Monicah Juma explains talks with IPPS, Kenya Power reformsFriday August 12 2022
Monica Juma’s tenure as the Energy and Petroleum Cabinet Secretary is nearing its end, less than a year at the ministry.
From October when the career diplomat took over at Kawi House, overseeing reforms at Kenya Power and reduction of consumer bills for electricity were top of her priority list.
She has, however, remained coy on the difficult question of the push to have the big independent power producers (IPPs) give up part of their lucrative oil billions in the electricity price cut push. Below are excerpts from her exit media briefing.
President Uhuru Kenyatta promised a 30 percent cut on electricity tariffs. The first cut of 15 percent was effected in January, but even as he exits, consumers are yet to have the second cut. Wholesale prices offered by the IPPs hold the key to this cut, what is the status of the talks?
So far, three IPPs operating in the variable renewable energy realm have signed up to lower tariffs that were in line with our expectations.
We are also engaging with larger IPPs. Four of these larger IPPs that operate across various technologies have already proposed short- and medium-term tariff reduction solutions. Negotiations are underway on arriving at optimal solutions for Kenya.
Apart from the cuts on the cost of electricity, there is the talk of reforming State utility to enable it improve services and also grow its revenues. What is the state of the reform agenda at Kenya Power?
There has been a conversation around restricting and improving the governance of various strategic government entities and that includes the KPLC. We cannot be competitive as a country if we have power that is overpriced.
That is why we are going through this reform agenda that is meticulous. We are having a lot of discussions around the sector, not just KPLC. KPLC is just an off-taker, there are other discussions that we must have around the cost of power generation.
We must look at reforms around the operations and maintenance, reforms in terms of government, technology. The conversation with the IMF continue and it is aligned with the same aspirations — power that is sustainable, cheap and reliable to drive our development.
Businesses and households have for years decried the unreliability of electricity supply by Kenya Power. How far are we in addressing this problem?
The institutional reforms within the power sector, not only at Kenya Power but also with KETRACO [Kenya Electricity Transmission Company Limited], REREC [Rural Electrification and Renewable Energy Corporation] and EPRA [Energy and Petroleum Regulatory Authority] have begun to improve the reliability of power.
The incidents of power outages decreased by more than 50 percent from 283,976 in 2020 to 113,385 in July 2021. We are looking forward to this year's data, but we can already see that the overall trend is very good.
What are some of the short-term targets that the ministry is looking at with the reforms at Kenya Power?
The improvement in the firm’s financial performance in the financial year ending June 2021 shows that reforms are already bearing fruit. But a lot of work remains to be done to restore the KPLC into an operationally efficient, financially stable utility.
Work is going on in terms of establishing business processes that improve efficiency. We are looking at our infrastructure. This is key to reduction of losses, which stand at a high percentage of about 22 percent. We have a pathway to get these down initially by five percent. We are also looking at the entire service chain to support this ambition.
The ministry recently published the Energy White Paper. What are the key take-homes for consumers in this policy document?
The white paper proposes a new power tariff plan that gives users control of their electricity bills and the introduction of smart tariffs and meters. Consumers will be able to track when electricity prices are at their cheapest and plan usage.
Through the smart tariffs, consumers will have more control, choice, and flexibility over their energy use depending on temporal needs, urgency, and shifts in market prices that reflect demand and supply dynamics.
Advanced smart meters will track pricing trends to help consumers choose when to use power by showing comparative prices.
Kenya in partnership with Italian firm, Eni has opened a biofuel refinery in Mombasa that will use vegetables to produce oil. Where will the impact of this plant be?
The biofuel plant in Mombasa has the potential to set us as a fast-mover as far as biofuel is concerned and through it, we have the possibility of doing jet fuel for ourselves and the region in less than five years from today.
We are in the process of accumulating raw materials for the refinery. Now, we are talking of about 25,000 farmers already involved in the provision of the seeds in 10 counties and will be expanded to 15 counties this October when rains start.
At its optimal capacity we are talking about impacting 250,000 farmers in ASAL areas. The counties that have difficulties in terms of producing many other things will now be put to use for things that are relevant for their ecosystems.
The International Monetary Fund said that Kenya should scrap the fuel subsidy scheme by October. The Bretton Woods institution says the subsidy has disrupted budgetary planning, a position shared by the Treasury. Can you authoritatively say the subsidy will be discontinued within the IMF’s timeframe?
It is true that we work closely with development partners in the pursuit of development and that happens across the world.
It is also true that everybody wishes that we develop a fiscal framework that is healthy. That is the intention of government and that is the mandate of international financiers, especially the World Bank and the IMF. The question on whether or not to do a subsidy is a matter of modality.