President Uhuru Kenyatta on Wednesday, September 29, 2021, received the Report of the Presidential Taskforce on Review of Power Purchase Agreements detailing a path to ensure the reduction of electricity costs in the country.
The Taskforce was constituted following appeals by Kenyans to address concerns of the high cost of electricity for both individual consumers and enterprises.
The government was concerned that high electricity prices constrain economic activity and limit the realization of Kenya's aspiration of becoming a globally competitive, newly industrialized, middle income, and prosperous country.
File image of President Uhuru Kenyatta. |Photo| Courtesy|
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Upon constitution, the taskforce was primarily given the mandate to undertake a comprehensive review and analysis of the terms of all Power Purchase Agreements (PPAs) entered into by the Kenya Power and Lighting Company Limited (KPLC).
It was also required to develop a suitable strategy for engagement with the Independent Power Producers (IPPs) and lenders, in order to achieve relief for electricity consumers and ensure the long-term viability and sustainability of the energy sector.
President Kenyatta noted that the electricity cost in Kenya had been driven up by the vast differential between KenGen and IPP tariffs and electricity dispatch allocations.
He also learnt that the lack of proper demand forecasting and planning, had led to irreconcilable projections as against demand.
The existing risk allocation imbalances between KPLC and IPPs further exacerbated by poor contract management frameworks; and an uncoordinated institutional architecture that inadvertently contributes to enhanced operational costs passed on to consumers, are some of the reasons for the high electricity costs.
President Kenyatta examined and welcomed the recommendations of the Taskforce that establish a path towards the reduction of the cost of electricity by over 33 per cent within four months.
"The consequence of the proposed interventions is that a consumer who previously spent Ksh. 500 per month on electricity shall by 31st December, 2021 pay Ksh. 330 per month. This cost reduction will be achieved through the reduction of the consumer tariffs from an average of KES 24 per kilowatt hour to KES 16 per kilowatt hour which is about two thirds of the current tariff," a statement signed by State House Spokesperson Kanze Dena read in part.
The President has since directed Ministry of Energy Cabinet Secretary, Charles Keter to secure the immediate implementation of all the recommendations of the Taskforce by December 25, 2021.
The Taskforce recommendations include:
I. Review and Renegotiations with Independent Power Producers (IPPs) to secure immediate reduction in Power Purchase Agreements (PPA) tariffs within existing contractual arrangements
II. Cancellation with immediate effect of all unconcluded negotiations of Power Purchase Agreements and ensure future PPAs are aligned to the Least Cost Power Development Plan (LCPDP);
III. Fast-track and deepen the ongoing reforms at KPLC to restructure it into a commercial entity that is both profitable and also capable of delivering efficient and cost-effective electricity supply to all consumers.
IV. KPLC to take the lead in formulation and related PPA procurement of the LCPDP plan.
V. KPLC to institute Due Diligence and Contract Management frameworks for PPA procurement and monitoring along the lines of the drafts provided by the Taskforce.
VI. KPLC to institute one and five-year rolling demand and generation forecasts and associated models.
VII. KPLC to adopt standard PPAs and proposed Government Letters of Support (LOS) along the lines of the drafts provided by the Taskforce.
VIII. KPLC to undertake a forensic audit on the procurement and system losses arising from the use of Heavy Fuel Oils (HFOs).
IX. In line with the constitutional imperative for transparency in the public sector, KPLC’s annual reports should include the names and beneficial ownerships of all IPPs with which it has contractual arrangements.
The Head of State appreciated the Taskforce for their sense of civic duty and professionalism and for expeditiously discharging their mandate.
The Presidential Taskforce was led by Mr. John Ngumi, as the Chairperson, Dr. Elizabeth Muli as the Vice-Chairperson.
Other members included: Solicitor-General Mr. Kennedy Ogeto; Hon. Justice (Rtd.) Aaron G. Ringera; Dr. James Mcfie; Mr. Mohammed Nyaoga, SC; Eng. Stanley Kamau; Ms. Wanjiku Wakogi; Eng. Isaac Kiva; Dr. Caroline Kittony; Eng. Elizabeth Rogo; Mr. Sachen Gudka; Eng. James N. Mwangi; Dr. John Mutua; Ms. Anne Eriksson; and Mr. Yida Kemoli.
The Joint Secretaries were Mr. Jasper Mbiuki (Executive Office of the President), Ms. Lillian Abishai (Office of the Attorney-General), and Ms. Elsie Mworia (KPLC).
The President also conveyed his gratitude to the new Board of Kenya Power for steering the ongoing ground-breaking reforms in the nation’s anchor utility company.
