[kictanet] KENYA POWER TO 'EXIT' RURAL ELECTRIFICATION MARKET - A CASE OF THE TAIL WAGING THE DOG?

Thu Aug 15 15:56:50 EAT 2013

Great opportunity for Machakos, Kiambu, Muranga counties to partner on
distributing power to rural households in these counties. The same can be
done by other counties.

On Thursday, 15 August 2013, Mark Mwangi wrote:

> And why not invest the profits?
>
>
> On Thu, Aug 15, 2013 at 2:52 PM, James Mbugua <jgmbugua at gmail.com<javascript:_e({}, 'cvml', 'jgmbugua at gmail.com');>
> > wrote:
>
>> Ali
>>
>> Let me weigh in as I represent Kenya Power in Investor Relations.
>>
>>  I was present at the press conference yesterday and suffice it to say,
>> Business Daily and Daily Nation grossly misreported the situation. Read the
>> Standard and People they seemed to have gotten it.
>>
>> There are a few things to appreciate about Kenya Power.
>>
>> 1. Following the multi-sector working group from across the energy
>> sector, petroleum industry players and World Bank that was convened in
>> 2001, its recommendations on the energy policy were subsequently issued as
>> Sessional Paper No 4. on Energy of 2004.
>>
>> 2. Out of this, The Energy Act of 2006 was enacted that brought into
>> force among other things, the Energy Regulatory Commission, the Geothermal
>> Development Corporation, the Kenya Electricity Transmission Company Ketraco
>> and the Rural Electrification Authority.
>>
>> 3. To shield consumers from the high capital expenditure of rural
>> expansion, the government formed REA to absorb that cost and leave Kenya
>> Power to distribute power.
>>
>> 4. The Energy Act of 2006 also ended Kenya Power's monopoly on
>> distribution. So as at now, KPLC is not a monopoly. In fact, the Energy
>> Regulatory Commission would license anyone who demonstrates both the
>> technical and financial capacity to be a distributor. All, they have to do
>> is to sign a power purchase agreement with an Independent Power Producer
>> and then negotiate a wheel-in charge for transmission to use either Kenya
>> Power's or Ketraco's lines or if they can, put up their own lines, and then
>> organize their billing and collections at the other end.
>>
>> 5. Rural Electrification is done by REA which has been connecting
>> centres, hospitals, schools, markets etc while KPLC comes in to metre and
>> switch on consumers.
>>
>> 6. Rural Electricity has always been subsidized by urban consumers. For
>> anything less than 50KWh, they are charged Sh2/Kwh while the average cost
>> of a Kwh will come to about Sh4. Nairobi/Urban residents typically pay
>> around Sh8/Kwh.
>>
>> 7. Since 2006, the Kenya Government has not subsidized power at
>> generation like it used to. Kenya Power purchases the power at cost and has
>> to subsequently evacuate, transmit and distribute this power at an
>> additional cost.
>>
>> 8. Since 2002 despite the rise in cost of materials from poles, to cables
>> and transformers, KPLC has not increased the price of connecting customers
>> until it decided to review that earlier this year.
>>
>> 9. In the year 2012 alone, Kenya Power added 307,000 new connections at a
>> charge it believes is lower than the actual cost of connecting the consumer.
>>
>> 10. Because of the ever expanding network, and you will see from
>> financial reports that the firm books ever bigger figures for depreciation,
>> and newer power purchase agreements, it has become necessary for KPLC to
>> spend more money on maintenance e.g. After connection, it is the company
>> that repairs vandalized wires, transformers etc.
>>
>> 11. Despite this, the government has (a) Not subsidized power which is
>> being supplied to an ever larger number at lower than cost (b) The
>> government does not provide guarantees for organizations which are not
>> wholly government-owned to access loans or bonds. (c) Between 1991-2007
>> there was very little investment in the grid as donors had frozen aid; only
>> until the Energy REcovery Strategy Program and the Kenya Electricity
>> Expansion Program have we seen significant investment to expand and
>> strengthen the grid.
>>
>> 12. Bear in mind that while constrained as to what it can charge
>> consumers, selling power in some cases at below cost, KPLC is expected to
>> source funding for investment either from its squeezed margins or from
>> financiers without government guarantees while purchasing power at cost and
>> taking responsibility for vandalism.
>>
>> 13. At the end of all this, it has to make its case to shareholders as to
>> what kind of returns they should expect.
>>
>>
>> James
>>
>>
>> On Thu, Aug 15, 2013 at 1:57 PM, Ali Hussein <ali at hussein.me.ke> wrote:
>>
>>  Listers
>>
>> Kenya Power has announced that they will no longer prioritize Rural
>> Electrification because of what they term unacceptable terms for
>> connectivity. This, even when the Government has offered 2.7B in subsidies
>> to the Monopoly Power company.
>>
>> I don't need to dwell into the myriad of issues this country's consumers
>> ha
>>
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>
>
>
> --
> Regards,
>
> Mark Mwangi
>
> markmwangi.me.ke
>
>
>
>
>

-- 
with Regards:

blog.denniskioko.com <http://www.denniskioko.com/>
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