Taxpayers face big load in Sh128.9bn electricity plan
A Kenya Power worker inspects a transmission line. Electricity distribution will soon be liberalised after Parliament voted to end the monopoly which has been enjoyed by the Kenya Power and Lighting Company for over 50 years. Photo/File
What you need to know:
A team set up by the government to look into ways of raising the additional funds with minimum impact on the consumer is considering a raft of measures that include government subsidy and cutting system waste.
The firm plans to spend Sh17.8 billion on the second phase of its electricity expansion project (KEEP), Sh45 billion in support equipment and Sh16.9 billion on refurbishing its transmission system.
The taxpayer will have to fork out a big chunk of the Sh128.9 billion that Kenya Power requires to expand its transmission system after the government blocked the company’s plan to raise tariff two months ago.
A team set up by the government to look into ways of raising the additional funds with minimum impact on the consumer is considering a raft of measures that include government subsidy and cutting system waste.
“At this point, I cannot say which of financing options will carry the day because the discussion involves all stakeholders including the Treasury and Energy ministry,” Energy Regulatory Commission (ERC) director- general Kaburu Mwirichia said on Tuesday.
To meet rising demand for electricity, the Kenya Power has lined up expansion projects to raise additional 1,248MW in the next five years.
The firm plans to spend Sh17.8 billion on the second phase of its electricity expansion project (KEEP), Sh45 billion in support equipment and Sh16.9 billion on refurbishing its transmission system.
If the team agrees on direct grant from the State, electricity will join the growing list of items being subsidised by the taxpayer. The long list already has primary and secondary education, tax rebates, urban food programme, fertiliser, maternity fees and laptops.
Sources have intimated that the State, which currently holds 50.8 per cent of the electricity distributor has been keen on providing additional financing in exchange for more shares that will raise its stake in the strategic national asset.
The additional financing could also come from other shareholders or debt market even as Mr Mwichia maintained it was still early to rule out passing some cost to the final consumer.
Those pushing for extra capital argue that that efficiency resulting from increased investment and the country’s shift to renewable energy will soon drive down electricity costs, enabling security holders to recoup their investments.
On Tuesday, Mr Mwirichia said investors were currently showing increased interest in the country’s renewable energy resources after the government revised its feed-in tariff incentive in 2010.
By April 2013, the energy and petroleum ministry had approved 80 expressions of interests (EoI) from the private sector targeting to generate 1900MW from solar, wind, small hydro, biomass and sea waves, the ERC data shows.
Of the EoIs, one project is currently generating power to the grid and three power purchase agreements (PPAs) signed, the ERC officials said yesterday as they launched a renewable energy portal in Nairobi.
The portal will work as a one-stop information counter offering guidance on licensing and regulatory requirements for renewable energy project development in Kenya.
“We have noted that lack of comprehensive, accurate and reliable energy regulatory landscape in Kenya has been a significant barrier to private sector participation,” said Mr Mwirichia.
Under the government’s Vision 2030 plan to turn the country into medium income economy in the next 17 years, a total of 20,000 megawatts —one quarter of it from geothermal — will be generated.
