• Kenya Power lost Sh7 billion in 2020, partly because it was forced to by expensive power from independent producers.
• President Kenyatta promised this week that power prices would fall after receiving the Ngumi Report on PPAs
President Kenyatta has just received the report of a 15-member task force led by John Ngumi to review Power Purchase Agreements (PPAs) entered into by Kenya Power.
In 2020 Kenya Power made a Sh7 billion loss, partly because of the high cost of buying power from independent power producers (IPPs) who sometimes charge 15 times as Kengen, the state producer.
Last year Kenya Power had to buy 11,000 megawatts against a total demand of 8,000 megawatts. It has to pay for power that it could not sell.
Kenya Power is partly the victim of political influence since some IPPs are connected to wealthy influential individuals or former state officials. With guaranteed purchase of power at above the market rate, PPAS can be a guaranteed way to make long-term super profits.
The Ngumi report recommends cancellation of all PPA negotiations underway, standardised purchase agreements and an end to guaranteed take-up.
Thank God that sanity is returning to the world of PPAs. It is crazy that Kenya is buying power that it does not need at inflated prices. President Kenyatta has promised that power prices will start dropping from early 2022.
But there is another benefit to cancelling or renegotiating PPAs. The worst offenders are mostly thermal producers. They should be exclusively restricted to providing top-up power to the grid only when there is a shortfall.
Kenya is already getting a high percentage of its power from geothermal and wind but it has the potential to get much more green energy.
By fully implementing the Ngumi report, Kenya can simultaneously save money and become 'greener'. Not many countries in the world have that opportunity.
Quote of the day: "Live as if you were to die tomorrow. Learn as if you were to live forever."
The Indian freedom fighter was born on October 2, 1869