REVEALED

Probe team indicts IPPs over high cost of power in Kenya

Kenya Power's annual report 2020 shows the company spent a total of Sh93.9 billion on fuel and non-fuel produced power

In Summary
  • IPPs report rattled Uhuru, pushing Keter and Njoroge from the energy docket
  • Consumer spending Sh500 per month on electricity will pay Sh330, saving Sh170 starting January 
A customer in Loresho, Nairobi, keys in tokens in her meter box on April 25, 2018. /ENOS TECHE
A customer in Loresho, Nairobi, keys in tokens in her meter box on April 25, 2018. /ENOS TECHE

Independent Power Producers will have to renegotiate their deals with Kenya Power to bring down the cost of electricity, President Uhuru Kenyatta said yesterday.

This is expected to bring down the cost of  electricity by Sh8 per unit.

This follows recommendations by a task force he appointed to review existing power purchase deals partially blamed for heavy losses at the state-owned power utility firm.

The John Ngumi led committee recommended various ways to lower the cost of power in the country, including immediate cancellation of Power Purchase Agreements (PPAs) under negotiation.

The task force has also called for a review and renegotiation of existing PPAs to cut on higher tariffs, a move likely to cut power costs in the country by 33 per cent starting next year.  

According to the president, cutting off expensive power producers will see a unit of electricity go for Sh16 starting December 31 from Sh24 which is two-thirds of the current tariff. 

''As a consequence, a consumer spending Sh500 per month on electricity will pay Sh330, saving Sh170,'' said statement from State House. 

The taskforce also wants Kenya Power to take charge in the formulation and signing of the Least Cost Power Development Plan (LCPDP). Currently the agreements are done by the Ministry of Energy and the National Treasury.

The team further recommends the fast tracking of reforms at Kenya Power after various audits revealed skewed procurement process, high system losses among other inefficiencies that have rendered the sole power distributor insolvent. 

The firm's total debt as at end of last June stood at Sh118.73 billion, made up of Sh65.96 billion commercial debt and Sh53.26 billion on-lent debt.

About 77.3 per cent or Sh51.02 billion of the commercial loans are dollar-denominated, making the level of repayment costs susceptible to currency fluctuations.

The power utility firm posted a historic loss of Sh7 billion last year.

The task force wants Kenya Power to undertake a forensic audit of its procurement and system losses arising from the use of heavy fuel oils. 

Kenya Power is also expected to adopt standard PPAs and proposed government letters supporting the lines of the draft provided by the task force.  

The task force's report comes just a day after the Star reported how IPPs are minting billions from taxpayers by overcharging Kenya Power.

Kenya Power's annual report 2020 shows the company spent a total of Sh93.9 billion on fuel and non-fuel produced power, with units coming from IPPs being more expensive.

For instance, it bought a unit at Sh173.08 from Triumph Power Generating Company while Gulf Power Limited sold a unit at Sh121.56.

It spent between Sh9.89 and Sh54.62 per unit on power from about 10 other IPPs.

This is way above the Sh5.48 per unit bought from KenGen, which remains the biggest supplier accounting for 48.1 per cent of the monies paid to producers.

An internal audit report seen by the Star shows Kenya Power spends an average of almost 15 times more to buy power from IPPs compared to that from KenGen, passing the high bill to consumers.

Owners of those IPPs are in most cases withheld, a move that has prompted the task force to compel Kenya Power to list directors of those firms. 

Uhuru has thanked the Kenya Power board for its great oversight role that has unearthed irregularities at the listed power distributor.

Immediately after receiving the IPP report, Uhuru partially reshuffled his cabinet, removing Energy Cabinet Secretary Charles Keter and his Principal assistant Joseph Njoroge from the docket. 

Keter was replaced by Monica Juma who moves from the Defence docket while  Gordon Kihalangwa is the new principal secretary.