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MPs shine light on independent power firms for high charges

NEWS
By Macharia Kamau | August 21st 2021
Kenya power officer attends to a power line in Migori town [Caleb Kingwara, Standard]

Parliament is probing the huge disparity between the amount Kenya Power pays independent power producers (IPPs) and State-owned KenGen for electricity sales, in yet another attempt to bring down the cost of energy.

KenGen sells electricity to Kenya Power at a wholesale price of about Sh7 per kilowatt hour (kWh) while some of the IPPs sell the same at about Sh10, with the thermal companies that use heavy fuel oil to generate power selling it at over Sh20 per kWh. This is before taxes and levies are loaded that bring the cost of power to about Sh24 per unit.

The National Assembly’s Departmental Committee on Energy was told on Thursday that the IPPs had the advantage of having delivered major power projects in many markets globally, giving them an edge when negotiating power purchase agreements (PPAs) with Kenya Power.

KTDA Power Company general manager Japheth Bulali said the IPPs, many of them international firms, have been active in power production and have huge expertise, including that of negotiating contracts that appear to be in their favour.

“The foreign companies have done these projects over the years in many countries and acquired a lot of experience that helps them define a contract in such a manner that they are clearly insulated and the moment you sign the contract, some of the clauses including the exit clauses are fairly punitive,” he said.

“We have to encourage more plants that have no commitments and give comparatively cheaper rates to address these issues.”

The PPAs have clauses that guarantee the companies payments even when they do not fed electricity to the national power grid.

Referred to as ‘take or pay’, the clauses require Kenya Power to either take the electricity they generate and where the power retailer does not offtake the output, it pays the companies for keeping their plants ready to feed their power to the national grid.

The Energy committee’s vice chair, Gladwell Cheruiyot, queried the level of ‘protection’ offered to the IPPs at the expense of Kenyans. 

“Why is it that the IPPs are such a big matter and should be protected while Kenyans pay the price? It appears that we really cater to the IPPs at the expense of the taxpayer,” she said. “That is serious and what is really killing the common mwananchi.”

KTDA Power Company is paid between Sh6.48 and Sh10.8 per unit of power sold to Kenya Power.

The firm operates three small hydro plants – Gura, Imenti and Chania – which supply power to tea factories and feeds excess power to the national grid.

The firm’s PPA with Kenya Power is regulated by the Feed-in Tariff contained in the Energy Act, 2019, which dictates how much the small power firms generating between 0.5 megawatts and 10MW should be paid.

This is unlike the larger power companies that negotiate PPAs with Kenya Power.

The committee took up the matter of cost variance between KenGen and IPPs following a similar query by Garissa Township MP Aden Duale in June to the Energy ministry, which the MP said was unsatisfactorily answered.

It adds to other probes that have been instituted on the high cost of power. In March, President Uhuru Kenyatta appointed a task force to review the agreements IPPs have with Kenya Power.

 

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