Kenya power prices to rise

the cost of new investments in infrastructure, a senior official said yesterday.
Following the construction of new power plants and transmission lines in East Africa’s biggest economy, consumers will be expected to shoulder the financial burden amid a push to more than double output to about 3 305MW by 2014.
“A rough estimate based on the plants we expect (an extra 1 200MW by 2013) would be 15 percent for the next three years,” Frederick Nyang, director of economic regulation at the Energy Regulation Commission, told Reuters in an interview.
“Generation costs account for about two-thirds of the (review) prices . . . transmission costs therefore would be about 5 percent,” he said. About 2 597km of transmission lines of various kilowatts are expected by 2013.
High living costs have fanned discontent in Kenya and sparked waves of deadly protests in neighbouring Uganda, with inflation in both countries in double digits.
Nyang said the June review of tariffs – covering the next three years – and eventual hike may be postponed to offer some reprieve to Kenyans.
“At the moment I think it would be misguided and insensitive on our part to do that (increase prices),” said Nyang, who is in charge of the review.
“I would not want it done for the next one quarter.”
During the last review in 2008 tariffs went up by 24 percent. Investment power infrastructure is badly needed in Kenya, where frequent power outages frustrate industry and household consumers.
Energy costs are already perceived to be high and are just one factor prompting some manufacturers to consider relocating to other countries.
Electricity consumption in Kenya grows at about 8 percent annually, Nyang said. “The investments lag and do not match (demand) leading to shortages,” said Nyang.
Kenya’s leading power producer KenGen and independent producers are seen ramping up power production by 10 times to 15 000MW annually by 2030 under a government-led initiative.
Local and foreign investors are increasingly attracted to Kenya’s energy sector, especially in renewable energy projects including the 310MW Lake Turkana wind power project and Ormat Technologies 100MW geothermal plant.
Nyang said the country offered investors good returns and a good business environment compared to other African countries.
He said some investors were seeing a return on equity of up to 20 percent. – Reuters.