KenGen reveal how KPLC can reduce cost of electricity

The Kenya Electricity Generating Company (KenGen) has lifted the lid on how the electricity distributor, Kenya power, can reduce the electricity cost.

Appearing before the senate’s energy committee, KenGen’s acting managing director Abraham Serem said that exclusive power from them would significantly reduce the cost of electricity.

“If KPLC decides to buy everything from us, then, absolutely, the cost of electricity will go down,” said Serem.

However, Serem told Nyeri senator Wahome Wamatinga-led committee that Kenya Power is currently engaged in active contracts with other independent power producers.

The committee is inquiring into the causes of the high cost of electricity that has been blamed for the high cost of living.

Currently, KenGen supplies up to 65 per cent of the electricity distributed by the Kenya Power and Lighting company.

Kenya power procures the balance of electricity from independent power producers that have been selling their commodity at exorbitant prices thus the high cost of electricity.

The IPPs are said to sell their power at a cost of Sh26 per kilowatt yet KenGen, the largest power producer, is selling theirs at Sh5 per kilowatt.

Some IPPs are said to have signed power purchase agreements with KPLC foreign currencies, especially dollars thus tying down the power producer to pay more with the depreciating shilling against the dollar.

The government, through the national treasury, hold 70 per cent of the shareholding at KenGen.

High taxation and the deepening Kenyan shilling against the dollar have also been blamed for the ballooning cost of electricity.

On Monday, Serem disclosed that the KPLC owes KenGen Sh28.23 billion, an amount that has affected the running of the firm.

“KenGen’s debt owed by KPC as of February 28, 2023, stands at Sh28.22 billion with an overdue of Sh16.79 billion,” said Serem.

“What is the total demand for electricity in the country and do you think KenGen alone can meet that need?” posed Wamatinga.

Serem told the nine-member panel that the country’s current power demand stands at about 2,146 megawatts.

“This is the current demand but if everybody is connected, then the demand will be higher,” the MD said.

Serem disclosed that KenGen has signed 14 power purchase agreements with Kenya Power, with some contracts expiring as late as 2044.

On Monday, the committee put KenGen on the spot over the Sh79.42 billion loan taken from a Chinese bank for the drilling of wells that are yet to be connected to the power plants.

“Is the company still repaying that loan? And is that reason why the cost of power is high?” said Elgeyo Marakwet senator Allan Kisang.

The management admitted that some wells have not been connected to the plants but said that has no effect on the cost of electricity it sells to Kenya power.

The firm explained it only passed the cost of KPLC once the wells are connected to the plant.

“It is not until they are connected that they are put in the tariff during the power purchase agreement,” the company said.