It was clear that the earlier announcement of unilateral reviews of the power purchase agreements (PPAs) was putting the government on a collision path with the energy firms who say they have strong legal protections in their contracts.
The negotiations offer the prospect of achieving the same goals without expensive legal battles that have the potential to result in billions of shillings awarded to the energy producers.
The government aims to cut electricity tariffs by an additional 15 percent and the target seems reasonable.
Negotiating lower electricity purchase prices with energy producers rather than ordering them to cut their charges is the right move.
It was clear that the earlier announcement of unilateral reviews of the power purchase agreements (PPAs) was putting the government on a collision path with the energy firms who say they have strong legal protections in their contracts.
The negotiations offer the prospect of achieving the same goals without expensive legal battles that have the potential to result in billions of shillings awarded to the energy producers. We urge the parties to make sure the talks are held with an aim of reaching an agreement as soon as practicable.
This will pave the way for consumers and businesses to enjoy reduced electricity bills, boosting the overall economy.
The government aims to cut electricity tariffs by an additional 15 percent and the target seems reasonable.
It should be remembered that the cost of the initial 15 percent power price cuts implemented in January fell primarily on Kenya Power.
The electricity distributor, whose margins have been squeezed as a result, has been tasked to improve its financial health through a raft of measures, including reducing system losses.
The energy firms now have an opportunity to also contribute to the goal of lowering the cost of living and making the country’s industrial sector more competitive.
The independent power producers, in particular, should be quick to offer concessions in the negotiations. A task force appointed by President Uhuru Kenyatta found that the private firms were charging vastly higher prices compared to State-owned KenGen.
This is not the time for independent power producers to lean on their legal rights to protect their lucrative contracts.
Before the government opted for talks, the energy firms argued that Kenya had no unilateral right to alter the contracted capacity and payments and that the State has a duty to protect the PPAs inked over a period of 20 years.
They also pointed out that they spent billions of shillings in building power plants through a combination of debt and shareholder funds that were sourced on the strength of the PPAs or wholesale electricity tariffs.
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