Kenya Says no Power Price Rises Expected Due to Drought

Kenya will not raise electricity costs despite a drought that is affecting water levels in its hydropower dams because it is generating more power from geothermal steam, the government said on Tuesday.

Endowed with vast geothermal energy resources in the Rift Valley, the east African nation wants to expand its generation capacity by 5,000 megawatts (MW) by 2017 from about 2,152 MW now, to lower tariffs and cut costs of doing business.

Energy and Petroleum Cabinet Secretary Davis Chirchir said despite the dry weather, water levels in the hydroelectric dams were still adequate because increasingly more geothermal power was being used, meaning even less reliance on hydro power.

Kenya was also not using expensive diesel-powered electricity, he said, a practice commonly used in the past during dry spells leading to higher tariffs.

Geothermal steam accounted for up to 52 percent of total electricity generation, Chirchir said.

"The hydros are performing very well. We are not overdrawing the water because we have significant amount of geothermal," he told a news conference.

The installed generation capacity for hydropower stands at 820 MW while that of geothermal is at 585 MW.

Demand for electricity from firms and homes outstrips Kenya's installed generation capacity, frequently leading to blackouts that disrupt businesses and forces them to spend extra funds to run generators.

The government also aims to connect 75-80 percent of its 44 million population to the grid in the next five years from about 32 percent now.

Chirchir also said a new petroleum law - required to be in place before awarding of licences for new exploration blocks - will be in place by the end of August as required by the constitution.

The petroleum law, updating a 1986 code, would list new guidelines on natural gas exploitation not adequately covered now, allow for the creation of a sovereign wealth fund to save some revenue and specify how local communities will benefit.

"We have circulated the draft bills, the final copies to all (parliament and senate) committees, so that we do meet the deadline of 27th of August this year," he said.

Tullow Oil (TUWLF) and Africa Oil, 50-50 partners in Kenya where they have found an estimated 600 million of recoverable crude reserves in the north west, are expected to submit to the government their development plans to start commercial production in late 2015.

By George Obulutsa