Economy

Kenyatta orders audit of thermal plants amid high cost of power

UK

President Uhuru Kenyatta. PHOTO | FILE

President Uhuru Kenyatta has threatened to end government contracts with some Independent Power Producers (IPPs) engaging in cartel-like behaviours for more profits while burdening consumers with higher bills.

“I believe there has been a lot of cloud around signing agreements with IPPs that has cost the country heavily,” the President said during an energy summit at State House, Nairobi.

“Those arrangements that are not cost-effective to Kenyans must be terminated – in a legal way – in the shortest time possible,” he added.

President Kenyatta has now ordered for a review of all the power contracts in efforts to boost transparency and cut costs for homes and businesses and make the economy competitive.

READ: KenGen switches off Aggreko power deal this month

State-backed KenGen is the largest producer (over 80 per cent) of electricity consumed in Kenya, largely from its geothermal and hydroelectric plants. Kenya's cost of electricity remains high, and a key reason for the country's high cost of doing business. Despite being able to attract key global service and technology firms, it has failed to attract significant manufacturing investments.

The remaining share is filled by IPPs most of whom operate diesel-fired plants and have 25-year power purchase agreements. They include Gulf Power, Iberafrica, Triumph and Thika Power.

Diesel-fired electricity is three time more expensive than geothermal (Sh7 per unit) and seven times costlier than hydropower(Sh3).

The IPPs are paid a fixed capacity charge whether they generate power or not, meant to cover their investment.