Press Center | Freight Shipping Logistics News
So far, the sector has acquired a new look, with the rebranding of the Ministry of Energy to the Ministry of Energy and Petroleum.
While there are a lot of expectations, going by the huge potential the industry has shown, there are also a number of challenges.
Rural Electrification Authority (REA)
It was established under Section 66 of the Energy Act, 2006, as a corporate body to accelerate rural electrification.
Early this month, REA’s board appointed Ng’ang’a Munyu, former general manager and head of corporate planning, as the acting CEO, replacing Zachary Ayieko whose term is expected to end on August 30.
According to the 2009 REA master plan, the authority is expected to connect 20,922 public facilities, including schools and hospitals in rural areas. This number has since been revised to 25,549.
REA had proposed a Sh28 billion budget to finance connection of 8.8 million households in Kenya this fiscal year, but parliament’s Budget and Appropriations Committee noted there would be no allocation for new and existing energy projects, denying it Sh1.3 billion.
REA hopes to connect all secondary schools by September. Out of a total 22,782 primary schools, 13,699 have been hooked to electricity. REA aims to connect the others during the first half of this financial year.
Mr Ayieko’s successor will be faced with the challenge of ensuring the authority achieves 100 per cent rural electrification, amid shrinking finances for operations.
Data from REA indicate that rural electrification increased to 22 per cent in June 2011 from 4 per cent in 2003.
Long serving CEO Eddy Njoroge went on early retirement last month, two years before expiry of his term citing “satisfaction” with KenGen’s achievements.
This month, the firm’s board appointed former regulatory affairs director Simon Ngure as the acting CEO.
During Mr Njoroge’s 10-year stay at the KenGen helm, the firm’s installed capacity for electricity generation has nearly doubled from 870 megawatts.
KenGen has a duty to ensure that adequate investments are made for power generation, especially from renewable sources.
KenGen’s total installed capacity is estimated at 1,300MW, mostly from hydro resources that are not reliable during dry weather. Kenya needs to generate an additional 1,000MW of electricity every year for the next 17 years to achieve the targeted capacity under the Vision 2030 growth blueprint.
Mr Njoroge’s successor will also have to exploit wind, solar, geothermal and coal to generate more power.
The monopoly electricity distributor has on two occasions been denied the go-ahead to increase tariffs in a bid to raise more revenue. This is despite the fact that less than 30 per cent of the population has access to electricity.
Though the firm is currently charging as high as Sh70,000 connection fees for a single phase meter, double what it has been charging, it may face a blow in this attempt after the Energy Regulatory Commission concludes a study to establish how much connection fees should be charged.
The firm has also had to deal with vandalism, which has left consumers without power and counting losses. Analysts at Faida Investment Bank indicate that Kenya Power lost Sh1.3 billion last year as a result of power losses — the difference between electricity sold to customers and the total amount generated.
With former Kenya Power boss Joseph Njoroge having quit last month to join the government, his successor will have a full intray. He will also have to oversee transition from manual to automated meter systems to curb high default rates.
Energy Regulatory Commission
It was established in July 2007 to regulate electricity, petroleum and other energy related products with a view to cushioning the consumer.
ERC started putting monthly price caps on pump prices in December 2010. It was nearly scrapped by Parliament after a section of MPs criticised its price capping model as encouraging high prices and fuelling inflation.
ERC has also been criticised for not eliminating cartels in the energy sector. The petroleum industry is faced with a number of challenges, with the country’s only refinery on the verge of collapse due to failure by oil marketers to lift their products from the facility on time, creating a cash flow crisis.
While ERC has the powers to compel oil marketers to lift their products from the refinery and make payments, in May, about 19 oil firms had defaulted on payment.
On electricity, the ERC seems powerless against Kenya Power, leaving consumers to pay almost double the internationally accepted prices.
Mr Kaburu Mwirichia, its boss, will quit on August 21, having served two terms as acceptable by law.
Kenya Pipeline Company (KPC)
KPC is mandated to manage transportation of fuel through the pipeline system. Mr Celest Kilinda, the former managing director, was relieved of his duties in May, following accusations of abuse of office.
At the time, KPC was faced with problems such as clogging of the pipeline, thereby causing delays in discharge of fuel, leading to additional demurrage costs charged by shipping lines. The costs are borne by fuel consumers.
It has also been alleged that KPC allows oil giants to pump private fuel imports at the expense of imports under the Open Tender System.
The firm is also operating on inadequate infrastructure that does not meet the industry needs. Kenya and Uganda are in the process of setting up a new pipeline between Eldoret and Kampala.
Under the Lamu Port South Sudan Ethiopia Transport corridor project, another pipeline is supposed to be constructed between Kenya and South Sudan.
Many other pipelines may need to be developed within Kenya following the recent oil discoveries.
Mr Kilinda’s successor will be faced with the task of turning around the company and reducing the need to transport fuel products using tankers.
Sufficient disaster management mechanisms will also have to be put in place to avert suits arising out of fires related to oil or gas pipelines, such as the 2011 inferno in Industrial Area, Nairobi, where more than 100 people died, subjecting the company to millions of shillings in claims for compensation.
PARASTATAL heads who signed the Mombasa port community charter risk being sacked if their agencies do not deliver on the contents of the new entity. The charter signed between the government and the private sector aims at improving the movement of cargo from the port into hinterland