Kiraitu names head of petrol dealers’ lobby to ERC board
Ms Wanjiku Manyara (left) and Mr Kiraitu Murungi, Energy Minister (right). Mr Murungi appointed Ms Manyara, the chief executive of the Petroleum Institute of East Africa, to the regulator’s board through the gazette notice of December 9, a move that insiders say has also left other board members in discomfort. File
Energy minister Kiraitu Murungi’s recent appointment of an oil industry executive to the Energy Regulatory Commission (ERC) board has sparked a fresh storm over the agency’s mandate.
Ms Wanjiku Manyara, the chief executive of the Petroleum Institute of East Africa, was appointed to the regulator’s board through the gazette notice of December 9, a move that insiders say has also left other board members in discomfort.
Consumer groups said the appointment confirms their long-held suspicion that the regulator had joined forces with the marketers to act against public interest and have promised to have Parliament amend the relevant law to neutralise the cartel.
“It amounts to appointing Mr Habil Olaka (the chief executive of Kenya Bankers Association) to the Central Bank of Kenya board or Mr James Mwangi of the Nairobi Securities Exchange to the Capital Markets Authority board,” said Mr Steven Mutoro, the secretary general of the Consumers federation of Kenya (CofeK).
Ms Manyara will sit in the ERC board for a period of three years, effective November 29.
Some ERC directors said the appointment amounts to a serious conflict of interest because Ms Manyara represents oil marketers whose operations are the main focus of the energy commission.
“The minister is within the law in appointing the PIEA executive to our board, but the decision fails the test of conflict of interest,” said an ERC commissioner who cannot be named contradicting the line minister.
“We cannot have people we are struggling to control sit in the highest decision-making organ of the agency. It does not happen in the banking or communication sectors and the minister should follow the same practice.”
Mr Kaburu Mwirichia, the director general of ERC, refused to comment on the appointment, saying the minister was best placed to explain his decision.
Ms Manyara’s appointment is seen as running contrary to the best practices by other regulatory agencies such as the Central Bank of Kenya (CBK) and the Communications Commission of Kenya (CCK) that strictly bar industry executives and lobby groups from joining their boards.
The Kenya Bankers Association (KBA) –the bankers’ lobby— has no seat at the board of CBK while ICT firms are barred from sitting in the CCK’s board.
“If an executive of an ICT firm is appointed as a director of CCK he or she would have to forfeit their job,” said Francis Wangusi, the acting director general of CCK.
Though the Energy Act of 2006 requires a director of ERC to have a university degree in engineering, physical sciences, law, finance, economics or energy and at least seven years experience in one of the fields, industry officials said the presence of Ms Manyara would erode public confidence in the agency.
The controversial appointment lends credence to recent claims by consumer groups, trade unions, and politicians that ERC had sold out to oil industry cartels in its setting of monthly petroleum prices.
In recent months as petroleum prices rise to consistently to an all-time high of more than Sh120 per litre, Cofek, the Central Organisation of Trade Unions (Cotu) and Members of Parliament have accused the ERC of failing to effectively regulate oil marketers adding impetus to rise in inflation to a high of 19 per cent last month.
Some MPs have called for the disbandment of ERC, saying that by guaranteeing margins to oil marketers, the regulator had killed the spirit of free competition.
“The (Energy) ministry should also review the price cap policy that the ERC uses to set the prices and repeal Section 102 (w) of the Energy Act to allow petroleum pump prices to be determined by market forces,” reads part of the report by the Parliamentary Committee on the Cost of Living.
“The government should ensure that the National Oil Corporation of Kenya (Nock) sells its petroleum products at a cost that is not profit-driven, but rather service-oriented,” the report says.
ERC has, however, argued that the rally in fuel prices is merely a reflection of the international crude prices that are mainly driven by global demand and supply forces in the wake of recent political turmoil in the Arab world.
Last week, fuel prices dropped for the first time in seven months on the back of a stronger shilling that now trades at about Sh85 against the dollar from a low of Sh107 in mid-October.
The price of refined petroleum products dropped by 5.07 per litre while that of diesel and kerosene fell by Sh3.33 and Sh4.13 per litre respectively.
These prices – that have been a major driver of inflation – are however still one third higher compared to December last year when super petrol, diesel, and kerosene cost an average of Sh95.6, Sh84.1 and Sh74.1 per litre respectively.
The rally in fuel prices has eaten into household budgets and inflated operating costs for businesses by driving up the cost of transport and electricity generated from diesel power plants.
Inflation rose to a peak of 19.72 per cent last month from 3.99 per cent in January.
Cofek on Monday responded to the minister’s decision with a demand that consumers be given a seat in the ERC board to balance out the marketers’ influence.
Mr Mutoro said the organisation has secured the backing of some MPs to seek the amendment of the Energy Act of 2006 to guarantee consumer organisations a seat in the ERC board.
The amendments will also seek to scrap the fuel price caps, effectively leaving prices to be determined by forces of demand and supply. “Cofek would like to see this pricing left to market forces as the price capping regime has rendered the sector extremely uncompetitive, open to cartels and excessive guaranteed retail margins,” Mr Mutoro said.
Aside from the oil industry, ERC regulates players in the power sector such as Kenya Power, and KenGen.
