Here’s how to lower power costs, IPPs tell House team
The Electricity Sector Association of Kenya say that reducing the cost of electricity cannot be addressed by just lowering the cost of production and distribution of power.
Investors in the electricity sector have proposed to a parliamentary committee seven ways that MPs can explore in order to address the high cost of electricity in the country.
The Electricity Sector Association of Kenya (ESAK) told the National Assembly Energy Committee that reducing the cost of electricity cannot be addressed by just lowering the cost of production and distribution of power.
In their proposal to the committee that is probing the high cost of electricity in the country, the association proposed seven ways to help them in their probe, which include opening up competition in the energy sector, reviewing taxes on fuel levy, using plants of IPPs beyond 20 years, addressing operational inefficiency at Kenya Power and fast-tracking regulations of Energy Act, 2019.
Others include fast-tracking the completion of power lines and ending constant investigations in the energy sector which, they warn, erode investor confidence.
Led by its CEO George Aluru, the association took the fight to the MPs’ doorstep on issues of taxes, saying they must also play their part if they want the cost of electricity to come down.
They cited the doubling of the Value Added Tax (VAT) rate on petroleum products to 16 per cent, saying it will have a direct impact on the cost of electricity.
Mr Aluru told MPs that the recent proposal by the Water Resources and Management Authority (Warma) to review the levy to Sh2 per unit of power from the current 0.01 shillings is set to make things worse.
They also told MPs that there is need to remove or reduce taxes on Heavy Fuel Oil (HFO) which is used in power generation, saying the move will lower Fuel Charge Cost (FCC) in the consumer bills and consequently lower electricity tariffs.
“If we are really trying and committed to reduce the cost of electricity, then we must all be aligned. Rationalising the taxation and levies applied can be a quick and effective step in reducing the cost of electricity in the short term,” Mr Aluru said.
The association told MPs that the persistent investigations in the power sector with no tangible action erode investor confidence.
There have been four task forces and three parliamentary inquiries in the last six years, all looking at the high cost of electricity.
Currently, both the National Assembly Energy Committee and their counterparts in the Senate are conducting investigations into the high power costs.
On the call by MPs to sign the Power Purchasing Agreements (PPAs) in Kenya shillings, the association told the committee that most PPAs are signed in foreign currency because of their foreign financing.
The association also told MPs of the need to improve operational efficiencies at Kenya Power and reduce electricity theft.
They pointed out that the completion of the Turkwel-Ortum-Kitale line, pending works in the Olkaria-Narok-Bomet line, Mariakani substation and the restoration of the double circuit on the Loiyangalani-Suswa line will go a long way in reducing power cost through strengthening the grid and eliminating capacity transfer bottlenecks.
They also asked MPs to consider using IPP plants beyond the life of PPAs, saying it is cost effective compared to building new plants for the same purpose.
