MPs blast Treasury over IPPs

Deputy Auditor General Stanley Mwangi and electricity supply stakeholders before the National Assembly's Energy Committee, August 4, 2023. [Elvis Ogina, Standard]

The National Treasury was at pains to explain why it issues letters of support to Independent Power Producers (IPPs) which a National Assembly committee said aids in protecting the firms.

These letters of support also formed the basis that had the Office of the Auditor General describe agreements between Kenya Power and IPPs as skewed.

Deputy Auditor General Stanley Mwangi said the firms are protected and over-insulated as it met the National Assembly's Energy Committee.

He pointed out the disparities among the contracts signed between IPPs and Kenya Power indicating the extreme differences in the cost of power.

From the submissions, the cheapest went for Sh5.31 per kw/h while the most expensive cost Sh130. By the time of the audit, there were 25 power purchasing agreements (PPAs), each with a different charge.

"We found that disparity to be quite wide," said Mr Mwangi adding that this was the case even when there were different generators utilising the same resources.

He said this contributes to the cost of electricity since all these producers do feed to the same consumer.

Mwangi pointed to Lake Turkana Wind Power, an IPP, saying that according to the contract with Kenya Power, the firm is paid for power generated even if it is not transferred to the grid.

He also noted a clause where Valued Added Tax (VAT) costs will be absorbed by the distributor (Kenya Power).

Mwala MP Vincent Musyoka, who is the committee chair, sought to understand why Treasury issues the letters of support.

"What are the contents of these letters of support? Are you not protecting them?" he posed.

"I would not like to get to that since I do not have those details," said Humphrey Muhu, a Treasury representative.