The government should look into industry experts’ proposals to pursue power purchasing agreements (PPAs) that are denominated in local currency for electricity costs.
Experts say this will shield Kenya against the forex fluctuations because the majority of the PPAs are dollar-denominated, and this is passed on to the consumers through costly power.
Electricity bills are denominated in dollars to cushion producers for forex losses. This was necessary to attract investors.
The bulk of PPAs between Kenya Power and energy producers are dollar-denominated, leading to higher forex exchange in the computation of bills at a time the shilling has plunged to record lows against the greenback.
The government should consider eliminating this extra cost when re-negotiating power purchase deals with existing independent producers.
Kenya also has excess power. Therefore, the need to bear the burden of forex exchange losses to attract investors should no longer be borne by consumers when signing up new electricity producers.
Kenya needs more local currency-denominated PPAs because there is enough capital to support energy projects in the local currency.
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