Three IPPs to take tariff cuts, signalling fall in electricity bills

In March, Kenya received a loan of Sh85.6 billion from the World Bank with part of the money expected to help bring down the cost of electricity. [iStockphoto]

Three independent power producers (IPPs) have agreed to reduce their charges as part of the government's far-reaching plan to cut electricity bills for consumers.

Energy Cabinet Secretary Monica Juma said Friday the three IPPs are in the variable renewable energy sub-sector.

"These companies represent a new growth sector of Kenyan companies that are disrupting the power generation space and at the same time expanding Kenya's green energy prospects," said Ms Juma at a press briefing in Nairobi.

However, the CS did not reveal the names of the IPPs that had agreed to reduce their charges or by how much the cost of power would go down.

As part of President Uhuru Kenyatta's promise of reducing the cost of electricity by 30 per cent, the government was to first effect a 15 per cent tariff reduction in the first quarter of this year through a raft of reforms that would benefit the entire power supply chain.

The other 15 per cent was to be implemented in the second quarter and would see IPPs restructure their power purchase agreements with Kenya Power.

In March, Kenya received a loan of Sh85.6 billion from the World Bank with part of the money expected to help bring down the cost of electricity.

Earlier, the International Monetary Fund (IMF) had put the money that Kenya would receive for restructuring of IPPs in renewable energy at Sh7.5 billion.

"Policy priorities for the WB's (World Bank's) planned early 2022 include a review of signed power purchase agreements (PPAs) that have not reached financial closure or started construction to reduce the cost of supply (in particular of green energy)," said the IMF in a statement released late last year.

Ms Juma exuded confidence that the restructuring would be extended to all the IPPs, noting that the negotiations, led by a team drawn from across government, are "on a positive trajectory." The CS said the government is also engaging with larger IPPs, with four of them having already proposed short- and medium-term tariff reduction solutions.

However, some IPPs have been reluctant to sign on the dotted line, fearing it would reduce their earnings.