EDITORIAL: Audit mega investments in the local power sector

Judging by the latest developments, it is only fair to conclude that the power sector remains one of the biggest points of exposure for the Kenyan economy.

This is the sector where deals are cut left, right and centre apparently with no clear oversight.

From the expensive thermal power of the Moi era to various investments in the pipeline today, the consumer pays an arm and a leg for the massive contracts signed by bureaucrats in complete disregard of their long term cost and economic impact.

Reports coming out of the National Treasury’s debt book clearly demonstrates that this trend is far from over despite the renewed effort to fight corruption in the public sector.

It has become clear that the cost of energy is unlikely to come down any time soon despite President Uhuru Kenyatta’s Tuesday promise that small business will enjoy lower tariffs.

Forget the fact that we have established and actually finance multiple agencies that should interrogate the cost structures and independently make such pronouncements. Kenyans are set to pay a whopping Sh66 billion mainly through fixed capacity and other charges in the coming years, even as it remains clear that the economy has no capacity to absorb the amounts of power that these contracts will make available.

Basically there is nothing wrong with having excess power if it is premised on forecast economic growth and subsequent demand. Indeed, the rule of the thumb is that a country should have power reserves that is equivalent to 15 per cent of demand to cater for contingencies.

Yet over the years questions have arisen as to whether investments in the power sector are driven by prudency and demand. Notably, we have more recently allowed three investors to put up thermal power units in Thika and Athi River at a time the Turkana Wind Power was coming up, meaning we now have to pay for the idle capacity as the wind power is expected — or comes to the national grid.

The payments are guaranteed under the Power Purchase Agreements signed with Kenya Power.

Clearly, we need to fully justify the need for any new investments or end up exponentially raising our external debt and production cost. Besides, what are we doing to foster local investments in the sector? It is time full transparency is imposed on the industry.