The Electricity Tarrif Hike is good for Kenya

Over the past few months, everyone has been protesting at the high electricity prices following a hike by the Energy Regulation Commission on 26th June 2008. I can feel the pain many homes and businesses are having as they try to adjust to these impossible prices. I can see how this will lead to inflation and will push many more Kenyans to poverty and darkness.

Right now, Kengen, the company that produces 80% of the electricity in Kenya is locked up in a dispute with KPLC. They wish to sell power at Kshs. 2.36 per KwHr while KPLC is insisting on Kshs. 2.10 per KWHr. In the meantime, I the consumer pays Kshs. 12 per KwHr!!!! In addition to that, we also paid an additional Kshs. 7.28 per KwHr because of the Fuel Cost Adjustment and Forex Adjustment Friends, how is it that Kshs. 18 is finding its way into every KwHr that I consume? That is before the 3% REA levy and 16% VAT e.t.c. Guess what, power is not just expensive in Kenya, it is a big favor to you the consumer - be careful how you use it ...

This begs the question; why are electricity prices high in Kenya? Where do we accumulate all these costs? I think electricity is expensive in Kenya because of:

1. Cost Structure: I dont think KPLC is doing well in managing the costs associated with power distribution - they dont seem to have much dividends either ....
   
2. Market Structure: There are very few players in the market, hence there is little competitive pressure for these players to pass any value to their customers. In any case what can these customers do??
   
3. Underinvestment: the electricity sector still depends on the most part on investments by quasi-government institutions for most of the infrastructure and since the government has not been investing enough in energy, we have a power deficit in the country.
   

Now why do I think the hike in electricity prices is good for Kenya? In allowing these price hikes, the ERC justifies that the hikes shall improve Kenya's energy security since the incomes of the energy companies before were not viable for development of the energy sector.

1. Firstly, the increase the income of these energy players shall enable them to invest more hence we will have enough power in the country. I hope so.
   
2. At these ridiculous prices, it makes more sense to generate your own power. In the long term these new increased tarrifs shall cause a migration from grid electricity to off-grid electricity. I dont think the ERC wanted to push KPLC and KENGEN out of business, but in effect, this should push them down if not out - ask Telkom Kenya what happened to their phone booths and their landlines.

I believe that the new tarriffs make the key players uncompetitive in the energy sector. There shall arise new players with vastly different cost structures, and they shall in the long run become the new barons in our energy sector. I make these claims on the following basis:

1. There is a new energy regulation regime in Kenya - under the Energy Act 2006, that should make it easier for private sector players to invest in energy projects.
   
2. The necessary disruptive technology now is available in the market to enable competitive production of power independent of the grid from tens of watts to tens of megawatts.
   
3. There is widespread goodwill for environmental friendliness and green energy
   
4. The financial sector has evolved new financing mechanisms for energy projects - there is a new trend towards asset finance and leasing.
5. The outcry over the energy prices has triggered reviews of the taxation structure for energy products - this would never have happened under the old tarriff regime.
6. There is a possibility that net metering is in the offing ...
   

I hope that we shall not miss this opportunity to make Kenya more energy competitive

What makes a good vision

The internet has got better in the city this week, but the traffic jam has got longer - so I have been reading the vision 2030 thing more of late. Now what makes a good vision document?

1. First, a good vision tells me very clearly where i need to get to - and usually that place is a good place. Vision 2030 is good here - To make Kenya a globally competitive and prosperous nation with a high quality of life by 2030. That is simple and good.
   
2. Secondly, the vision sells this place to you. It makes you want to be there.
3. Thirdly, it shows you what you need to do to get there - For 2030, I can see many flagship projects and framweworks that will be set up.
4. Finally, a good vision gets you going there. Its not a movie

2030 has a very good score on where it wants to get me to. I want to be there.

Whats happening to Internet, water and power in Nairobi?

Over the past few weeks, I have noted a considerable drop in internet speeds at different internet facilities in town. I think one of the major providers defaulted on a bill or had been enjoying a trial package before signing on. Please, we need a little faster internet.

While on utilities, I also noted that the pressure level of Nairobi water has considerably reduced and now everyone has to buy a pump. In South C, there are pumps that buzz, pumps that groan, pumps that tweet, pumps that croon and pumps that screech and I thought mosquitos are the only ones allowed to sing all night. I didnt know there are turbo-jet powered pumps - these pumps are NOISSSY - ours is noisy too!

Since you have to pump more, you need more power and electricity prices just hit the roof! Maybe that is why internet is slowing down ...