The Sh1.3 billion dubbed connectivity subsidy aims to cushion the utility from losses given that it sells the power to the remote towns at price lower.
Kenyan consumers connected to the national power grid use a mix of cheaper geothermal, hydropower and thermal electricity.
Those off-grid are limited to thermal power and a small share of solar energy.
Taxpayers are set to shoulder a Sh1.3 billion burden for Kenya Power to continue offering electricity to remote zones in the north via expensive diesel generators.
The Treasury has allocated the cash for the utility firm to continue charging homes and businesses in 17 towns not linked to the national power grid at rates similar to the rest of the country despite the areas relying on expensive diesel-generated electricity.
The Sh1.3 billion dubbed connectivity subsidy aims to cushion the utility from losses given that it sells the power to the remote towns at price lower than the cost needed to generate it.
“This money is payable to Kenya Power and is meant to subsidise the cost of electricity in off-grid counties, which are run by thermal plants,” said Energy secretary Charles Keter.
“All consumers currently pay the same tariff, even though power in such areas is very expensive because it is thermal. Transporting the heavy fuel to these places is also expensive. So this provision is meant to standardise cost.”
Kenyan consumers connected to the national power grid use a mix of cheaper geothermal, hydropower and thermal electricity.
Those off-grid are limited to thermal power and a small share of solar energy. Kenya Power spends between Sh23 and Sh40 to produce a unit of power in the towns not linked to the grid and sells the same at between Sh11 and Sh17. This translates to losses of up to Sh23 per unit for the distributor.
Taxpayers will now offset the loss through the connection subsidy—which has for the first time been introduced in the national budget.
The off-grid towns where power is lower relative to costs include Wajir, Mandera, Marsabit, Lodwar, Lokichoggio, Moyale and Elwak. Others are Baragoi, Rhamu, North Horr and Eldas.
These towns are not connected to the national grid due to the heavy investments on electricty lines needed to link northern Kenya to power plants.
It is for this reason that Kenya imports power from Ethiopia to feed the neighbouring Moyale town, which is also not linked to the power grid.
Rural Electrification Authority (REA) plans to set up 100 small solar plants in the off-grid towns to light up majority of homes and wean those connected of thermal power use.
The agency reckons that connecting off-grid towns by stretching the national grid would take longer and gulp enormous resources, making solar the most viable alternative.
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