President Uhuru Kenyatta on Wednesday, September 29 directed the Ministry of Energy to implement the recommendations of the Presidential Taskforce on Review of Power Purchase Agreements.
The John Ngumi-led taskforce was created in March to review Kenya Power’s contracts with Independent Power Producers (IPPs), which have long been blamed for the expensive cost of power and the distributor’s losses. Implementation of the recommendations is intended to deliver a 33% reduction in the price of power by December 25, 2021.
Should the recommendations be implemented, consumers paying an average of Ksh500 a month for power will pay Ksh330.
“The cost reduction will be achieved through the reduction of the consumer tariffs from an average of KES 24 per Kilowatt hour to KES 16 per Kilowatt hour which is about two thirds of the current tariff,” a statement from the Office of the President read in part.
Power bills in the country hit a three-year high in August 2021.
The taskforce recommended re-negotiation of Kenya Power’s agreements with power producers to secure immediate reduction in Power Purchase Agreements (PPA) tariffs within existing contractual arrangements.
It also recommended the immediate cancellation of all unconcluded negotiations of PPAs and ensuring all future PPAs are aligned to the Least Cost Power Development Plan (LCPDP).
The taskforce further highlighted the need to reform Kenya Power to make it competitive.
“Fast-track and deepen the ongoing reforms at KPLC to restructure it into a commercial entity that is both profitable and also capable of delivering efficient and cost-effective electricity supply to all consumers,” it recommended.
KPLC was directed to take the lead in formulation of the plan to deliver cheaper power, and to institute due diligence and contract management frameworks for PPA procurement and monitoring along the lines of the drafts provided by the taskforce.
Notably, it was also recommended that KPLC undertake a forensic and system audit on the procurement and system losses arising from the use of Heavy Fuel Oils (HFOs). To boost transparency, the taskforce further recommended that KPLC’s annual statements include the names and beneficial ownerships of all IPPs with which it has contractual arrangements.