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Kenya Power wants Epra out of energy deals

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A Kenya Power technician at work. FILE PHOTO | NMG

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Summary

  • The company, in a ten-page confidential letter addressed to the parent ministry, also blamed Epra’s approach to address the challenge of excess supply through delayed project commercialisation dates for the already signed PPAs.
  • The state electricity distributor says EPRA also expressed fears that the country had overcommitted to power generators in a move that may prove difficult for the business to remain sustainable under the stagnated tariffs and lagging demand for electricity.
  • Epra is said to have allowed some 34 PPAs which are expected to inject about 1,891 megawatts into the national grid in the next five years.

Electricity distributor Kenya Power #ticker:KPLC now wants the energy sector regulator removed from power purchase agreement (PPA) negotiations to reduce oversupply of electricity in the market.

Kenya Power, which has been in a tussle with the Energy and Petroleum Regulatory Authority (Epra) over delayed revision of electricity tariffs, says a separate entity needs to be established to oversee signing of power deals which have overburdened it due to excess supply wthat has to be paid for.

The company, in a ten-page confidential letter addressed to the parent ministry, also blamed Epra’s approach to address the challenge of excess supply through delayed project commercialisation dates for the already signed PPAs.

“The sectors’ approach towards addressing the issue of excess generation as recently guided by EPRA, is shifting of commercial operation dates and introductions to take and pay clauses in PPAs,” reads the letter seen by Business Daily.

“It is noteworthy that with the current slow growth in peak demand, the shifting of project Commercial Operations Dates (CODs) will not address the imminent oversupply challenges.”

The state electricity distributor says EPRA also expressed fears that the country had overcommitted to power generators in a move that may prove difficult for the business to remain sustainable under the stagnated tariffs and lagging demand for electricity.

Epra is said to have allowed some 34 PPAs which are expected to inject about 1,891 megawatts into the national grid in the next five years.

Kenya Power said this is set to make matters worse since it will be forced to pay for the energy generated even if it will not have consumers to utilise it under the take-or-pay deals.

The power retailer is now asking for a new entity to be set up to engage power generators in signing of new deals, suggesting its discomfort with the way EPRA has allowed several such deals to be signed in the recent past.

“Clearly a different model is required that will deliver revenues for these projects at the same time reduce retail tariffs as per government policy. One option is to create a separate entity dedicated to entering into PPAs with generators on behalf of the government,” Kenya Power wrote to the Ministry through Energy Principal Secretary Joseph Njoroge.