CS Juma walks a tight rope in cutting electricity costs

Energy CS Monica Juma was the principal secretary in the Ministry of the Interior and Coordination of National Government when in 2015 Kenya Power tried to behave like a private company dealing equally with customers and disconnected the government and parliament for defaulting on electricity payment.

It was an unprecedented move that plunged MPs into darkness and revealed the cash crisis in the government she was coordinating at the time.

Seven years later, as the Energy CS, she is at the centre of a national power outage trying to remind Kenya Power it does not operate as a private company whose main objective is buying cheap and selling expensive.

Kenya Power managers have started voicing disquiet after being forced to bear the 15 per cent cut on electricity.

While the firm’s managers are keen to avoid expressing displeasure publicly over the new lower tariffs, so as not to be seen standing in the way of President Uhuru Kenyatta’s efforts to lower the costs of electricity, privately, however, the company feels it is being forced to single-handedly shoulder the burden. Amid this disquiet, vandals struck electricity pylons sending the country into national power outage. The crisis has pit the electricity supplier against government functionaries suspicious of sabotage.

As she pushes through the government policy on officials under investigations for alleged sabotage and managers who believe the cost structure is unworkable in the long run, the CS is facing headwinds.

“The Ministry of Energy is hard at work to ensure that the experience of the last two days does not recur. I commend our staff from Kenya Power and Ketraco who worked round-the-clock to repair the faults and restore power across the country,” CS Juma said.

“I call upon all Kenyans, institutions, employees in the energy sector and our partners to rally behind and support these reforms,” she said.

The promise to cut power by 33 per cent was made on the assumption Kenya Power could make savings from reducing system losses and passing the benefits to consumers and the government could force Independent Power producers (IPPs) to negotiate their contracts.

Both have not happened. The electricity distributor is finding it difficult to cut costs fast enough to pass on to consumers forcing the government to cut their revenues without finding ways of plugging the hole they are creating.

Kenya Power knows it will be an uphill task to reduce system losses, the share of electricity bought from generators such as Kengen that does not reach homes and businesses, within weeks despite battling for decades to cut power theft and leakages without achieving much.

The system losses through a confluence of power theft and leakages from the ageing transmission grid shot to 24.14 per cent in June 2021, an equivalent of Sh20.1 billion. The combination of power theft and leakages from the ageing transmission grid, which stems from the long period of under-investment, has seen the system losses rise from 17.51 per cent in 2015 to 24.14 per cent in June 2021, well above the global benchmark of 15 per cent.

Sources with direct knowledge of Kenya Power operations point out that no country can reduce system losses to zero meaning Kenya Power can only make a 9 per cent cost saving. “The biggest losses come from transmission and not theft, even if you gave Kibera people free power they will not consume more than a megawatt. You also need money to save on the losses, to upgrade the substations and the lines and then you want to reduce the money Kenya Power is making for this same purpose,” a former senior energy sector official said on condition of anonymity.

“Out of every Sh1 that Kenya Power receives, it only retains 30 cents and 70 cents goes to generators, the government wants to make savings that is where they should target,” the source said.

The official said savings could be made at Kengen by lowering the cost of power sold to Kenya Power.

Kenya Power buys the bulk of its power, 70 per cent from Kengen at Sh5.3 per kilowatt hour and sells the power at Sh15.66.

The source also said there needs to be rationalisation of Kenya Electricity Transmission Company (Ketraco), Rural Electrification and Renewable Energy Corporation (REREC) and Nuclear Power and Energy Agency (NuPEA) into project implementation teams rather than off shoot companies with huge budgets.