Ethiopia will become Kenya’s second biggest source of hydropower from November under a deal by Kenya Power to buy 600 Megawatts from East Africa's most populous nation.
This follows a 27-year power purchase agreement signed on Thursday that will run till 2047 as Kenya turns towards cheaper sources of electricity.
The power from Ethiopia Electric Power (EEP) is expected to cost between Sh6 and Sh7 seven cents a kilowatt hour which is lower than the average of Sh10 a kilowatt hour offered by power producers.
The new deal which is expected to edge out the expensive power from the national grid promises to increase the capacity charges - the money paid to thermal power generators when Kenya Power does not buy power from them.
But the lower tariffs will help the State-owned utility further lower bills on households and businesses, helping ease the pain on the cost of living and boost Kenya’s attractiveness to manufacturers.
“The agreed tariff is competitive and will see Kenyans enjoy power at a lower cost. EEP will be the second largest power supplier to KPLC aside from the KenGen Hydros Eastern Cascade at 600MW,” Kenya Power acting Managing Director Geoffrey Muli said on Thursday.
The high tariffs charged by independent power producers (IPPs) have squeezed Kenya Power’s ability to lower the cost of electricity.
Kenya Power buys the bulk of power from Kenya Generating Company (KenGen) at Sh5.3 per kilowatt-hour but other IPPs have priced their power as high as Sh195.
Kenya signs power purchase deal with Ethiopia
Kenya cut consumer power bills by 15 percent in January, easing the pain on households and cutting the operational costs of manufacturers.
But Kenya Power has been unable to further lower bills by another 15 percent as promised by the government due to reluctance by the IPPs to lower their tariffs.
Kenya Power has remained adamant about the push to sell power below its buying prices from the IPPs without assured savings and reduced prices from the suppliers.
The government gave Kenya Power Sh14 billion to partly cushion the company from the losses caused by the 15 percent cut.
