Kenya will buy power from Ethiopia at 6.5 US cents per kilowatt for the next five years before it can be allowed to renegotiate.
Ethiopian Electric Power (ECC) has revealed a clause in the power purchase agreement that says Kenya Power can only seek a review of the tariff after that period.
Kenya signed a 25-year deal with the Horn of Africa’s nation to start importing electricity from next month in a bid to edge out the expensive power from the national grid and ensure buffers to meet peak demand.
The clause allowing tariff renegotiation is a key plank for the State-owned utility to get cheap energy that will then be passed on to consumers in the form of lower bills.
“Ethiopia would sale this electric power at a price of 6.5 US cents per one-kilo watt for the coming five years having the room of negotiation table concerning tariff adjustment which was requested by Ethiopian Electric Power after five years,” reads a communique by ECC. This means that the earliest the talks to review can happen is 2027.
High tariffs charged by independent power producers have squeezed Kenya Power’s ability to lower the cost of electricity.
Kenya Power was unable to effect a second cut of 15 percent on power charges following failure to broker a deal with power producers to lower the wholesale tariffs.
The first cut of 15 percent was gazetted at the start of this year and allowed homes and businesses to enjoy lower bills before it was reversed last month.
Kenya Power buys the bulk of electricity from Kenya Electricity Generating Company (KenGen) at Sh5.3 per kilowatt-hour but other IPPs have priced their power as high as Sh195 for the same unit.
KenGen accounts for 70 percent of the electricity supplied to Kenya Power with the 21 IPPs supplying the balance.
The room to renegotiate lower tariffs is key to Kenya Power’s efforts of providing cheaper electricity and easing pressure on homes besides offering investors attractive rates in a bid to make local products more competitive.
Electricity prices jumped 15.7 percent last month reversing the January cuts of equivalent value that were gazetted by the former administration of President Uhuru Kenyatta.
The jump pushed a kilowatt hour to Sh25.3 for domestic consumers who use more than 100 units a month.