Economy

Keter unable to give legal backing for IPP operations

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Energy Cabinet Secretary Charles Keter. FILE PHOTO | NMG

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Summary

  • The Ministry of Energy was Wednesday unable to provide a legal framework under which independent power plants operate in Kenya.
  • Energy Cabinet secretary Charles Keter could not pinpoint the legal provisions in the Energy Act of 2019 or the Public-Private Partnership Act 2013 that anchor Independent Power Producers.
  • Mr Keter sought more time to study the two Acts before responding to the National Assembly’s Energy Committee.

The Ministry of Energy was Wednesday unable to provide a legal framework under which independent power plants operate in Kenya.

Energy Cabinet secretary Charles Keter could not pinpoint the legal provisions in the Energy Act of 2019 or the Public-Private Partnership Act 2013 that anchor Independent Power Producers.

Mr Keter sought more time to study the two Acts before responding to the National Assembly’s Energy Committee.

“I seek more time to study the two Acts and provide the exact provision that we used to sign power purchase agreements (PPAs) with 19 IPPs,” he said.

Mr Keter appeared before the committee that is conducting a public hearing following a request by Garissa Township MP Aden Duale to inquiry into power purchase agreements between Kenya Power and IPPs, arguing the rates are inflated.

The expensive power purchase agreements are blamed for the poor performance by Kenya Power, which has debts to the tune of Sh7.6 billion.

He told the committee that the ministry had terminated two IPPs with the third expected to exit in September after their contracts expired.

Mr Keter said contracts for the three IPPs would not be renewed, adding that contracts for Mumias Sugar and Iberafrica Power had expired.

“For Tsavo Power, its contract comes to an end in September, and it will be renewed,” he told the committee chaired by Nakuru Town East MP David Gikaria.

President Uhuru Kenyatta in March appointed a task force to review PPAs signed between Kenya Power and all electricity generators to renegotiate energy prices and other terms downwards.





The team is chaired by boardroom veteran John Ngumi and will has 15 other members drawn from the private and public sectors.

“The taskforce will come up with an analysis on whether some IPPs can be terminated. If we terminate the PPAs now before the contracts expire, it will involve hefty. Therefore we will wait for the taskforce recommendations. However, two PPAs have already been terminated after their contracts lapsed,” he told the committee.

He told MPs that the ministry had put on hold all transactions on pending PPAs following a moratorium to allow the taskforce come up with its findings.

Mr Keter, who appeared before the committee alongside principal secretary Joseph Njoroge said Kenya Power spent Sh24.67 billion to pay the IPPs for capacity charge in the year to June 2020.

“Capacity Charge is funds paid to the investors for provision of electricity capacity. That means the machine must be ready to be used. We are paying IPPs for holding capacity when demand is low,” Mr Njoroge said.

Mr Duale demanded to know whether the Sh24.67 billion of taxpayers’ cash was spent to offset loans for the IPPs.

“For investor to pay debt and access funds, the capacity charge is paid to facilitate the investor to be able to service the loan,” engineer Njoroge said.

He said payment of capacity charge is the practice globally on project finance. “Capacity Charge is used to service the loan,” he told the committee.