Kenya Power is yet to sign new Power Purchase Agreements (PPAs) with independent power producers (IPPs) a year after the Cabinet lifted a ban on the signing of the contracts after Parliament vetoed the move.
“The Cabinet lifted (the moratorium) then the National Assembly imposed (another ban),” said Kenya Power managing director Joseph Siror.
The Cabinet in February last year lifted the ban imposed by former president Uhuru Kenyatta’s Jubilee administration on procurement of new IPPs. It argued that lifting the ban was necessary bolster investment in the energy sector and ensure steady supply of power.
“In addressing the challenges of realising a sustainable energy mix occasioned by the prolonged drought, Cabinet approved the lifting of the moratorium on PPAs as a way of enhancing the nation’s energy security through opening up the energy sector for continued investments,” said a dispatch from the Cabinet.
The National Assembly has nonetheless blocked the lifting of the ban, even as it commenced its own months-long inquiry into the high cost of electricity and finding the best strategies to reduce the prices.
Mr Kenyatta’s task force on review of PPAs, which was formed in March 2021 and submitted its report in September of the same year, froze procurement of new IPPs. This means that for just over two years now, no new PPAs with IPPs have been signed.
Power purchase deals between Kenya Power and private electricity producers have come under scrutiny in recent years given the high prices offered compared to those of Kenya Electricity Generating Company (KenGen).
Kenya Power buys the bulk of electricity from KenGen at an average price of Sh5.3 per kilowatt-hour but other IPPs have priced theirs as high as Sh195.
In April last year, MPs directed the National Assembly’s Departmental Committee on Energy to inquire into the current power purchase deals and table a report within four months.
But the freezing of the signing of new PPAs comes at a time when Kenya’s reserve margin—the gap between the quantity of power that the country can generate and demand from customers—is thinning.
Last year, Kenya Power said this margin stood at just four percent and, therefore, onboarding new electricity generators to the national grid was necessary.
If this margin continues to narrow, it would expose Kenya to a risk of power rationing in some parts of the country to balance between generation and demand.
