rise about 60 per cent, driven by fuel cost charges — a varying item on the bills that is linked to the amount of power on the national grid generated from thermal sources.

The fuel cost charges had risen from Sh3.92 in March 2009 to Sh7.49 this month, sparking uproar in Parliament this week on claims that the power firms are profiting from the power crisis.

The KPLC chief says the fuel cost charge could fall to below Sh3.50.

“Many consumers have complained about high costs of electricity in the recent times and this is solely because we have had to rely on the more expensive thermal power,” said Mr Njoroge. “The choice has been tough as to whether to switch off customers or to provide them with the more expensive power. The latter proved the better option for the sake of continuity of economic activity.”

The reduced cost of electricity will be a relief to the 1.2 million consumers most of whom have suffered significant losses of purchasing power on expensive basic household items and stagnant incomes.

It also offers relief to industrialists who have been complaining about expensive electricity, arguing that it is blunting their competitive edge in the regional market where low priced goods have emerged as the key driver of market share growth.

The World Bank says that the power crisis including supply and costs is shaving 1.5 per cent off the country’s GDP in lost business opportunities, besides weakening the country’s competitiveness in attracting fresh investments.

Observers have argued that Kenya was playing on dangerous zone if the power rates stayed higher than the regional average, making them to lose on the pricing front.