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Economy

Why homes will pay Sh6bn electricity fine

Energy Cabinet Secretary Charles Keter. FILE PHOTO | NMG
Energy Cabinet Secretary Charles Keter. FILE PHOTO | NMG 

The Sh5.7 billion fine that Treasury will pay Lake Turkana Wind Power in penalties for failing to build a transmission line to its farm will be recovered from electricity consumers from next year.

Energy Cabinet Secretary Charles Keter told Parliament that funds, shaved off from the Constituencies Development Fund (CDF), will be recovered within a period of six years starting June next year.

Kenya had committed to start paying a monthly fine of Sh700 million through consumer bills should it fail to link the mega wind farm to the national grid by January this year.

The government failed to meet that obligation with the line, currently 70 per cent complete, expected to be ready next May, forming the basis for negotiations to defer fines payment for idle power.

The State has allocated the Sh5.7 billion in a supplementary budget to be wired to the power producer.

“We have to pay the money to avoid the financers of the wind power project invoking a section of the contract that would have seen a partial guarantee from the African Development Bank (AfDB) called,”said Mr Keter.

Delays in making the payment could have seen the AfDB pay €20 million (Sh2.4 billion) to the owners of Turkana Wind Power and financiers of the 300 megawatts wind plant under guarantee agreement.

The AfDB pay was to be triggered by the risk of Kenya Power failing to pay Lake Turkana on delays of the transmissions line. The pay could have hurt Kenya’s credit rating.

Homes and businesses will pay the Sh5.7 billion surcharge through their power bills, equivalent to Sh0.1 per kilowatt hour (kWh) spread over the six- year period.

Energy ministry officials said that the agreed surcharge with the investors stands at €638,889 (Sh78.6 million) per month, adding up to the Sh5.7 billion.

The wind farm, the largest in Africa with a capacity of 310 megawatts — enough to power up to one million homes — was supposed to inject the first 50 megawatts to the grid last October and the whole capacity by July this year.

But delays in construction of the 428-kilometre power line has hampered electricity evacuation from the northern town of Marsabit to Suswa substation in Narok, the country’s main interchange for power coming from different sources.

This has left the wind farm developers with stranded power amid pressing cash needs such as loans repayment, an obligation that taxpayers will shoulder.

Consumers will also pay another Sh4.6 billion to a special fund created at the Treasury to cushion the wind farm investors from losses, bringing the total consumer costs, outside the normal electricity bill, to Sh10.3 billion.

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