Why consumers have been paying more for electricity

Kenyans doubled the amount paid to independent power producers following the drought in the last two years. The drought has forced the country to increasingly rely on expensive non-renewable electricity generation sources.

According to Kenya Power’s financial results for the year ended June 2017, the company paid Sh22.1 billion to IPPs that use diesel to generate electricity, in comparison to Sh12.7 billion in 2016. This could explain why the cost of electricity has been going up since last year.

At the same time, the firm said it experienced marginal growth in net profit owing to higher power transmission and distribution costs. Profit after tax grew 0.9 per cent to Sh7.26 billion in the year to June 2017, from Sh7.19 billion over a similar period in 2016.

“Transmission and distribution costs increased by 16.6 per cent from Sh28.65 billion (in 2016) to Sh33.4 billion in the year. The rise was attributed to higher operational and maintenance costs on the expanded electricity network facilities, depreciation due to increased capital investment and the rising cost of doing business,” Kenya Power Chief Executive Kenneth Tarus, said.

Kenya Power said electricity generated by diesel fired plants increased 66 per cent to replace power that ordinarily comes from hydroelectricity. The country has been experiencing severe drought that started last year and spilled into 2017. This resulted in substantial reduction in the power produced from hydro-power dams such as the Seven Forks in Kenya’s upper eastern region.

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Due to this, the country has had to engage thermal power producers that use diesel to generate electricity. Whenever this happens, the entire cost of fuel is borne by consumers and is captured in the monthly power bill as the Fuel Cost Charge.

The charge is reviewed every month by the Energy Regulatory Commission (ERC) and goes up or down depending on the amount of fuel used in power production and currently stands at Sh3.35 per unit of electricity.

Higher Fuel cost

The firm, in its annual results published yesterday, said the amount of power generated by the thermal power plants grew 67 per cent to 2,165 gigawatt hours (GWh) in the year to June 2017, compared to 1,297 GWh in 2016.

“Fuel cost increased by Sh9.4 billion from Sh12.6 billion the previous year to Sh22.1 billion in the year due to increased usage of thermal sources during the year. Electricity units generated from thermal plants increased by 66.9 per cent from 1 297 gigawatt hours the previous year to 2 165 GWh,” Tarus said.

Tarus added that the amount of hydro-power the firm bought during the year reduced 13.2 per cent due to reduced water levels at the hydroelectricity dams. The amount of power from geothermal sources also went down 3.2 per cent due to technical challenges experienced in Olkaria during the year.

“This is attributable to a reduction in units purchased from the hydro generation due to poor hydrology in the year and reduced geothermal generation in the year,” Tarus said.

While announcing its results for a similar period earlier in the week, KenGen said electricity generation from geothermal decline eight per cent, which it said was due to an evacuation challenge and refurbishment works on one of its power plants in Olkaria.