Inadequate rains have forced the energy ministry to extend contracts for diesel powered emergency electricity generator Aggreko for three more months, dampening earlier hopes that electricity bills would ease at the end of this year.

The UK- based Aggreko Company is currently generating 287 megawatts of thermal power or one fifths of the country's total power consumption under two rolling contracts, one of which expires this month and the other in November, next year.

Expected short-season rains have failed to fill up dams used for hydro- power generation and the energy ministry has been forced to extend Aggreko's services to ensure consumers have adequate, although more expensive electricity.

First contract

Energy permanent secretary Patrick Nyoike says the first contract generating 150 megawatts (MW) of power, through the two power plants in Eldoret and Nairobi's Embakasi area will be partially phased out at the end of December as earlier planned, but the bulk of supply of 90 MW will be retained for three more months.

"We are retiring the Eldoret plant on December 31. We will also reduce the capacity in Nairobi by 20 megawatts," Mr Nyoike said. Eventual termination of this capacity is pegged on the adequacy of the March-May long rains in the eastern and central parts of the country where the reservoirs are situated.

"If the rains do not come, we will again go to tender and Aggreko will bid afresh among others," added the PS.

Along with other independent power producers, thermal sources account for 40 per cent of electricity consumed during peak time , up from 16 per cent when the dams are full.

Power bills have shot up in tandem with fuel cost adjustments which have risen to Sh7.90 per unit of power in November compared to Sh6.60 per unit incurred in October.

Known as the fuel cost component of the bill-- the money is collected by KPLC on behalf of thermal power producers and is now the most expensive item on the power bills.

This is compounded by a fresh rally in the international crude prices which traded at $74 per barrel on Friday having risen from $68 last month and $45 in April.

Investment analysts are forecasting that crude prices will continue to rally and could hit $90 a barrel before year end-pointing to more pain and added pressure to the surging cost of living, especially during the festive season.

By extending the Aggreko contract, it will be the third time in six months that the State is resorting to stop gap measures to address the energy deficit.

In June, the diesel powered generators were given a six month extension in anticipation that the short rains, buoyed by a forecast El Niño phenomenon would fill dams to capacity for hydro power generation.

Contracts for the temporary power supply are negotiated over a fixed period of time, determined by the State.

However, should the rains come, then an early termination could be negotiated.

In recent months, energy policy makers have shifted focus to developing renewable sources of energy as a solution to the wavering supply situation.

But with the lead times for the planned green electricity projects, the country is likely to remain incrementally dependent on oil generated electricity.

"As long as the rains do not come we need Aggreko," said Dr Eric Aligula, an infrastructure expert at the public policy think tank--the Kenya Institute for Public Policy Research and Analysis (Kippra).

"Any quick fixes that reverse oil dependence make strong economic sense for Kenya. As we wait for more green electricity, the economic growth is calling for more power," said industry consultant George Wachira.

The electricity supply crisis is however expected open new avenues for Kenya's biggest oil marketer--Total-- to consolidate its market strength.

The extension also allows Total which is Kenya's biggest oil marketer by market share, to continue to supply 170 tonnes of diesel to all the Aggreko plants at Embakasi in Nairobi and Eldoret.

Last Tuesday, Total took over the bulk supply contract from National Oil and the transfer of the contract now means that Total will be supplying all emergency power stations in the country after it won in August the tender to supply Aggreko II which has a capacity of 80 megawatts in Nairobi and Naivasha (60).

Monthly averages for diesel supplied to emergency power plants stand at 60 million litres a month. This is a 62 per cent rise since March.

With bulk supplies a key factor to market share in a fragmented market, Total's market share is projected to rise from the current 24.3 per cent to about 29 per cent.

Back in 2000, when the country faced a crippling power shortage after the failure of seasonal rains reduced the output of the hydroelectric power plants.

Surveys Power rationing was introduced, costing the economy an estimated $10 million a day in lost production and exports.