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Citizen Weekly

Sunday, 10 May 2015

DAGGERS DRAWN OVER CHEAP POWER

 The last 10 days have seen a fierce war pitting Kenyan bloggers over reduced electricity costs and why Uhuru Kenyatta’s election promise to reduce cost of electricity by 30pc in 2014 and a further 50pc this year may fail. A silent titanic battle which has been going on for years within the energy industry blew up online pitting those in favour of protecting the existing electricity cost arrangement against those in favour of going green through geothermal.
There is widespread concern that Uhuru’s government, even though well intentioned to achieve a lower power cost for Kenyans, could easily lose the war against billionaire energy power barons enriched by selling high cost energy to Kenyans through an arrangement entrenched through the Kanu days. Last week, an article on the widely read blog “Kahawa Tungu” suspected to emanate from Kenya’s most controversial blogger Robert Alai titled “The Kenya Energy Cartel Which is Keeping Your Electricity Bill Very High” resulted in one of most bitterest online wars on #KOT (Kenyans On Twitter) as different interests took positions in what turned out to be the most revealing aspect of the factors influencing the cost of electricity for Kenyans. According to the popular post, over the last 10 years, an exploitative structure taking advantage of Kenyans has ensured diesel independent power producers are paid over 76pc of Kenya’s electricity budget every year. In the 2013/2014 financial year, the government paid Sh57 billion of its electricity budget to the IPPs.
The shocker according to the blog is that these companies only produce 30pc of Kenya’s electricity through diesel generation. The remaining 24pc of the government electricity spending pays for the rest of 70pc of Kenya’s electricity.
These revelations have been proven true by the Weekly Citizen through reference to Kengen and KPLC reports on electricity expenditure in the last 10 years.
While most analysts believe the Uhuru administration is serious in seeking to reverse this from 30pc to 70pc (generation) versus 76pc to 24pc (cost) ratio, there is doubt whether Jubilee can implement its energy manifesto fast enough and antagonise the masters of diesel power generation who are losing money since increasingly they will have to generate less electricity. 
President Uhuru Kenyatta’s statement in 2014 that Kenya will henceforth bank on geothermal to reduce the cost of electricity is believed to have provoked the battle lines between technocrats and businesses with interests in power generation as it put billions of dollars of business at risk for an arrangement entrenched during the Kanu regime.
The Kahawa Tungu blog which has staked its reputation by rubbing the status quo the wrong way on issues such as slow Recce squad deployment in the recent Garissa terror attack among others posed the question: “Why is the journey towards more use of cheaper geothermal electricity slow?”
The blog went on to make allegations that a conspiracy is afoot to slow and sabotage the exploitation of cheap geothermal power due to profits enjoyed by diesel energy power barons. No sooner had the article been posted on Tuesday May 5 than a huge war erupted online as thousands of tweets flowed endlessly picking sides on hash tags such as #KenyaEnergyCartels and #SimiyuCartels in an effort to place blame on who is responsible.
While Alai boldly backed up the sensational blog story on his personal page, two politically connected bloggers took on him in a war that flowed with invective and insults keeping Kenyans on Twitter following the blow by blow exchange.
According to Alai and hundreds of Kenyan twitter posts, there is a conspiracy to keep an energy cartel wealthy through an expensive power deal that keeps Kenyans power bills high. In contrast, the two opposing bloggers @ItsMutai and Cyprian Nyakundi, allege it is the fault of Silas Simiyu, the CEO of Geothermal Development Company (since suspended). Several Kenyans have weighed in on the debate with majority claiming existence of a conspiracy to blame Simiyu so as create a scapegoat. Simiyu is deemed hostile to diesel IPPs and his woes are thought to emanate from his position that apparently seeks to eliminate their expensive power generation. What is apparent is that this is no ordinary debate. Big money is at play. Strangely, mainstream media has kept away from it.
According to the Kahawa Tungu blog, introduction of diesel IPPs in the Kanu 1990s to cushion decreased hydro power output due to drought, has been hijacked and turned into a money minting exercise for a few billionaires at the expense of Kenyans.
“Between 1997 and 2003, diesel IPPs shielded by powerful Kanu power brokers and energy bureaucrats minted billions as hydro power plants were frequently “shut down for maintenance”. The government was “forced” to deploy “emergency power”, which is four times more expensive at Sh35 per kilowatt hour (sometimes as high as Sh44 pkh) as compared to the average power price at Sh9.10 per kilowatt hour”, it reports.
Documents seen by Weekly Citizen confirm that the original plan by Kanu government was to pay Sh20 pkh while only absorbing 13pc of Kenya’s total power from diesel. Instead, the diesel thermal IPPs plants have for over 18 years continuously operated 30pc of the time while charging expensively in unregulated deals that cost between Sh24-35 per kilowatt hour.
Kenyan customers normally pay for electricity in the region of Sh7 per kilowatt hour. So any higher costing power has to be subsidised to assist Kenyans afford power. Geothermal steam power cost of Sh5.60 per kilowatt hour (pkh), Hydro-power (Sh9.10 pkh) and diesel sold to government by Thermal IPPs which is the most expensive costs Sh35 pkh (sometimes Sh44),  Which means anything above Sh7 that the government buys is subsidised from taxpayers’ money!
Under the era of Moi’s powerman and longtime Energy minister Nicholas Biwott and later in Mwai Kibaki’s regime, business worth over Sh1trillion was enjoyed by five leading diesel IPPs among them Agreco, Tsavo, Ibera Africa, Thika Power and Rabai.
Several ministry of Energy officials are said to own shares in several IPPs creating overnight millionaires as they wrote power purchase contracts through which the Kenyan government bought power expensively while Kenyans were forced to endure punishing power bills to pay back. Even after the Narc revolution in 2002, moves to reduce the diesel power barons’ stranglehold on electricity costs was fought fiercely.  Lucky for Kenyans Kibaki’s family were not involved in diesel power generation. His Makerere economics theory emphasised on cheaper power, infrastructure and efficient tax collection as the best way to industrialise Kenya.
However, with the Kibaki regime plagued by political instability, sickness and battles with Raila Odinga’s LDP, there was little success in taming power cartels. The sickly Kibaki in his first term left everything to his energy lieutenants some of whom had long term ties to diesel IPP power barons. Energy PS Patrick Wanyoike, Kengen boss Eddy Njoroge and Joseph Njoroge successor to the late KPLC boss Samuel Gichuru, are silently believed to have maintained the arrangement inherited from the Moi regime. However, immediately after the 2008 post-election violence and the formation of the grand coalition government with Raila, Kibaki was brave enough to insist on sanity and national interest in the power industry. Kenya and Nairobi by 2008 were rated as the most expensive places to do business owing to high energy costs. Investors were fleeing and avoiding Kenya in droves.
The first step to find alternative ways of generating affordable electricity, Kibaki’s administration embraced a World Bank Business Plan developed by Geothermics (USA) and PWC consultants in 2007 that emphasised on making geothermal the ultimate solution to the runaway electricity cost blamed for scaring away investors as well as escalating the cost of living. Kibaki together with Raila under the coalition government mooted development of a special purpose geothermal company by the name of Geothermal Development Company in 2009. Its mandate was to accelerate the development of geothermal resources in Kenya
According to the Kahawa Tungu blog, prior to the coalition government’s formation of GDC, geothermal development was deliberately slowed down by ministry of Energy decision-makers with a “policy” that emphasised drilling steam without conversion to electricity. This is what resulted in Olkaria 1, 2, 3 taking between 16 to 26 years from drilling wells, testing them, and then taking countless years to convert the steam to electricity. Allegedly, for years geothermal steam that should have been turned into cheap electricity has been lying at Ol Karia without use while billions were spend to drill for more steam. 
This was the strategy for companies and individuals to make money drilling while preventing Kenyans from enjoying the steam found that could be turned into cheap electricity. Analysts point to a well laid out conspiracy to safeguard the billions being earned by diesel generation by blocking anything that would let any cheap electricity into the national electricity lines!
It is now common knowledge that any time GDC has found steam ready to be converted, the energy mandarins insisted on higher and higher megawatts drilling knowing it would take years to approve and build power plants. For the recently commissioned Ol Karia 280MW geothermal plant, it took 16 years from drilling in 1998 while commissioning was done in 2014/15.
The 105MW Olkaria Olkaria II Power plant took 23 years from drilling to commissioning while the 45MW Olkaria I power plant took 28 years! Even the recent 110MW Olkaria III IPP power plant took 27 years from commencement of drilling to the time full 110MW of power got connected to the national grid! 
Energy sources say the war to sabotage cheap electricity haunts the Uhuru administration to date. His recent successes to fasttrack GDC’s 105MW Menengai project is now viewed with total hostility by the energy mandarins. Menengai has taken five years from drilling to turning it into electric power. It is considered a record by world standards. President Uhuru is also on record demanding the reduction of expensive diesel-generated power that his government has been buying from 38pc to 10pc.
Uhuru is said to be concerned by statistics that show the Kenyan economy has lost Sh220 billion on fuel cost charges in the last five years alone. For every high cost kilowatt of power bought by the government, more money is needed to subsidise it so Kenyans can buy it affordably.
The current bad publicity and incessant power struggles to control the GDC is being traced to intrigues and strategies to control appointments that manage electricity generation in Kenya. Sources close to State House say Uhuru’s is fed up at the current happenings.
These non-stop shenanigans are said to have prompted his lightning decision to sack GDC chairman Issac Gicharu in 2014 when Gicharu was suspected to be planning a secret coup to have GDC CEO Simiyu and management sacked to be replaced by a new group friendly and connected energy cartels. 
Though Simiyu is among those currently suspended, suspicion that Uhuru could reappoint him is said to be causing different players sleepless nights as his “fasttracked drill to conversion” model of running the GDC is dangerous for several entrenched interests. Simiyu’s decision to have the GDC purchase seven geothermal drills is believed to have threatened companies that have benefitted from procurement whenever GDC outsources drilling services worth billions of shillings to private contractors.
An online media war launched by several bloggers suspected to be at the behest of energy cartels is what is believed to have led to his suspension.
Recently, Uhuru appointed Gershom Otachi as the new chairman with a new board of directors. Observers hope the changes will help Jubilee to reduce electricity costs by totally eliminating diesel generation while going 100 owe cent geothermal.
Jubilee strategists are reported to be already in panic mode over Uhuru’s legacy after the false starts experienced by the railway and Laptop projects ahead of the 2017 elections. Cheaper electricity to Kenyans is another Uhuru campaign promise at risk.
Obviously, Jubilee has an uphill task to drastically reduce the influence of these established cartels who will lose billions of shillings since expansion of geothermal power will mean they are generating less and less electricity.