The recent surge in the share of geothermal power in Kenya’s total electricity output to 49 per cent is impressive, but this has not translated to lower power bills for Kenyans.
Currently, geothermal and hydro-electricity account for 87 per cent of Kenya’s total power output, presenting the country with an opportunity to relook at its power pricing and give Kenyans better electricity tariffs.
In last month’s review, the Energy Regulatory Commission increased power prices by 8.5 per cent for consumers of 50 units a month and five per cent for those consuming 200 units, which it attributed to exchange rate costs.
In the month of October, consumers of 50 units per month paid Sh602 compared to Sh555 the previous month, which is way too expensive for majority of Kenyans.
At these costs, the ongoing Last Mile project that is aimed at connecting all the primary schools in the country with electricity to help power adjacent villages will not achieve its intended purpose.
The reduction in the cost of power connections is also a move that could only be supported by lower monthly consumption prices.
Kenyans are paying high energy costs at a time when both the actual cost of electricity (geothermal and hydro) and oil have hit rock bottom, meaning that the government needs to reconsider its general pricing mechanism.
A raft of charges and taxes such as the fixed charge, consumption charge, power factor surcharge and VAT need to be reviewed to improve the living standards of Kenyans.
As much as the percentage of thermal power in the national output has been reduced to 12.3 per cent, it is still too high and should be brought down.
Diesel generators are essential for provision of standby electricity for major cities and industries, especially during the dry season. However, more than 10 per cent of thermal power in the country’s power mix is high.
Cheaper electricity should help cut the cost of doing business in Kenya and improve the country’s competitiveness given that power accounts for up to 40 per cent of the total costs for some industries.
The recent increase in the cost of electricity in Egypt and South Africa was seen by many Kenyans as a relief to Kenya’s manufacturing, but the reality is that the two countries were reacting to a crisis and may sooner or later bounce back with cheaper power prices.
Kenya is not just competing with the above countries, but with countries such as China, India and other global powers and therefore cannot rely on the failures of others to achieve momentary competitiveness.
SOURCE: BUSINESS DAILY