Electricity distributor Kenya Power on Wednesday reacted to the Cabinet’s directive that it resumes connecting new consumers at the rate of Sh35,000 with an announcement that it was exiting the rural market to focus on urban customers. The company argues that connecting rural households located far from the national grid is no longer possible at the government-backed fee of Sh35,000 for single-phase consumers. “Our role will be to connect customers at the last mile — perhaps only a cable to households. We will focus on commercially viable connections,” Kenya Power’s acting chief executive Ben Chumo said at a media briefing on Wednesday. “Government established REA [the Rural Electrification Authority] to connect rural homes. We need to find a sustainable way to improve connectivity in non-commercial areas,” Mr Chumo said, effectively signalling the firm’s exit from the rural electricity market. The company, which connected 78,901 new rural customers in the financial year ended June last year, said suspension of new connection fees had left it without money to supply electricity to off-grid areas. “We are a business quoted on the stock exchange and must run as a commercial entity,” said Mr Chumo adding that Kenya Power will no longer complement REA’s efforts in lighting up the countryside. The decision is expected to slow down the rate at which Kenyan homes are getting connected to electricity. Kenya Power’s exit from the rural electricity market means that newly constructed homes and business premises in the countryside will wait longer to access electricity in the short term — leaving their owners with expensive power sources such as diesel-powered generators or solar kits. Electricity is a recognised catalyst for economic development and a slowdown in rural connections means Kenya’s majority rural population will remain a marginalised lot that is unable to undertake small-scale value addition in agribusiness and manufacturing. Kenya Power’s announcement comes barely a day after the Cabinet ordered the firm to revert to the previous Sh35,000 and Sh49,080 fee for new connections with immediate effect for the next three months pending results of an ongoing study to establish the actual cost of power connections. Only one in every four Kenyans has access to electricity, making Kenya Power’s decision to pull out of rural areas a big drawback to the government’s objective of increasing access rate to 40 per cent of the population by 2020. All power consumers pay Rural Electrification Programme (REP) levy at the rate of five per cent of total electricity consumed, making it difficult to justify the departure from rural areas. Kenya Power’s decision is informed by the fact that rural areas require heavy capital investments to connect due to the long distances from main power lines and low population density compared to urban areas. REA is a State-funded agency formed in 2007 to develop and build the rural electricity delivery system —lines and substations — which it then hands over to Kenya Power for operation and maintenance. Poor funding and overreliance on donor support has, however, weakened the company’s financial base rendering it incapable of executing its mandate. On Wednesday, Kenya Power said it spent Sh641 million last year to roll out 117 rural electrification projects countrywide. In 2011, the firm connected 54,251 new customers after completing 197 projects valued at Sh1.3 billion. The higher charges halved the number of new electricity connections to about 160,000 in the in the fiscal year ended June 2013 compared to the 307,101 a year earlier. Kenya Power adds an average of 25,000 users to the grid every month, and currently has 2.2 million customers in its books. On Wednesday Mr Chumo said those who had already paid the revised higher fees will not get a refund as the directive ‘cannot be implemented retrospectively.’ Kenya Power argues that the Sh35,000 fee set in 2004 is no longer practical, citing a steep increase in the cost of labour and materials used. The government subsidy, however, offers temporary relief in bridging the gap between the charges and actual connection fees. “We have had these prices for the last 10 years notwithstanding the rising costs of labour, materials and transport,” the company said. “Kenya Power has therefore been subsidising connectivity using its own resources to plug the gap between the actual cost of new connection and the cost set in 2004, resources which were meant for other critical projects, such as improvement of quality of power and reduction of blackouts.” The utility firm argues that between 2004 to date, the cost of timber poles has increased 44 per cent to Sh12,150; prices for a cut-out fuse have almost tripled to Sh1,224; while cable costs have doubled to Sh86 per metre and saddle conduit prices grew fourfold to Sh45. “Kenya Power has therefore been subsidising connectivity using its own resources to plug the gap between the actual cost of new connection and the cost set in 2004, resources which were meant for other critical projects, such as improvement of quality of power and reduction of blackouts.” The cost of copper and aluminium cables more than tripled during the period even as transformer prices doubled and fuel costs rose 47 per cent.
Posted on: Fri, 16 Aug 2013 06:10:46 +0000