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Kenya concerned over power costs

Nairobi, Kenya — ESI-AFRICA.COM — 27 February 2012 – A Canadian firm SNC-Lavalin has been contracted to carry out an intensive study on the cost of electricity in Kenya, and it is expected that the results of study could lead to reduced power prices in the country.

The survey, to be conducted by the Ministry of Energy, will start next month and is expected to be complete in six months. Part of the objectives of the study will be to develop cost reflective tariffs and tariff structures in generation, transmission, distribution and dispatch of electric power.

This project has been financed by International Development Assistance (IDA) as part of a US$330 million loan to the Kenya Electricity Expansion Project (KEEP). “It is intended to be used in informing the next tariff review scheduled for 2014. After the study, recommended tariffs will be adopted for application during the period 2014-2017,” said the terms of reference of the contract.

Consultants will also be required to undertake a financial analysis of operational and investment requirements and to establish a cost recovery tariff with a reasonable return on investment.

“We met with Kenya Power. We agreed that they need a modest profit, not for shareholders’ dividends, but for reinvesting in increasing access and quality of electricity,” said Stephen Mutoro, the Consumer Federation secretary-general at an electricity stakeholders meeting.

Power demand in the country has been rising significantly and so has the cost. “This has been associated with rising fuel prices, weakening foreign exchange rate and continued reliance on hydro-generated power,”. Kaburu Mwirichia, the director general of the Energy Regulatory Commission, says future plans to reduce cost of power are diversifying to other energy sources.

These include expansion of renewable power development and exploration of new sources, including coal power and nuclear power.

The expansion plan indicates that by 2030, 27% of the installed capacity in the country will be geothermal power, 20% from coal, 12% from imports and 10% from nuclear plants.