Kenya to review all power contracts to bring down cost
By Patrick Alushula | November 16th 2016
The Government will review all power purchase agreements at the end of the year to cut down on power costs.
This was revealed by Energy and Petroleum Cabinet Secretary Charles Keter in his Nairobi office yesterday when he unveiled a multi-sectoral task force to carry out the exercise.
Mr Keter reckons all existing and potential Power Purchase Agreements (PPAs) will be reviewed with the aim of dropping agreements that are stressing the power tariffs.
The exercise, he said, will go as far as 20 years back, with the task force considering changes in the microeconomic environment between the time of signing the PPAs and current situation.
“It is recognised that because of technological advances and innovations, the cost of equipment for feed-in tariffs technologies has drastically reduced and we intend to leverage on these positive changes so that we can give Kenyans the best tariff,” explained Keter.
While alluding that the outcome of the exercise may see the Government pull out of expensive contracts, Keter downplayed fears that the process could lead to litigations between Government and Independent Power Producers (IPPs).
“The mandate of the team is to check and see if for instance a PPA was signed for 25 years and we are only paying for capacity charged and whether it’s sustainable paying for the remaining period in case of termination of contract and if there is an exit option in the deal,” explained the CS.
Strathmore University’s Prof Izael Da Silva, the brain behind the institution’s solar energy, will chair the task force.
Other people who will be on the task force have been drawn from energy sector entities, National Treasury, State Law Office, Kenya Private Sector Alliance, Kenya Association of Manufacturers and experts from universities, Energy Regulatory Commission and commercial law.
“The review will also include review of tariffs for ongoing negotiations between Kenya Power and power plants including feed-in tariffs projects,” said Keter.
The terms of reference for the team will include reviewing the legislation relating to PPAs to accommodate the 2006 Energy Act and the 2016 Energy Bill. It will also come up with the annual revenue requirements for each PPA and for the remaining PPA period.
With such data, the team will help the Government explore viable ways of transiting projects done under current feed-in tariffs policy to the intended renewable energy auctions.
In addition, Keter said the data will be used to do a comparison of the tariffs with others in the region and globally and come up with ways of standardising them.
Meanwhile, the Government has suspended processing of any expressions of interest under the feed-in tariff policy until the task force has finalised its work and the recommendations put into consideration.
The suspension, however, exempts some new commitments in solar, wind and biomass amounting to 3,600MW, which Keter said will continue alongside the review it commissioned.
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