No respite in sight for power consumers

Consumers will pay more for electricity if the ongoing rains do not fill the Seven Forks dams complex to required levels.

According to Kenya Power and Lighting Company (KPLC), customers will pay Sh7.90 per unit of electricity as a fuel cost surcharge for November as a result of the rising cost of diesel and fuel oil used for thermal generation.

Fuel cost will rise to Sh7.90 per unit from the previous Sh7.75. The global price of crude oil has shot from $68 in September to about $78 a barrel while Kenya’s output of cheaper hydro power has gone down.

Energy permanent secretary Patrick Nyoike said despite the onset of the short rains, the 40-megawatt Masinga hydro plant is yet to start generating electricity due to poor water inflow from the Mount Kenya catchment area.

“We are not out of the woods. It is better to have expensive power than none. Rationing of electricity has far reaching ramifications on the manufacturing industry and other key sectors of the economy,” he said.

Kenya Electricity Generating Company (KenGen) closed Masinga along Tana River in June when the water level fell to 1035.5 metres. It was one and half metres below recommend minimum operating level.

The dam is the main reservoir of the Seven Forks complex on the Tana River. KenGen then started releasing the remaining water in the dam through low level outlets to optmise generation at Kamburu Power Station on the same river.

Steep rise

There are fears that a steep rise in the fuel surcharge on power bills will lead to a steady increase of the cost of goods and services.

KPLC spokesman Migwi Theuri said the fuel cost charge is influenced by the price of petroleum products and amount of fuel used to generate power sold to the national transmission and distribution utility.

“If international prices continue to rise, it will subsequently cause an increase in expenditure on fuel used by generation firms hence an increase in fuel cost charge in customers bills. Money collected from clients is refunded to generators and does not constitute income to KPLC,” he said.

Other components of consumer bills include foreign exchange rates, inflation, taxes and levies. The rains have been erratic in the Mount Kenya and the Aberdares regions that are the main catchment areas of the dams.

Masinga, as the main reservoir of the Seven Fork dams complex, had by Thursday last week filled to one metre above the minimum operating level of 1,037 metres.

The Meteorological Department had forecast that Kenya would receive above normal rainfall during the short rains season. This raised expectations that depleted hydro power dams would be replenished.

Mr Migwi said domestic consumers pay Sh8.10 for a unit of power for 50 units up to a maximum of 1,500 after which the cost rises to Sh18.57.

Save energy

“Heavy reliance on thermal generators has increased fuel cost charges in customers’ bills. We urge them to exercise energy conservation measures to keep their bills at affordable levels,” he said.

According to the power distributor, the country has not received sufficient rain, which means that the increased fuel cost charges will be sustained or change slightly upwards due to thermal plants using more oil products to generate power.

KPLC, however, expects the fuel cost surcharge to go down after hydroelectric power plants resume optimum generation in a few months, assuming sufficient rain falls.

Apart from adversely impacting household budgets, the high cost of power has the multiple effect of forcing manufactures to raise the price of their goods, increasing nflationary pressure and hurting the competitiveness of Kenya’s exports.

Failure of the short rains to fill the dams means that consumers will have to wait for the March-to-May long rains for a reprieve.

But in the meantime, users will still bear a heavy cost burden because of continued reliance on fuel-driven power generators.

In August KenGen contracted Aggreko, an independent power producer, to provide an additional 140 megawatts of emergency electricity to cushion the country against effects of rationing.

Exit clause

The contract, signed by KenGen on behalf of the government, is expected to run for a year but has an exit clause should the Seven Forks dams be replenished.

The national power producer posted a 48 per cent increase in pre-tax profit to Sh4.56 billion in the 12 months ending June 30, 2009 as higher prices offset the impact of a severe drought.

“Hydrology this year was the worst we have had in the last 75 years. As a consequence of this, units sent out declined from 4,818 million kWh in 2008 to 4,339 million kWh in 2009,” the company said in a statement.

Earnings in 2009 were impacted favourably by the implementation of a new power purchase agreement with KPLC which made a higher average yield of Sh2.42 per kWh compared with Sh2.36 in 2008.