Economy

Treasury signals Sh1bn monthly wind power fine for households  

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Turkana Wind Power substation project in Marsabit in 2016. FILE PHOTO | NMG

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Summary

  • Treasury has allocated Sh960 million in the supplementary budget ending June that received parliamentary approved last week to Lake Turkana Wind Power as penalty for delayed injection of the plant’s 310-megawatt to the national grid.
  • Lake Turkana Wind Power agreed additional penalty of Sh1 billion monthly should Kenya fail to connect the plant to the grid beyond June due to lack of power lines built by state-owned Ketraco.
  • The Turkana wind farm was supposed to inject the first 50 megawatts into the grid in October 2016 and the whole capacity by last July.
  • However, delays in construction of the 428-kilometre power line has hampered electricity evacuation from the northern town of Marsabit to Suswa substation in Narok.

Homes and businesses will from June start paying an additional Sh1 billion in monthly electricity bills after Kenya failed to connect Lake Turkana Wind Power to the national power grid.

Treasury has allocated Sh960 million in the supplementary budget ending June that received parliamentary approved last week to Lake Turkana Wind Power as penalty for delayed injection of the plant’s 310-megawatt to the national grid.

Lake Turkana Wind Power — which has already fined Kenya Sh5.7 billion for delays — agreed additional penalty of Sh1 billion monthly should Kenya fail to connect the plant to the grid beyond June due to lack of power lines built by state-owned Ketraco.

The allocation in the budget signals the power lines will be delayed beyond June, forcing Treasury to pay the monthly penalties to be recovered from the monthly electricity bills.

“Despite the Lake Turkana Wind Power project being complete, Supplementary estimates 2 proposes an additional Sh960 million to the project which are entirely from the government,” said the Parliament’s Budget Committee.

The additional monthly penalty $9.7 million (Sh972 million) comes at time when consumers are bearing record electricity prices following increased use of expensive diesel generators following reduced cheaper hydro power due to bad weather.

Homes consuming 200 units of power paid a record high of Sh4, 262 last month, up from an average of Sh3, 727 last year and Sh3, 066 in 2013.

The Turkana wind farm was supposed to inject the first 50 megawatts into the grid in October 2016 and the whole capacity by last July.

READ: Court stops residents' appeal against Sh75bn Turkana wind power firm

But delays in construction of the 428-kilometre power line has hampered electricity evacuation from the northern town of Marsabit to Suswa substation in Narok, the country’s main interchange for power coming from different sources.

This has left the wind farm developers stranded with power amid pressing cash needs such as loans repayment, an obligation that taxpayers will shoulder.

Construction of the power line started in November 2015 but was delayed by landowners’ compensation demands and the closure of a major contractor.

The Treasury wired Sh5.7 billion September to Lake Turkana and fine will be recovered this year from consumers via monthly bills.

Delays in making the payment could have seen the African Development Bank (AfDB) pay €20 million (Sh2.4 billion) to the owners of Turkana Wind Power and financiers of the plant under guarantee agreement.

The AfDB pay was to be triggered by the risk of Kenya Power failing to pay Lake Turkana Wind Power over delays of the transmissions line. The pay could have hurt Kenya’s credit rating.