In a gazette notice, Keter appointed a high profile group of experts comprised of engineers, power economists and utility lawyers to a committee he called , the ‘Standing Committee on Review and Renegotiation of Power Purchase Agreements’
Keter had waded into the space where the contemporary elite make big money.
Away from the limelight, segments of the political elite are at each other’s throats over these power purchase agreements.
Energy Cabinet Secretary Charles Keter had made an audacious attempt to tackle the biggest elephant in the electricity sector today- namely, the power purchase agreements (PPA’s) the government has signed with merchant power plants.
In a gazette notice, Keter appointed a high profile group of experts comprised of engineers, power economists and utility lawyers to a committee he called , the ‘Standing Committee on Review and Renegotiation of Power Purchase Agreements’
Keter had waded into the space where the contemporary elite make big money.
Away from the limelight, segments of the political elite are at each other’s throats over these power purchase agreements.
Being a broker or political godfather of owners of merchant power plants can be an extremely lucrative affair in this country. Investors in merchant power plants are a big political force. The move by the minister was bound to elicit stiff resistance.
The terms of reference that Keter set for the committee raised the stakes even higher.
The committee had been- among others- tasked to not only to ‘develop a programme for renegotiating PPA’s but to actually renegotiate some of the agreements.
The committee was to ‘review committed generation projects’ even as the country plans to transit to a system whereby these agreements will be publicly auctioned the way we auctioned mobile telephone licences.
Keter also wanted the standing committee to ‘review the terms’ of both the existing and operational PPA’s and agreements to determine impact on cash flows of Kenya Power.
Three days later, Keter was forced to beat a hasty retreat. He put out another notice revoking the appointment of the standing committee explaining it away-rather unconvincingly- that the ministry was taking a step back to ensure that all stakeholder are involved in the process.
He said he needed to expand the committee to include the Office of the Attorney General and the National Treasury.
I am prepared to give Mr Keter the benefit of the doubt that the revocation of the standing committee was just but about tinkering with its composition and replacing it with another committee.
But what I know is that the task of dislodging merchant power plants from the advantageous perch they occupy today will not be easy.
To put cheap power to the consumer the core and most important policy objective in the electricity sector, you need much more than you can get from recommendations of a standing committee appointed by politicians.
It will require audacious political will from the very top. Parliament and civil society must be brought in the battle of both loosening the stifling grip merchant power plants wield over the electricity sector and making cheap power to the people the main policy objective.
I know that in seeking to renegotiate power purchase agreements, the government faces the risk of being accused of repudiating contracts and legal commitments to investors.
We risk losing places and high scores in global rankings in as investment climate assessment, global competitiveness and cost of doing business.
But we are at a point where policy must not now put the electricity consumer at the centre of policy.
How do you justify a situation where the consumer pays a heavy price for electricity it has not used through so called ‘capacity charges’ and ‘deemed energy’ in the cases of wind and solar power?
The existing PPA regime is how we ended up allowing merchant plants that were not on the priority of our least cost development plan to jump the que and set up plants.
Today, and because of the promiscuity at dishing out PPAs to these merchants, we are told that we have ended up with excess power. That if we don’t increase the tariff- Kenya Power may be pushed into a situation of buying electricity it cannot sell.
It begs the question: If we have excess power, why aren’t electricity prices tumbling down in accordance with the laws of supply and demand?
Admittedly Kenya Power has suffered years of corruption and mismanagement. But the existing PPA regime is the main reason why we have a broke off-taker in a context where merchant power plants keep minting billions.
How can you say we have an oversupply of power in a context where millions of citizens still cook in smoky open fires. It’s an excuse to keep the poor in the dark.
The famous American investor, Thomas Edison, was once quoted as saying that he wanted to make electricity so cheap that only the rich could afford to burn candles. Even the great Lenin is said to have described communism as ‘socialism plus cheap electricity’.
Affordable and secure energy is fundamental to people’s daily lives. We must accept that the existing PPA model is broken irreparably.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
