Kenya Power will be required to make public ownership details of independent power producers it has signed power purchase agreements with as Parliament seeks increased transparency in the sector.
A Bill proposing the review of the Energy Act of 2019 also wants priority given to power producers generating electricity from renewable energy sources in a bid to tame the high cost of electricity in the country.
The Energy (Amendment) Bill, initiated by Nairobi Senator Edwin Sifuna, will see private power producers supplying electricity to Kenya Power disclose and register full beneficial ownership details and be open to public scrutiny.
If the Bill is passed into law, Kenya Power will be required to publish the register on its website and annual audit reports, an action that will be conducted 90 days after it is enacted.
The Senator said the Bill seeks to create transparency in the purchase of electric energy from private generators and ensure the contracts entered into are financially sound to protect the end user of electricity from inflated electricity costs.
"An energy purchase agreement... shall only be entered into with a generating entity which has disclosed and registered full beneficial ownership in accordance with the Companies Act," the Bill reads in part.
It adds that the Energy and Petroleum Regulatory Authority (EPRA) should not approve PPAs between Kenya Power and IPPs that fail to make full disclosures on their beneficial owners.
The Bill also wants electricity generated from renewable energy sources such as geothermal, hydro and wind to be given priority and have thermal power producers, which use heavy fuel oil to generate power as a last resort.
Thermal IPPs have been blamed for the high electricity costs. This is on account of their generating power using heavy fuel oil, with the cost of acquiring the fuel passed to consumers through the Fuel Cost Charge component of the power bill.
The Bill notes that the system operator, which decides the power plant to feed the grid, should “ensure that priority is given to dispatchable generation with a sustainable base load at the point of dispatch (and) give priority to a generating entity generating electrical energy through renewable technology”.
Sifuna explained there may have been instances of bias in the past in selecting the power producers to feed the grid.
“The dispatcher at KPLC (a role that has since been transferred to the Kenya Electricity Transmission Company – Ketraco) is basically a small god. He determines whose power is added to the grid at any one time. We have IPPs who even have provisions for a discount of up to 50 per cent if KPLC hits a certain threshold of power from them but KPLC has never taken advantage of this,” he told Standard.
Section 134 of the current Act grants the Cabinet Secretary for Energy what Sufuna said are immense powers in the operations of power producers and allows little scrutiny.
"The Cabinet Secretary may direct that any generating plant shall, in extraordinary circumstances, be operated and maintained in accordance with such directions as he may prescribe," Section 134 (1) states.
Sifuna defends his Bill as aimed at ensuring that energy purchase agreements comply with the constitutional principles of openness and accountability, as well as public participation.
He adds that it will promote investor confidence and good corporate governance practices and help uncover "tax evasion schemes, money laundering practices, corruption schemes, and other illegal activity involving either one or more companies".
"The rationale for disclosure of beneficial ownership information is to create an accurate public disclosure regime that provides transparency in the beneficial ownership and control structures of companies," he states in the Bill's memorandum.
Before any purchase of power, KPLC and other purchasing entities will be required to conduct a feasibility study to ensure there is enough demand. That essentially bars KPLC from entering into power purchasing agreements (PPAs) before establishing there is a need for an upscale in capacity.
"We have signed PPAs that we don't need yet Kenyans have to pay for those generating plants via what they call Capacity charge. These contracts also have take or pay clauses. So even if you are not getting any power from those plants we still pay," Sifuna, who sits in the Senate's Energy Committee, said yesterday.
There have been claims that some of the IPPs are owned by powerful individuals in the country and in a position to influence decisions including which power plants feed the national grid with electricity.
“Most of these IPPS are registered in offshore tax havens. We strongly suspect they are owned by former powerful people in the energy ministry but we can't tell because there is no requirement to disclose their names,” said Sifuna.
"The public and Parliamehe Bill also want electricity generated from renewable energy sources such as geothermal, hydro and wind to be given priority and don't have sight of all the PPAs that have been signed. We have provided in the amendment bill for a register of all those agreements that will be available for public scrutiny."