[kictanet] Vision 2030: ICT and Other Sectors Converged (Day 3)

Mon Jan 2 01:42:14 EAT 2012

Ladies and Gentlemen,

David's well articulated summary herein below on the going's on in the Energy Sector to date ( David I hope you do not mind working on an Energy concept Paper as requested 

by the Vision 2030), quite clearly indicates that we are in the woods as we have stated before. 

It is imperative that we realize that if we have to bring energy efficiencies to speed and develop & industrialize this economy, electricity  has to lead from the front. 

It therefore follows that we must  streamline the main players – very critical. We cannot tolerate a situation where investors are in full flight citing the high cost of  

electricity to set up industry here at home, while neighboring countries can easily accommodate their needs.

I suppose that we can note with satisfaction the efforts being undertaken in electricity generation so far, as earlier assessed. However we have to address  the 

distribution sector.

For me, I would be keen on three areas:

1.    The ‘goings-on’ at the  Distributor – KPLC.  If whether it is a parastatal, quasi-parastatal or its ownership remains a ‘mystery shroud’ to date, we need to resolve this now. Does this interfere in any way with operational/pricing efficiencies filtering to the consumers? There needs to be transparency with a critical national utility Service provider such as this.. So can the right honorable gentlemen please clear the air on this?  Grace.., possibly we could request Hon Rege for comment on this or get on board an active member of the Committee on Energy..?

2.    Monopoly – We still insist  - Competition breeds competencies. Can we systematically begin working on breaking up the monopoly setup we currently have in place. What happened to the Energy Act 2006  that was to remove monopoly of Kenya Power as distributor …?

3.    ERC – Am still yet to fully comprehend the makeup structure/mandate. Can we make it work better – especially, on Electricity/Oil..?

Bw PS, while we may fully agree that Solar energy is a viable alternative am afraid that by our standards here and now, we can only develop some small scale domestic consumption in the short term. This won’t

really make any much dent in KPLC’s side. Meanwhile, we are discussing driving economy /industrial growth in the mid-term/long term for Vision 2030. Electricity has to carry out the job and drive this.

The general concern we all share right now is that, while we are actively scaling up efforts to generate more power to fuel our growth, we might just have to content with a bottleneck distribution, and this is currently only done by KPLC and so far, this state of affairs is quite unsatisfactory.

Harry

-----Original Message-----
From: kictanet-bounces+harry=comtelsys.co.ke at lists.kictanet.or.ke [mailto:kictanet-bounces+harry=comtelsys.co.ke at lists.kictanet.or.ke] On Behalf Of David Otwoma
Sent: Sunday, January 01, 2012 10:35 PM
To: harry at comtelsys.co.ke
Cc: KICTAnet ICT Policy Discussions
Subject: Re: [kictanet] Vision 2030: ICT and Other Sectors Converged (Day 3)

Solomon,

Having moved from Science & Technology (under Ministry of Higher

Education, Science and Technology) to Nuclear Electricity Project

(under Ministry of Energy) there are some perceptions that the PS of

Information & Communication have that needs further interrogating.

While working outside Kenya (1998 to 2006) I was privileged to visit

many countries that operated nuclear power plants for electricity

generation and will share experiences from a few.

In France the energy giant is called EDF.see

http://france.edf.com/france-45634.html It is like combining Kenya

Power (distributors), KETRACO (transmitters), KenGen (generators) and

a myriad of others e.g. Nuclear Electricity Project, Geothermal

Development Co, Rural Electrification, etc. EDF owns power stations

(58 nuclear power plants, coal and gas power generators, hydro power

stations). EDF also owns the transmission lines (for both high and low

voltages) and EDF is also a great marketer (sells electricity to over

30 million customers in France and over 25 million outside France).

Yet the government of France owns the lion share in EDF. What we call

here Independent Power Producers are insignificant in France. In fact

the regulators, who for example control the nuclear power

infrastructure (called the French  Nuclear Safety Authority see

http://www.french-nuclear-safety.fr/ ) has only 5 Commissioners (2

selected by the President, 1 by the Prime Minister –the French have a

system whereby the losing party produces the prime Minister – one by

the equivalent of COTU, one by the professional in the nuclear

industry). This is similar to USA where Nuclear Regulatory Commission

also has 5 Commissioners, 3 chosen by the party in power and 2 by the

losing party. In both France and USA nuclear is therefore a national

matter and is not reduced to part politics.

In USA by contrast what we call here IPP reign supreme. In nuclear for

example some equivalents of our Tana and Arthi River Develoment

Authority, Kerio Valley Authority I;e; Tennesse Valley Authority own

both hydro and nuclear power plants. Municipalities too own power

companies. So too do equivalents of IPPs here. Different entities also

own transmission and distribution lines.

What is in USA is more of an exception and not the rule. The

rules/laws in USA for example would not tolerate a scenario where a

serving people’s representative (in Senate or Congress) would be a

wanted person for deals done when s/he was a Secretary (of State,

Energy, Treasury etc.) and a former MD (President in USA energy firm)

would be ‘respectable’ public figures after questions bordering on

criminality arise.  Most of the world (Russia, China, Japan, South

Korea, Iran, Egypt, etc.) the government irrespective of the party in

power plays a very visible role in energy generation, transmission,

distribution and marketing. In Egypt for example electricity is

cheaper for manufacturers (hence fruits grown in Egypt by irrigation

using electricity to pump water from the nile to orchards are cheaper

in Kenya than our own locally produced fruits with rain fed

agriculture!) and heavily subsidized for the population so as to

ensure 98% electrification (Kenya we are just blow 20% while in

Hungary upto year 1999 every human habitation it was the duty of the

government to connect it with electricity that costs less than kshs.

40 per month for the dweller then irrespective of consumption).

Hansard has a report with the following in it.

The Energy Act 2006 removes monopoly of Kenya Power as distributor.

The Committee on Energy, Communications and Information was

constituted on June 17th 2009 and its membership is as follows:-

1. The Hon. (Eng.) James Rege, M.P. Chairman

2. The Hon. Maina Kamau, M.P Vice Chairman

3. The Hon. Danson Mwazo Mwakulegwa, M.P

4. The Hon. Mohamed Hussein Ali, M.P

5. The Hon. (Eng.) Nicholas Gumbo, M.P

6. The Hon. Edwin O. Yinda, M.P

7. The Hon. Emilio Kathuri, M.P

8. The Hon. Ekwee Ethuro ,M.P

9. The Hon. (Prof.) Phillip Kaloki, M.P

10. The Hon. Cyprian Omolo, M.P

The Committee is mandated to consider:-

• Development, production, maintenance and regulation of Energy.

• Communication.

• Information.

• Broadcasting, and

• Information Communications Technology (ICT) development.

The Committee executes its mandate in accordance with the provisions of Standing

Order 198 (3), which is –

a) to investigate, inquire into, and report on all matters relating to

the mandate,

management, activities, administration, operations and estimates of the assigned

Ministries and Departments;

b) to Study the programme and policy objectives on Ministries and

Departments and

the effectiveness of the implementation;

c) to Study and review all legislation referred to it;

d) to study, assess and analyze the relative success of the Ministries and

departments as measured by the results obtained as compared with their stated

objectives;

e) to investigate and enquire into all matters relating to the

assigned Ministries and

departments as they may deem necessary, and as may be referred to them by the

House or a Minister; and

f) to make reports and recommendations to the House as often as possible,

including recommendation of proposed legislation.

Further, Standing Order No. 152 provide that:-

(1) Upon being laid before the National Assembly, the Annual Estimates

shall stand

committed to the respective Departmental Committees according to their

mandates.

(2) Each Departmental Committee shall consider, discuss and review the Estimates

committed to it under this standing order and submit its report thereon to the

House within twenty one days after they were first laid before the House.

Ministries assigned

In executing its oversight mandate the Committee oversees the

following Ministries:-

i) Ministry of Energy

ii) Ministry of Information and Communications.

On Wednesday14th April, 2010 during the Afternoon Sitting, the Member

of Parliament

for Mumias Constituency, Hon. Benjamin Washiali asked the Ministry of Energy the

following Question by Private Notice.

a. What is the relationship between Kenya Power and Lighting Company

(KPLC) and Rural Electrification Authority (REA)?

b. How much money has the Ministry paid to KPLC through REA since its

inception to date?

c. Could the Minister provide details of the amount paid as dividends to the

major shareholders of KPLC since its privatization?

In addition to this Question, the Member for Yatta, Hon. Charles Kilonzo had on

Tuesday 16th March, 2010 asked a Question on overcharging of

electricity consumers

by KPLC.

The two questions elicited a lot of interest from Members who sought

to know whether

KPLC is a parastatal or a private company, its shareholders, whether it receives

funding or financial support from the Government, its working

relationship with REA,

the amount of dividends it had paid to its shareholders over time and

other issues

surrounding its ownership and management. As a result, on 14th April, 2010, the

Speaker directed that the Departmental Committee on Energy, Communication and

Information should take up this matter and file a report in the House.

KPLC is a public company that was incorporated in 1922 as a private

company and was

later listed in the NSE in 1954. On diverse dates between 1960 and 1975, the

government bought KPLC shares totaling to 32,853,268 which represents

40.4% of the

voting shares of the Company. It is responsible for transmission,

distribution and retail

supply of electrical energy to end users. It purchases power in bulk

from KenGen and

the IPPs through bilateral contracts or Power Purchase Agreements

(PPAs) approved

by ERC.

KPLC is responsible for ensuring that there is adequate line capacity

to maintain supply

and quality of electricity across the country. The interconnected

network of transmission

and distribution lines covers about 41,486 kilometers. It has more

than 1,500,000

customers who consumed over 5,432 Gigawatt hours of electricity in the

financial year

2008/9. During the year, the maximum daily electricity peak demand recorded was

1,072 MW.

The Energy Act and the Sessional Paper No. 4 of 2004 on Energy widely

liberalized the

energy sector in the country which was started in 1997 when KenGen was

formed out of

KPLC. The Policy Paper among others established a single energy regulator and

unbundled KPLC to form KETRACO, REA and GDC.

KPLC is the only licensed supplier, distributor and retailer of

electrical energy in Kenya

KPLC is a single buyer for all the power generated in Kenya and

injected into the interconnected grid for sale to the consumers. The

trading arrangements between KPLC and each of the generators are

governed by a long-term Power Purchase Agreement (PPA) approved by

ERC. Such PPAs comprise capacity charge, energy charge, fuel pass

through and inflation indexed clauses. The retail tariff structure

comprises of a fixed charge, energy charge and capacity charge.

On Wednesday 14th April, 2010, while answering a Question by Private

Notice by Hon.

B. Washiali, the Assistant Minister for Energy, Hon. M.M. Mohamud was

not clear on

whether KPLC is a parastatal or not. At one point he informed the

House that KPLC was

a private company with the Government as one of the shareholders. At

another point,

he informed the House that ‘…KPLC is a Government parastatal, but a different

parastatal from other parastatals. It is in a different category with

other parastatals. There are parastatals which are not listed at the

NSE. So this is different to that extent.’ The Government needs to be

clear on whether KPLC is a Government Parastatal or a private company.

The Committee notes the importance of KPLC to service delivery in the

country and that

the achievement of Vision 2030 depends on the success of the

electricity sector. It is

evident that the Government largely supports KPLC through guaranteed

loans and profit

plough-backs and also appoints a majority of directors to the company’s Board of

Directors. Further, the Company’s vehicles have blue registration

number plates, a

preserve of parastatals contributing to the uncertainty as to whether KPLC is a

parastatal or a private company. Due to the importance of the

electricity sector in the

country and the regular support offered to KPLC, the Government should not allow

KPLC to be in the control of business people who are motivated by profits at the

expense of the citizens.

KPLC could be termed a State Corporation if it was ‘wholly owned or

controlled by the

government or by a state corporation’ in accordance with the

definition proffered in the

State Corporations Act. Following the disposal of shares by NSSF, the

Company does

not meet the requirements stipulated for it to qualify as a state

corporation. Furthermore,

KPLC has not submitted fully to the provisions of the Public Audit

Act, by having its

accounts audited by the Controller and Auditor General and submitted

to the National

Assembly for examination by the Public Investments Committee (PIC).

he Controller and Auditor General last submitted audited accounts for

KPLC for the

year 2001/2002. PIC queried the non submission of KPLC accounts for

the subsequent

years in its 12th Report of 2004. Thereafter, accounts for the

financial year 2007/2008

were tabled in December 2009. That notwithstanding, in 2004 PIC examined the

following non accounting issues:-

i) KPLC’s pension’s scheme,

ii) Contracts between KPLC and IPPs,

iii) The general financial status of the company and

iv) Supply of treated poles during the Financial year 2004/2005 (13th Report).

The Committee therefore recommends that:-

i) The Government proceeds with the conversion of some of its 7.85% redeemable

non-cumulative preference shares (87.12 million shares which Treasury has

approved) into ordinary shares at a ratio of 1:1 and retains the

ordinary shares so

as to raise its stake in KPLC to 75% thus qualifying the company as a

parastatal.

The Government’s shareholding in KPLC be determined by the shares held in the

name of the Permanent Secretary, Treasury and not other state agencies who

might later on dispose their shares without approval from the Treasury.

Before unbundling of electricity generation from transmission and

distribution in the

1990s, there were 5 major players in the power sector, namely Kenya

Power Company

(KPC), Tana River Development Company (TRDC), Tana and Athi Rivers

Development Authority (TARDA), Kerio Valley Development Authority (KVDA) and

KPLC. The initial unbundling comprised first merging TRDC and KPC in 1996 to KPC

which changed its name to KenGen in 1998. The second step comprised

consolidating

all the power generation assets, owned by the five (5) parastatals

under KenGen and

the transmission and distribution assets under KPLC. By October 1999, all power

generation assets from KPLC, TRDC, KPC, TARDA and KVDA were transferred to

KenGen at ‘depreciated replacement costs’. Similarly, transmission and

distribution

assets owned by other entities were transferred to KPLC at depreciated

replacement

costs.

The Committee recommends that, like the previous unbundling:-

i) All assets under the REP since 1973 should be tracked and taken over and

reflected in the books of REA. Currently such assets are owned by the Government

but under KPLC.

ii) All transmission assets should be tracked and taken over and

reflected in the books

of KETRACO. Currently such assets acquired before the formation of KETRACO in

2008, are owned by KPLC while KETRACO will own new assets that it will develop.

KPLC should surrender all transmission assets to KETRACO.

iii) All assets under geothermal exploration and extraction held by

KenGen (including

Olkaria I & II) should be taken over by GDC to avoid the Government competing

with itself.

The Committee notes that ERC has failed to deliver on its mandate

especially with

regards to protecting energy consumers. This is reflected in the high

costs of electricity

in Kenya as compared to its neighbours which is a key factor in

driving investors out of

the country. Further, the high electricity costs cause most Kenyans to resort to

traditional sources of energy such as charcoal and firewood, further

depleting our

environment. While unbundling the electricity sub-sector, the

Government intended to

make the electricity clean, quality and affordable which is evidently

not the case.

The Committee also notes with concern that under the Energy Act, ERC

is expected to

ensure that the industry players such as KenGen remain profitable and

viable which

impacts negatively on the consumers despite the PPAs guaranteeing reasonable

profits. The Committee therefore recommends that the Energy Act be amended and

that ERC puts in place feedback mechanisms to ensure that demand is met with

reliable, cost effective and high quality energy services in an

environmentally friendly

manner.

The Committee further recommends that the Government increase its subsidies for

the transmission and operation costs so that they are not reflected in

the tariffs and the

consumer bills.

The Committee notes that the public is misinformed on the operations

of the various

players in the power sector and recommends that the Government carry out public

education to inform the public on the various initiatives and power

players which will

promote transparency in the energy sector. Further, the price

variations reflected on

the consumer bills should be demystified to the public.

In conclusion what PS, Ministry of Information and Communications

raises i.e. inviting Hon Rege who is Chairman of Energy and

Information & Communication to shed light on how the Committees

recommendations have been taken up by the relevant institutions.

In conclusion and as noted in some earlier debate, energy is an

enabler and the current situation is not sustainable i.e. Kenya is

dominated by petroleum and electricity which are the prime movers of

the modern sector economy, while wood fuel provides energy needs of

the traditional sector including rural communities and urban poor. At

the national level, wood fuel and other biomass account for about 68%

of the total primary energy consumption followed by petroleum at 22%,

electricity at 9% and others including coal at about less than 1%.

This is not sustainable as electricity providing less than 10% of

energy yet we plan to industrialize! The October 2011 National Energy

Conference revealed that even the 20+% oli bill almost 10% goes to

burn in diesel generators to produce the expensive fuel levy reflected

in electricity bills. While making Dr. Ndemo play Presidential

aspirant it was concluded that while electricity has the least Cost

Power Development Plan team doing 20 year rolling plans no such

activity is in the oil sector! Is that by design or its a long term

oversight? Wood (read biomass) never got any country on earth

industrialized and hence government cannot (should not) wait for

Independent Power Producers to invest in energy, as the easiest return

(short term of course) is in charcoal burning, followed by burning oil

(again returns occur in less than a Parliamentary term) not putting up

a nuclear power plant.

Best wishes for 2012 to all.

David

On 12/31/11, Solomon Mbũrũ Kamau <solo.mburu at gmail.com> wrote:

> Dr. Ndemo,

> With due respect, I find your comment on listers' popints to Mr. Mugo

> not satisfying (to your expectations). However, in the foregoing, I

> understand that most of us were not privy to the conception of the

> Vision 2030, and perhaps, we were raisin issues per what we see

> happening, for example on energy. Kenya Power as a monopoly enjoys

> 100% benefit in the power sector, yet in the ccompetitive and

> liberalized world, competition thrives when the market is not capped

> on one firm. Kenya Power, while being good in blackouts, stills enjoys

> support from the government, yet as we speak about achieving the

> Vision, energy is the most important aspect driving us towards the

> realization of the flashship projects pointed out.

> Generally, without education, there is nothing like achieving

> development in it's full scale.

> 

> In my view, I think the contributors interrogating Mr. Mugo did their

> level best to make the Vision clear in a layman language, more

> sepcifically, Mr. Mugo himself.

> 

> Regards,

> 

> Solomon

> 

> 

> On 31/12/2011, bitange at jambo.co.ke <bitange at jambo.co.ke> wrote:

>> Eric,

>> I am not done with your questions yet.  On Government blocking investment

>> in

>> energy.  This is what we are trying to address: The role of government in

>> enterprise.  If you go deeper into Schumpeter's theory, you will find that

>> no government can block an idea or innovation whose time has come.

>> 

>> When Graham Bell invented the telephone, the British Post dismissed the

>> idea

>> saying there were enough messengers around.  With the invention of mobile

>> telephony, the land line is undergoing the same fate it brought to

>> communication early in the 20th century.  This is what is called "creative

>> destruction".

>> 

>> We must understand this theory if indeed we want to survive in the days to

>> come.  In my recent visit to China, I saw what the future would be like.

>> A

>> city the size of Nairobi is using both solar and wind energy to light up

>> street lights.  This innovation even in Kenya does not require government

>> approval.  Further we have enriched the Arab world far too long when we

>> use

>> parrafin to power our rudimentally oil lamps.  Instead we should by now

>> have

>> provided a simple battery, a solar panel and a micro wind vane to every

>> household for energy supply.  This will save us billions of dollars that

>> we

>> can invest in preventive medical care.

>> 

>> Your problem is that you want to replicate what you have seen in advanced

>> economies.  Your approach would fail.  You must first create the market

>> through simple understandable solutions.  The demands for energy will then

>> be incremental such that even if you were to build 10,000 MW you have a

>> ready market.

>> 

>> On colonialism;  This is non sense in my view.  Those who colonized us are

>> dead and most of those who were colonized are dead too.  We must not

>> forget

>> that this happened but our focus should be to build confidence in

>> ourselves

>> to face the world.  Take China for example, Japan dominated them but they

>> have not spent their lives grumbling about the past.  They have faced up

>> to

>> Japan and today they compete on an equal footing.

>> 

>> Although parts of Africa are still under the French colony, you must be

>> grateful that the British colonized us.  The British were only interested

>> in

>> domination and material wealth.  The French's integration approach still

>> has

>> implications on their colonies.  Indeed as I write there are Africans in

>> Africa who consider themselves French.  There are African states that

>> still

>> pay French tax.  Mineral resources on African continent still belong to

>> France.

>> 

>> I have nothing against the French.  If our Francophone brothers feel

>> comfortable this way, let it be.  The best we can do is to face up to our

>> colonial power, leverage on the Common Wealth

>> Association to build a new alliance that benefits all of us.  Together we

>> have more voting power and ability to lead the agenda.

>> 

>> 

>> Regards.

>> 

>> Ndemo.

>> 

>> Sent from my BlackBerry®

>> 

>> -----Original Message-----

>> From: "Eric M.K Osiakwan" <emko at internetresearch.com.gh>

>> Sender: kictanet-bounces+bitange=jambo.co.ke at lists.kictanet.or.keDate:

>> Fri,

>> 30 Dec 2011 15:51:57

>> To: <bitange at jambo.co.ke>

>> Cc: KICTAnet ICT Policy Discussions<kictanet at lists.kictanet.or.ke>

>> Subject: [kictanet]  Vision 2030: ICT and Other Sectors Converged (Day 3)

>> 

>> _______________________________________________

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>> people and institutions interested and involved in ICT policy and

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>> sector in support of the national aim of ICT enabled growth and

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>> 

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>> The Kenya ICT Action Network (KICTANet) is a multi-stakeholder platform

>> for

>> people and institutions interested and involved in ICT policy and

>> regulation. The network aims to act as a catalyst for reform in the ICT

>> sector in support of the national aim of ICT enabled growth and

>> development.

>> 

>> KICTANetiquette : Adhere to the same standards of acceptable behaviors

>> online that you follow in real life: respect people's times and bandwidth,

>> share knowledge, don't flame or abuse or personalize, respect privacy, do

>> not spam, do not market your wares or qualifications.

>> 

> 

> _______________________________________________

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> Unsubscribe or change your options at

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> 

> The Kenya ICT Action Network (KICTANet) is a multi-stakeholder platform for

> people and institutions interested and involved in ICT policy and

> regulation. The network aims to act as a catalyst for reform in the ICT

> sector in support of the national aim of ICT enabled growth and development.

> 

> KICTANetiquette : Adhere to the same standards of acceptable behaviors

> online that you follow in real life: respect people's times and bandwidth,

> share knowledge, don't flame or abuse or personalize, respect privacy, do

> not spam, do not market your wares or qualifications.

> 

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