President Uhuru Kenyatta has directed the termination of lopsided contracts with Independent Power Producers (IPPs) to reduce the cost of power.
He said it was unfair for Kenyans to continue struggling with high cost of power because of skewed deals with IPPs operating thermal generators. IPP contracts, the President said, should be pegged on performance to ensure Kenyans have access to reliable power at affordable rates.
“If there is any unfair deal between the country and the IPPs, I urge that the contracts be legally terminated in the shortest time possible so that we can save the country from exploitation,” said the President.
He was speaking at the State House Energy Summit, which brought together players in the energy sector – heavy power consumers, small-scale consumers and independent power producers – senior Government officials, ordinary Kenyans and the media. Whereas Kenyans stand to benefit from the latest directive with prices of electricity going down, they will shoulder high charges due to a tight agreement the Government has with these independent producers.
The IPPs will be entitled to a fixed-capacity charge of $0.04 (Sh3.47) per kilowatt-hour throughout their remaining contract period, which is normally long-term and runs between 20 and 25 years.
This means the country could still face higher power tariffs in the medium-term as electricity-distributing firm Kenya Power passes the fixed capacity costs to consumers. But even so, past calculations have indicated such a move could help the State lower the cost of power in the country by Sh7.81, a huge relief if passed on to consumers who have been grappling with high costs of power.
“We have made huge strides as a government to expand power across the country; we want to broaden the supply far and wide because apart from reaching more people, it was also important that there is equitable distribution including areas that are off the grid,” the President added.
Quest for transparency
The Head of State stressed that the private sector was a partner in widening access, but that costs would have to be checked. “As we go forward, yes, we want to encourage private sector participation in power generation but it must be done in a transparent manner to ensure Kenyans get maximum benefit,” he said.
Uhuru challenged power producers and manufacturers not to transfer their inefficiencies to consumers and to let Kenyans enjoy reduced costs of electricity. “Why should the prices of basic commodities continue to rise while the cost of power has significantly reduced?” he posed.
