Senate Energy committee to probe secretive government-IPPS electricity purchase contracts

Kenyans will now for the first time know the details of the highly guarded contractual deals between the government of Kenya through Kenya Power and the shadowy Independent Power Producers (IPPS) whose identity and contractual obligations with the government on the Power Purchase Agreements (PPA) have remained a closely guarded secret.

This is after the Senate Energy Committee said they are investigating contracts signed by the eleven to establish why cost of electricity has gone up in the last few months.

Committee chairperson and Nyeri Senator Wahome Wamatinga said they have summoned the 11 firms to explain how much they are selling their power to Kenya Power and why they are being paid in foreign currencies, mainly in US dollars and Euros.

Past attempts to have the PPA’s between the government and IPPS have proved futile citing confidentiality and non-disclosure clauses unless a court order is obtained to that effect.

In June 2021, while appearing before the National Assembly’s Public Investments Committee (PIC), former Kenya Power Managing Director Bernard Ngugi declined to reveal the owners of beneficiary firms and 17 Power Purchase Agreements (PPAs) that committed the loss making entity to the shady dealings.

“Power Purchase Agreements have contractual provisions which would require more time to obtain consent and authorisation from court processes because of confidentiality clauses such as Non-Disclosure Agreements,” Ngugi said.

Yesterday, Electricity Consumers Society of Kenya (ECSK) Executive Director Isaac Ndereba while appearing before the committee revealed that Kenya Electricity Generating Company (Kengen), the largest producer of power, supplies Kenya Power electricity at Sh5 per kilowatt while others had their prices five times more.

“The Senate Energy Committee is taking this matter seriously since Kenyans have complained of high cost of electricity which is now a major source of power in most homes. It is our duty to find out why this is happening so that we can establish how citizens can be cushioned,” said Wamatinga.

Ndereba told the committee that an electricity consumer pays for Value Added Tax, Fuel energy charge, Forex charge, Water Regulatory Authority (WRA) charge, Energy Petroleum Regulatory Authority (EPRA) charge and inflation adjustment from the tokens they purchase, an amount he said raises the cost of electricity.

“We would like the Senate Energy Committee to find out why some Independent Power Producers are selling their power with varied costs with some supplying it to Kenya Power at Sh26 per kilowatt yet KenGen the largest power producer is selling at Sh5 per kilowatts,” said Ndereba.

ECSK disclosed that the IPPs signed their contracts with a rider that they should be paid in foreign currencies and are only filling the deficit of national consumption to about 30 per cent.

Ndereba sought to have the committee establish why the IPPs signed contracts to be paid in foreign currencies and why is it a charge overburdened to the consumer and that will pave way for the findings as to why the electricity cost in the country was exorbitant.

“The loses being experienced in the electricity sector differs from one month to the other, we need to ask ourselves why the cost is always constant yet in other months it is 26 per cent and in other times it is even lower than 15 per cent, this raises a lot of questions,” said Ndereba.

The Nyeri Senator said Kenyans have been exploited for a long time with the high cost of electricity, adding that the cost must be brought down and that those responsible for increasing the cost for their own benefit must be brought to book since that is defrauding innocent members of the public.

Wamatinga said the government was committed to bringing down the cost of electricity and that it will soon tell Kenyans why the IPPs signed skewed contracts for their own selfish gains at the expense of ordinary Kenyans.

Siaya Senator Oburu Oginga said they will not shy away from exposing those who are out to make the lives of citizens difficult asking his colleagues to approach the matter in a bi-partisan manner as they put the interests of the citizens above petty political differences.

Nairobi Senator Edwin Sifuna said reducing the cost of electricity was urgent and that all unnecessary levies being shouldered by innocent Kenyans should be done away.

“One of the greatest achievements at the moment is to help bring down cost of living for citizens, we should start with electricity since it is now the source of energy in most parts of the country, it is our duty to flush out those making life expensive,” said Sifuna.

The senators said the current average cost of electricity per unit is Sh25 an amount they explain can only allow a consumer to get 40 units for Sh1000 or 4 units for Sh100 spent which shows a great difference and raises serious questions of something not being right in the energy sector.

The audited accounts ending the financial year ending in June 2021 show that KenGen supplied a total of 8,443 gigawatt hours, which makes 70 per cent and was paid Sh44.8billion while Independent Power Producers provided 3,000 gigawatt hours, which translates to about 30 per cent of the total power and were paid more than Sh56billion.

The senators said if KenGen had supplied 100 per cent of the power consumed, the amount paid would have been Sh64 billion and that there could have been a net savings of Sh37.1 billion to Kenya Power.

According to Kenya Power records seen by The Informer Media Group, some of the listed independent power producers in the country are, Iberafrica Power, Tsavo Power, Thika Power, BioJuole Kenya Limited, Mumias-Cogeneration and OrPower 4.

Others are Rabai Power, Imenti Tea Factory Hydro, Gikira Hydro, Triumph Power, Gulf Power, and Regen-Terem Hydro.

Kenya Power’s electricity purchase costs stood at about Sh82.1billion in the financial year 2020, accounting for over half of its operating costs.

Last week, the cabinet approved the contracting of new Independent Power Producers (IPPs) with an aim of increasing power generation in the country.

According to the Cabinet, the decision was arrived due to the current drought situation in the country that has reduced dispatch of hydroelectric power.

“In addressing the challenges of realising 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,” read a cabinet dispatch.

The move comes after recommendations by the task force recommended by former President Uhuru Kenyatta to review PPAs signed between Kenya Power and all electricity generators in 2021.

Laikipia Women Representative Jane Kagiri is set to sponsor a private members’ bill to lower the cost of electricity and tighten noose on IPPs which sell power to Kenya Power at exorbitant prices than government owned Kengen.