This feature on Kenya Power scandal was written and published by economic analyst Ephraim Njega: I have spent a whole week investigating the rot in our power sector. It has been a draining and sickening experience. As I conclude this exposé, I want to remind you of the following issues that we have discovered and discussed.
1). In 2020, Kenya Power bought a unit of power from Kengen at an average of KShs 5.48. It sold a unit at an average of KShs 16.31. The weighted average cost of power bought from Thermal power producers in 2020 was KShs 35 per unit. The amount charged by these thermal Independent Power Producers (IPPs) ranges from KShs 19 to KShs 173 per unit.
2). While Kengen provided 72% of all the power Kenya Power bought in 2020 it only received 48% of the total money paid to power producers. The IPPs producing thermal power provided 5% of the power bought by Kenya Power in 2020, but received 20% of the money paid to power producers. We are underpaying our public power producer and enriching foreign power producers.
3). Some of the IPPs producing dirty and expensive thermal power are operated by companies owned by European governments namely the UK (Tsavo Power), Netherlands (Rabai Power) and Norway (Rabai Power). These countries are talking about climate change in Europe while producing dirty power in Kenya. Some of the IPPs such as OrPower and Thika Power are registered in corrupt tax havens namely Cayman Islands and British Virgin Islands respectively.
4). The installed power production capacity of Kengen + Clean IPP power totals to 2,511 MW against a demand of 2,311 MW (inclusive of 20% reserve margin). This means that the country does not need expensive dirty thermal power. More clean power amounting to 180MW will be added to the grid by the end of this year.
5). In 2020, Kenya Power bought 11.5 Billion units of power and paid the power producers KShs 87.5 Billion. Out of the amount paid to power producers 54% or KShs 47.5 Billion was payment for idle capacity. The capacity charges imposed by power producers including Kengen should be reviewed.
How can we be paying KShs 47.5 Billion each year for unused power? This is one of the main factors behind the high cost of power in the country. For instance, in 2020 Kenya Power paid an average of KShs 8.20 to power producers out of this KShs 3.49 was cost of power bought while KShs 4.71 was for capacity charges.
6). The Presidential Taskforce on Review of Power Purchase Agreements was just a ploy at hoodwinking the public and it will not achieve much. For example, it recommends reduction of power cost from KShs 24 per unit to KShs 16 per unit yet before its formation we were buying power at KShs 16 per unit. In fact Kenya Power has been selling power at an average of KShs 16 per unit for many years as indicated in its annual report 2020. If the Taskforce were serious they would have provided options for termination of all thermal power IPPs.
7). The share of contribution of manufacturing to GDP has declined from 11% in 2012 to 7.5% in 2020. One of the reasons behind this is high cost of power. If we do not reduce our cost of power most of our manufacturing sector will die and many jobs will be lost. Our manufacturing sector will never realise its full potential till the cost of power is brought down.
8). The Lake Turkana Wind Power (LTWP) project defrauded us KShs 18.5 Billion disguised as compensation for delays in construction of transmission lines to evacuate power from its wind power plant. The Auditor General says the company recruited the contractor of the power lines and therefore it cashed in on a failure of its own making. The Auditor General further says that the company contravened provisions of the Public Procurement and Disposal Act.
The owners of LTWP include the governments of Finland, Denmark and Norway. These are the same people always talking about corruption while defrauding a poor country like Kenya.
9). The economic burden imposed on Kenyans by IPPs is extremely high and unjustifiable. IPPs have signed PPAs with Kenya Power which shield them from all risks and which burden the power users with their costs such as cost of fuel used in power production. There is no justification why an IPP should be paid for power sold to Kenya Power and then compensated for fuel used in producing the same power. This is a double payment and pure theft. This is immoral unjust enrichment which must be challenged in court.
Even the clean power IPPs are still causing the country a lot of economic losses. They are producing power using local natural resources like geothermal and wind yet they are paid in foreign currencies. In essence, we are importing wind and geothermal resources located in our own country. We are being penalised even for inflation happening in the US and the EU. This is madness.
10). The claims that the cost of terminating IPPs would be too high must be interrogated and weighed against the cost of not terminating these contracts. This can only be done by quantifying the actual cost of such a termination insisted of mere fearmongering that it would be too high without providing any figures. It is also not true to say that we are helpless and cannot exit these contracts. Many options exist including expropriation with or without compensation.
In conclusion, our power sector has become a playing field for international crooks. This must be stopped. We need to move our courts to stop this theft of public resources. It is time once again to decide whether to die on our feet or to forever live on our knees.
Everyone of us can play a role however small. This conversation must not be allowed to die. These revelations must not be in vain. Something must give.