Only two moths ago the entire nation was thrown into darkness in a mishap that was then blamed to a technical fault.

Energy Minister Kiraitu Murungi said the demand for electricity, which currently stands at 1049 Megawatts, is outstripping supply.

"We should not continue pretending. We are facing a power crisis," the minister said bluntly.

Speaking when he visited the Kenya Power and Lighting Company (KPLC) headquarters in Nairobi, Kiraitu said urgent intervention measures need to be taken to deal with the situation which could have major repercussions on the country’s economy and political stability.

"There is a real danger that all the gains that we have made in the last six years including the high level of connectivity, are likely to be reversed," he warned.

Kiraitu said massive investments need to be made to exploit other sources of energy such as geothermal, whose reserves has the capacity to generate about four thousand megawatts of electricity.

He also announced that the government would soon restructure KPLC, where it owns a 48 percent stake, to streamline power distribution in the country and make it more efficient.

A new entity, the Kenya Power and Transmission Company, he said, would be created to be solely in charge of electricity transmission.

"It will be a state-owned company that will be subjected to performance obligations within the performance based contracting," he explained.

KPLC, Kiraitu said, would be left with the distribution aspect.

"We would like it (KPLC) to be private sector-led. The performance will be based on a license issued by the regulator, which will have strict (performance) targets," he added.

Kiraitu said the re-structuring an overhaul of KPLC’s procurement system were part of the hard choices his ministry has had to make to ensure the firm’s efficiency in the face of increasing power outages and increasing demand.

At the same function, KPLC urged the government to waive its preferential shares in the company to enable it source for additional funding that it requires.

The situation arose when a debt amounting to Sh12.3 billion owed by KPLC to KenGen was reallocated into preference shares.

Outgoing CEO Don Priestman, whose two-year tenure expires at the end of June 2008, lamented that the Sh15.9 billion preference shares make KPLC unattractive to investors and lenders thus the need for the government to relinquish those shares.

The debt-equity conversion also caused KPLC's financing costs to drop from Sh421 million to Sh3 million.

He added that only 25 percent of the revenues billed to customers ends up with the firm with the remainder being passed on to other entities such as KenGen, Independent Power Producers (IPP), the Energy Regulatory Commission (ERC) and the Rural Electrification Authority (REA).

The CEO also appealed to the minister to intervene and ensure the quick reimbursement of the REA costs and the payment of VAT refunds.

During the meeting, Priestman however lauded the government’s move to ban the export of copper and aluminium saying this will go a long way in reducing vandalism that cost them billions of shillings.

Energy Permanent Secretary Patrick Nyoike however said that a legal notice banning the export of used scrap metal would be gazetted before next week.

And in a bid to cushion consumers from the burden of financing the cost of tariff adjustments which is expected to be announced by the ERC in July, Nyoike said the government did provide Sh1.75 billion in the 2008/2009 budget for transmission capacity expansion and the connection of more consumers.