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

Mon Aug 19 10:37:54 EAT 2013

I think once we understand this devolution business , we will be home
and dry, however fragmenting power distribution is likely to open
another can of worms as appears to be the case, i think we need a
rallying call such as electricity for all to address this issue, with
affordable electricity and good infrastructure, the exchequer will be
smiling 24/7 since mwanainchi will be empowered to make money.

Best Regards

On 8/19/13, meshack emakunat <memakunat at yahoo.com> wrote:
>
>
>
> Hi
>  Just a thought, how has the stakeholders to supply power to rural areas
> diversified there resources so that they do not have to rely so much on
> govern,ent subsidies and offers. Example if they have to supply power to
> rural areas then they may utilise renewable energy sourcex sucj as wind
> eneryg solar like what is in turkana. The organisations can help rural folks
> to install solar energy and that way the only cost will be purchase of
> equipment and installation. That way they do mot have to deal with below
> breakeven costs that is recurrent every month and every year.
> They can also run renewable energy awareness programs in the villages.
> Btw most rural areas are sunlight intensive.
>
> Regards
>
> Meshack
>
> ------------------------------
> On Fri, Aug 16, 2013 12:04 AM PDT Mark Mwangi wrote:
>
>>I was not aware that Kenya power is nolonger a monopoly. I apologize for
>> my
>>ignorance. we cannot however ignore the fact that thy single handedly have
>>the widest distribution infrastructure as we speak. KETRACO only has
>>control of the new power lines. I assume that Nairobi is only covered by
>>Kenya power?
>>
>>Even AT&T in its hey day was forced by the government to give service to
>>unprofitable outposts in the middle of nowhere in the principle that
>> nobody
>>is left behind. I understand that most of the fees collected by KPLC are
>>for other organisations but the domination in power distribution remains
>>and thus the attendant visibility and blame.
>>
>>I wonder how counties will handle this. Will Kenya power be split into
>>local county power companies or will it remain a monolith? I bet some
>>counties will want to monopolize their dams etc.
>>
>>
>>On Thu, Aug 15, 2013 at 6:37 PM, Ali Hussein <ali at hussein.me.ke> wrote:
>>
>>> James
>>>
>>> I appreciate your contribution to this issue. And I suspect that there
>>> are
>>> many invisible barriers to entry that may need to be removed to ensure a
>>> credible competitor(s) to KP emerge. This is the only way to enthuse
>>> energy
>>> (pun intended) into the sector.
>>>
>>> The issue of the counties is a critical component in the energy equation
>>> and I hope that we will have enough of them who are forward thinking to
>>> encourage investment in the sector.
>>>
>>> Lastly James I cringe when I hear you talk about government institutions
>>> becoming a roadblock to progress. I'm not a legal specialist but doesn't
>>> the Government have the powers to call up Eminent Domain statutes
>>> to,move
>>> things for infrastructural investment?
>>>
>>> Regards
>>>
>>> Ali Hussein
>>> CEO | 3mice interactive media Ltd
>>> Principal | Telemedia Africa Ltd
>>>
>>> +254 713 601113/ 0770 906375
>>>
>>> "The future belongs to him who knows how to wait." - Russian Proverb
>>>
>>> Sent from my iPad
>>>
>>> On Aug 15, 2013, at 5:06 PM, Barrack Otieno <otieno.barrack at gmail.com>
>>> wrote:
>>>
>>> It is the little foxes like this that will turn Vision 2030 to vision
>>> 3020. We will can only achieve prosperity when there is equity across
>>> the
>>> country in terms of in terms of Infrastructure and connectivity.
>>>
>>> Best Regards
>>>
>>>
>>>
>>>
>>> On Thu, Aug 15, 2013 at 4:10 PM, James Mbugua <jgmbugua at gmail.com>
>>> wrote:
>>>
>>> Dennis
>>>
>>> One of the things KPLC is looking at is partnering with those counties
>>> that are ready and proactive; that will provide land for substations and
>>> wayleaves, the company will partner with them to rapidly scale up
>>> expansion
>>> of connections in these counties.
>>>
>>> This is important if you consider that one of the reasons Nairobi's
>>> power
>>> has issues is because a 400KV (High Voltage) line running from Mombasa
>>> to
>>> Nairobi has stalled just outside Nairobi as the likes of KWS refuse to
>>> give
>>> way leaves citing bird migration.
>>>
>>> As a result, power from Kipevu III has to be rerouted through Kindaruma
>>> first and then to Nairobi and this over a lower capacity line meaning
>>> more
>>> power losses.
>>>
>>> The line from Ethiopia to Suswa to bring in 400MW is already running
>>> into
>>> issues as some ranchers in Laikipia don't want to give wayleaves.
>>>
>>> The power sector is beset by many challenges and cooperation from
>>> Counties to facilitate faster completion of projects would result in
>>> overall better access to energy for all.
>>>
>>> James
>>>
>>>
>>> On Thu, Aug 15, 2013 at 3:56 PM, Dennis Kioko <dmbuvi at gmail.com> wrote:
>>>
>>>> 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>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
>>>>>
>
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-- 
Barrack O. Otieno
+254721325277
+254-20-2498789
Skype: barrack.otieno
http://www.otienobarrack.me.ke/