As Kenya’s Sh18.5 billion plan to connect close to one million households to the power grid gathers pace under the Last Mile Connectivity Project, questions continue to emerge on the socio-economic benefits of the initiative.
Experts say the plan, which is touted to place Kenya on the league of most connected countries in Africa, is now faced by low consumption, poverty in some of the beneficiary households and the perception associated by its ‘free’ model.
Under the plan in which more than 36,000 households have so far been connected to the grid — according to latest data from Kenya Power — customers are required to pay Sh15,000 to be hooked to the grid.
Those who cannot pay the fee at one go still get connected and pay in instalments through their power bills.
Majority of those seeking to be connected falls in the latter group, meaning they will have to pay at least Sh1,000 per month given the fixed charges and the minimal consumption they make every month.
Kenya Power says there has been a 46 per cent rise in the number of new customers in the last two years raising the number of those connected to more than 3 million.
The questions being raised are: Do these households need the power and will they afford or at least be willing to pay? And what if they don’t pay, how will the billions used in connecting power to thousands of households be recovered?
Smart Company spoke to economic experts about the plan funded by the African Development Bank, the Government of Kenya and the World Bank that is now at the heart of Kenya’s plan to meet universal access to power by 2020.
Nairobi-based economic consultant Gitau Githogo said even though the long term rationale of giving households power to create their economic potential under the model holds, the low consumption will hurt the power value chain and dampen the intended benefits of accessible and affordable power to all Kenyans in the long run.
The economist contend that had there been a drive to get industries with considerable electricity consumption and with attendant ripple economic benefits to the country, the plan would have been more sustainable.
“I see nothing wrong with having many people connected to power because in the long run it should have some economic benefits. But the fact that despite increased connections by more than a million customers in the last two years there has been marginal rise in consumption is worrying because then the billions being allocated for the energy sector specifically to generate power could will not be returned,” Mr Gitau said.
“Projects like the Lamu power plant will require heavy funding but who will consume this power? If there was a plan to have more industries who consume more power, create more jobs and generate more economic impact into the country, then the programme would have made an economic impact.”
Photos of Deputy President William Ruto in a grass-thatched house in Garissa connected to electricity went viral, drawing criticism whether the Last Mile connectivity would yield socio-economic benefits.
Online readers questioned the wisdom of power connection to a poor household that should first — in the right order of priorities — have access to food, water, proper shelter and good health services.
An insider involved in the project and who spoke to Smart Company in confidence said the biggest threat in collecting revenue from this approach of power connectivity is the perception that those being connected may not have asked for it and will therefore be unwilling to pay.
“Some contractors on the ground are just connecting for the fun of it and achieving some numbers. These people are supposed to repay the Sh15,000 through monthly bills and since some will barely even use the power, they will not care whether it is on or off,” the official said.
No regular incomes
“Why would they want to spare more cash monthly out of their normal expenditure when you know very well most remote areas where we are connecting people do not have regular incomes and do not spend on utilities?”
Those astonished by the images from Garissa questioned how temporary structures received approvals for electrification given the stringent safety standards required before connection.
Kenya Power, which is tasked with implementing the plan and who will be responsible for collecting the revenues from the beneficiaries, avoided questions on a fall-back plan should those connected fail to foot any bills but said costs associated with connections will not hurt the utility firm’s books.
The firm, in an emailed response to questions from Smart Company, did not also disclose costs associated with connecting a household under the scheme, only saying beneficiaries had the option to pay the subsidised Sh15,000 in full or in instalments.
“This is a government-funded project and KPLC is an implementing agency on behalf of the government hence the financing facilities will not reflect in the company’s books. Enhanced connectivity supports growth in our revenue which guarantees shareholders a better return,” the firm wrote.
With the average consumption of these consumers said to average around 20kWh per month, the nomads who may leave their houses and the rural households who had not expressed the need for connectivity may not contribute much to the growth in demand of electricity for productive purposes, or in building up Kenya Power’s revenue base.
Former Energy Regulatory Commission Chairman and energy sector analyst Hindpal Jabbal however said as much as the costs associated with connection are not directly linked to Kenya power, increased maintenance, power losses and management costs would be an extra burden to the firm which will have so many customers with very little revenue returns.
Mr Jabbal argues that the increased number of new customers will strain the power distributor’s technical, commercial and financial resources apart from increasing system losses which have gradually increased from about 16 per cent in 2009-10 to about 19 per cent in 2015-16, most of them at low-voltage levels.
Increased line faults and transformer failures driven by vandalism of the gadgets placed in remote areas, he says will also worsen the reliability of supply which has been a huge headache for the Kenya Power already.
“Most of those being connected under the Last Mile have very small consumption, actually less than a unit in a day and the government is in it purely for socio-political reasons. It has nothing to do with economics,” Mr Jabbal said.
“Of course it is funded by donor agencies and the government but in terms of losses, maintenance costs and management will be left to Kenya Power who will either want to pass the cost down to consumers or bear it either way.”
In June, Kenya Power announced investment of Sh720 million in the first phase of a live line powerline maintenance project to boost reliability.
The World Bank had also injected an additional Sh200 million towards implementation of the second phase.
The utility firm which has made all the new connections on prepaid meters to reduce metering costs spent Sh150 million to train 76 technicians to operate on 11kV, 33kV and 66kV distribution lines underlining the costs associated with keeping the masses connected.