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Firms counter State’s plan to cut off lucrative power deals

By Moses Michira | June 26th 2020

Kenya Power has come under sharp attack from its electricity suppliers over plans to terminate their contracts, citing the Covid-19 pandemic.

A group of the suppliers said the utility firm’s decision has nothing to do with reduced demand for power in the wake of the pandemic as alleged.

Among the Independent Power Producers (IPPs) that have filed their complaints with the industry, regulator are Rabai Power, Ibera Africa and Thika Power.

Plans to pull the plug on the power purchase agreements with the firms had been in the pipeline for a while on the recommendation of a task force to review the deals in 2018.

The team had noted in its recommendation to then Energy Cabinet Secretary Charles Keter that the move would help bring down the cost of power in the country, as most of the deals were lopsided in favour of the IPPs.

As of June 2017, there were 12 IPPs in the country, one emergency power producer and three import firms with 3,029 MW of installed power capacity.

Kenya Power wants to walk away from the decades-old contracts with the producers of expensive diesel-generated electricity as part of the country’s push towards the cleaner and less costly renewable energy.

But the IPPs claim Kenya Power has been reckless in signing up additional generators without aligning them with demand, resulting in oversupply.

In a letter to the Energy and Petroleum Regulatory Authority, the IPPs have complained against the utility firm for invoking the “act of God” (force majeure) provision in terminating the supply contracts.

“KP (Kenya Power) claims that the measures taken by the government of Kenya in order to contain the Covid-19 pandemic have reduced national demand for electricity, which has affected the company’s ability to utilise available capacity and take delivery of electrical energy,” they wrote.

Ordinarily, terminating a contract would have huge cost implications in expenses that the utility firm can ill afford, especially in the present times when it could be reporting losses.

President Uhuru Kenyatta has also been vocal in the push for the country to terminate the contracts with the IPPs given the increased investments in geothermal, solar and wind.

While commissioning the 310 megawatts Lake Turkana Wind Power Project in July last year, he said consumers had in just eight months saved Sh8 billion by embracing wind power at the expense of the expensive diesel-generated thermal power.


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