Kenya Power says it will not carry burden of electricity costs alone
By Dominic Omondi | November 17th 2021
Kenya Power (KPLC) will not shoulder the cost of cheap electricity on its own, its chairperson Vivienne Yeda said yesterday during an investor briefing.
This comes as the government starts the process of reducing power costs, with Energy Cabinet Secretary Monica Juma giving independent power producers (IPPs) up to Friday to come to the negotiating table.
In September, President Uhuru Kenyatta directed the Ministry of Energy to reduce power tariffs by 33 per cent to an average of Sh16 per kilowatt-hour (kWh or unit) from the current Sh24 a unit.
However, Ms Yeda said the power distributor will share the burden of cheap electricity with other players in the supply chain.
“We need to reach that figure (Sh16 per kilowatt) without affecting KPLC’s bottom line,” she said, noting that the utility company had last year undertaken not to increase the tariff, which left its revenues low.
“So any savings that will be realised to reach the 33 per cent will have to be either in terms of operations or efficiencies within the energy sector.”
Yeda said the company would be working with the Energy and Petroleum Regulatory Authority (Epra) and other players including to find ways of bringing down the cost of electricity as per the president’s directive.
“KPLC is not underwriting the entire cost of that reduction,” she said.
Meanwhile, CS Juma said some independent power producers had already approached the ministry for renegotiation of their contracts with Kenya Power.
This is in line with the radical recommendations of the task force on the review of power purchase agreements (PPAs).
“In the same spirit, I would like to take this opportunity to formally invite all IPPs to come forward to the negotiating table so that we can engage towards a win-win solution,” said Juma.
She asked IPPs interested in the talks aimed at reducing the cost of power to write to the Energy ministry through the Principal secretary.
“That expression of interest, which will be by Friday (November 19, 2021) will be followed by a notification of a scheduled session,” said the CS.
The task force on the review of PPAs chaired by John Ngumi found that nearly all electricity producers have at some point breached the contracts with Kenya Power.
This means that Kenya Power could force them to renegotiate the contracts or terminate them altogether, giving the State some way out of the expensive PPAs. This would then lower electricity prices.
“Of course, the government has a rapporteur of tools it can invoke but my preference is to seek solutions that nurture partnerships and are responsive to the needs of Kenyans and our development aspirations,” said Juma.
The high cost of electricity has not only raised an uproar among the citizens but has also been a disincentive for investors who would like to set up in Kenya.
“Our cost of energy is far too high for any productive business to be sustained,” said Juma, who recently replaced Charles Keter in the Energy docket.
Yeda also said with the Shilling depreciating, the cost of power is likely to go up as the company buys it from IPPs in foreign currency and sells it to consumers in local currency.
The Shilling was yesterday trading at an average of 111.9 against the dollar.
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