New Bill gives Energy CS immense power over electricity sector

A proposed energy law has given immense powers to the Cabinet Secretary, some of which if exercised might result in further surge in power prices.

The Bill gives the CS lee way to make numerous decisions in the management of power resources without an obligation to consult other institutions under the ministry. The draft law went through a public participation phase last week and is due in the National Assembly for the second reading.

This is unlike the scenario with other ministries where major decisions are required to go through a consultative process and even public consultation.

If it passes and becomes an Act, it will give the office of the CS power to impose levies on electricity consumption that might result in hiking of power bills as well as exempt geothermal firms from paying proposed royalties to communities and government.

Among the instances where the CS will get to exercise power unilaterally include a scenario where the Bill gifts communities in geothermal rich areas a royalty to be paid by firms producing electricity using the resource but also gives the CS powers to take away the money by exempting firms from paying the royalty.

Deny the communities

The Bill proposes that geothermal companies pay up to 2.5 per cent per year of their earnings from the energy source in the first 10 years as royalties. Thereafter, the firms will pay between two and five per cent annually. The royalties will be shared by the community (5 per cent), county government (20 per cent) and the National Government (75 per cent).

However, it gives the CS power to take away the royalty by exempting the power companies from paying the royalties and effectively deny the communities as well as the county and national governments earnings from the kitty.

The Bill is not specific on modalities the CS will use in waiving royalties but only said this would be done to encourage investments in geothermal.

“The Cabinet Secretary may waive, suspend or reduce the royalty for any licensee in the interest of encouraging the greatest utilisation of geothermal resources,” reads the Bill.

Other instances where the Bill bestows considerable powers to the CS without requiring him to consult other State agencies include giving licences to firms to explore for geothermal resources as well revoke the licences.

It, however, stipulates the conditions for the revocation of the geothermal exploration licences including activities that affect other key geothermal resources as well as public interest, but also centre around the office of the CS.

“The CS may authorise any person in writing to make surveys, investigations, tests and measurements in search of geothermal resources… any authority granted under this section may be revoked by the CS,” says the Bill. Once the resource has been discovered, the Bill however requires the CS to seek advice from Energy Regulatory Commission (ERC) on how to proceed in the extraction of the geothermal resource.

While there are instances where regulations that come in place to enable the implementation of the Bill once it becomes an Act might dilute the powers of the CS, the case with a majority of other Acts are that such checks are built in the law from the onset.

Such is the case with the Petroleum (Exploration, Development and Production) Bill, 2017, which also underwent the public consultation phase last week before undergoing the second reading in the National Assembly.

The Bill has set up institutions such as the National Upstream Petroleum Advisory Committee and the Upstream Petroleum Authority that the CS Petroleum will consult on different issues such giving go ahead to oil companies to explore for oil or even suspend their licences to undertake such activities.

ERC Director General Pavel Oimeke declined to comment on the Bill, noting it might be subject to numerous changes while going through Parliament.

He, however, noted that ERC would not support initiatives that might see the cost of electricity go up, adding that this would be a drag to other sectors of the economy that rely on electricity as an enabler.

While he was not explicit on what initiatives those might be, 2.5 per cent royalty paid by geothermal power producers might be passed on to the consumers and see a further surge in the cost of electricity.

Narok Senator Ladama Olekina said a powerful CS wold mean some of the decisions made by the Energy Ministry might not be subjected to the necessary checks and balances.