As the year winds down to a close in preparation for the new year, when lights will be turned off by revelers at 11:59 on New Year’s Eve before the clock strikes midnight, this may just be a harbinger for what awaits the country following the latest announcement about electricity costs, and the role of Kiharu MP Ndindi Nyoro.
The depressing stories that have been doing rounds on social media were preceded by a damning report by The Daily Nation on an impending surge of the already high electricity costs from next year.
This was reported to be so because the government has to raise revenue to pay the latest set of independent power producers to join the national grid.
This caused an outcry, with most comments dragging in Ndindi Nyoro, with the insinuation that there might be more to this than meets the eye, and might not be coincidental that he happens to be the biggest shareholder of Kenya Power shares.
An October 3 letter from the Energy and Petroleum Regulatory Authority (Epra) directing Kenya Power to submit a tariff application all but confirmed the price surge.
The letter from Director-General Daniel Kiptoo read: “You are directed to submit a retail tariff application by October 31, 2022 to consider revenue requirements of the commissioned power plants, expected plants to be commissioned within the tariff control period, Ketraco’s system wheeling arrangements, Kenya Power operations maintenance costs and the cost of operating and maintaining the Rural Electrification Scheme.”
From correspondence, the biggest pressure on tariff is attributable to operations of the recently commissioned Independent Power Producers (IPPs) that include Selenkei and Cedate power stations, Malindi Solar, Kipeto Solar, Olkaria V and Kianthumbi Power.
In response to the letter, Kenya Power has presented the regulator with a tariff review application. The non-fuel component of the tariff will go up from Sh16.95 per unit by 12.3 per cent in 2022/23, 11.3 per cent in 2023/2024, 7.15 per cent in 2024/25 and 5.86 in 2025/26.
The single largest component of the proposed tariff will be invoices for capacity charges to the new IPPs. The last time Kenya Power made an electricity tariffs application was 2018.
The current rate that reduced the 2018 tariff level by 15 per cent was approved by Epra on January 7, in line with the recommendations of the Presidential Task Force on Review of IPP Power Purchase Agreements that was chaired by investment banker- John Ngumi. The lower tariff is to lapse by December.
Under the IPP model followed by Kenya, every merchant power plant that comes on board brings its revenue requirements.
This means Kenya Power must apply for a tariff increase whenever a new plant comes into operation. Since the government has signed many IPP agreements within a very short period, the system has witnessed an unsustainable build-up in payments for unused electricity.
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