Workers oppose private sector participation in transmission

Workers in the energy sector are opposing the handover of parts of the transmission line to private sector players under a public-private partnership (PPP).

Employees at various energy sector agencies, working through the sprawling Kenya Electricity Workers Union (Ketawu), have warned that this could have a significant impact on the cost of electricity, while also expressing concern that their welfare would suffer if private companies took control of power transmission.

The National Treasury recently said it was in talks with two private companies to build the transmission line under a PPP model. India’s Adani Energy Solutions and the African Development Bank’s Africa50 will undertake the construction and operation of the transmission line respectively, at a total cost of 158 billion shillings ($1.22 billion).

The government has been seeking to hand over the construction and operation of several transmission lines, arguing that there is not enough money to build the new power infrastructure needed to meet the growth in electricity consumption.

National Interest

Kenya Power will pay the companies so-called transmission charges to use their lines to deliver power to consumers, a cost that will be passed on to electricity users.

Keita’s general secretary, Ernest Nadome, said the government should safeguard the national interest and ensure that basic public services remain in the public domain.

He said Keitau would defend the interests and welfare of power industry workers and threatened “a massive strike as a decisive measure to safeguard the national interest.”

“We know the government is in the process of privatizing all transmission assets,” he said on Saturday.

“The Department of Energy should immediately cease these attempts … and forget about them. Electricity workers will not accept even one inch of (these transmission assets) being transferred to a private company.”

The Ministry of Energy has been considering attracting private sector participation in the construction and maintenance of transmission lines through a public-private partnership model. The Ministry of Energy believes that one of the major challenges facing the country in expanding transmission infrastructure is insufficient investment in transmission infrastructure maintenance.

In the past, this has been blamed on the collapse of major power transmission lines, which has plunged the country into nationwide blackouts.

The ministry said handing over part of the network to private capital would ease pressure on Kenya Power and Kenya Electric.

Kenya Power pays Ketraco for transmission charges, which are fees for using its transmission lines to move electricity from power producers to consumers.

Kenya Power paid Ketraco Sh2.72 billion in transmission charges until June 2023. Kenya Power said in a disclosure that it still owed Sh2.59 billion.

It is not yet clear how private companies in the transmission sector will be paid, but the payments are likely to be higher. Unlike Ketraco, which is funded by the state, these companies will use their own funds.

Plans to hand over some transmission line construction to the private sector could be similar to measures taken by governments in the 1990s and early 2000s to fill generation gaps.

Kenya Power has signed power purchase agreements (PPAs) with independent power producers, which have been controversial and blamed for high electricity costs.

In addition to requiring power producers to pay Kenya Power even when they do not supply it (costs that are passed on to consumers), the contracts have been criticised for being unnecessarily long, lasting an average of 20 years, and appearing to disadvantage power consumers while leaving Kenya Power with seemingly little room to renegotiate the contracts.

The power purchase agreement is fraught with problems and the Jubilee government has tried several times to find a way out of the contract but has failed each time. Kenya Power recently said it is still seeking to renegotiate the power purchase agreement.

In its annual report for the year ending June 2023, the company said one of the pillars of its business transformation was “reducing the cost of electricity purchase”, adding that “this requires renegotiating power purchase agreements to reduce the cost of electricity to end users”.

Nadom, who is also the first assistant secretary general of the Central Organisation of Trade Unions (COTU), also expressed concern over the Kenya Airports Authority (KAA) plan to involve Adani Airport Holdings in the management of the Jomo Kenyatta International Airport.

The Indian company recently submitted a private initiative proposal to take over operations of the important hub for 30 years.

During this period, the company said it would invest in upgrading airport facilities and building new ones. It will recoup its investments through fees paid by passengers and airlines, and through an annual franchise fee paid to KAA.