The government will strip Kenya Power of the role of implementing big-ticket projects aimed at expanding electricity reach to let the firm only carry out its primary role of buying and selling electricity.
The National Treasury, in the draft Budget Policy Statement (BPS), said the government will take the drastic step amid inefficiencies and role duplication in Kenya’s energy procurement, generation, transmission and distribution, which has led to high power costs.
“The government will delink development initiatives from Kenya Power and let the company operate on a commercial principle,” said the Treasury.
The move is the latest among many reforms that have been proposed in recent years to improve the financial health of the company that is mired in debt.
Kenya Power currently does many expensive development projects including expanding its network to net more customers to the national power grid.
The company – in partnership with the Rural Electrification and Renewable Energy Corporation (Rerec) – is also undertaking the government-subsidised and donor-funded Last Mile Connectivity project.
The project was started by the Jubilee administration in 2013 to accelerate electrification across the country and achieve the elusive universal electricity access with households paying Sh15,000 for connection.
Off-grid power stations
Kenya Power also runs some 30 off-grid power stations, which were initially developed as thermal plants serving areas located far from the national grid.
As part of its development plans, the utility aims to spend Sh4.31 billion to retrofit 18 of its diesel-powered off-grid stations with solar energy to lower costs as part of a donor-funded initiative.
However, such development projects, some of which are undertaken using expensively-sourced commercial debt have often failed to turn into revenue, especially from rural electricity consumers who use small quantities of power monthly.
By removing the undertaking of such projects from Kenya Power, the government aims to have the utility focus on its main mandate of reliable electricity distribution even as the State seeks lower power costs.
“While generation capacity and total electricity connections have increased considerably in recent years, electricity in the country remains expensive and unreliable,” said the exchequer.
“One of the key contributors to both the cost and quality of power is the ageing transmission and distribution network. The investment required to upgrade the network is considerable, more so in the difficult financial situation that the country is in,” it said.