State’s debt to Kenya Power for rural scheme hits Sh19bn
Elizabeth Keter Cherotich at her house in Nandi, which was connected to electricity under the Last Mile Connectivity Project. The State now owes Kenya Power Sh19.35 billion for electricity connections to poor households in the year to June 2022.
The State now owes Kenya Power Sh19.35 billion for electricity connections to poor households in the year to June 2022, raising risks of a slowdown in implementation of the rural electrification project.
Records show that the Rural Electrification Scheme (RES) debt rose by 3.2 per cent from Sh18.73 billion in the year to June 2021 with the company risking losing the money as the government has long failed to settle the debt despite the annual increase.
The programme was initiated by the government in partnership with the utility in 1973 where the State would subsidise Kenya Power to connect rural households to the national grid.
To intensify expansion of the underdeveloped regions, the government subsequently created the Rural Electrification Authority, which has since been renamed the Rural Electrification and Renewable Energy Commission (REREC).
Kenya Power, however, continues to operate and maintain the whole network, in addition to implementing projects for REREC on a contract basis.
The government subsidy covers the losses the company incurs for developing, operating, and maintaining the rural electricity network as the project is economically unviable considering that the expenditure for rural households on electricity is dismal. “The schemes of RES are generally sub-economic since their operational and maintenance costs exceed their revenue. The resultant accumulated deficit is recoverable from the government of Kenya as stipulated in the 1973 Mercado agreement signed between KPLC and the GOK,” said the utility.
The government has defaulted on paying the debt for years putting pressure on the company, which incurs the expenditure for the rural electrification projects. Auditor-General Nancy Gathungu, in her audit report of Kenya Power firm for the financial year to June 2020, expressed fear that the utility could lose the money, which had reached Sh16.5 billion at the time.
This is after the debt had risen sharply from Sh11.9 billion in the financial year 2018/19.
“Further, it is not clear why it has taken a significantly long period to recover the outstanding amounts, which are at risk of becoming unrecoverable and impaired over time,” said Ms Gathungu.
These costs are, however, set to continue rising as the firm gears up for the fourth phase of the Last Mile Connectivity project that seeks to connect some 280,475 rural households in 32 counties to the mains.
In the financial year 2021/22, the company hooked 641,237 new customers to the power grid, expanding its customer base to 8.91 million.
