The government has ordered Kenya Power to immediately suspend the ongoing and pending negotiations with the independent power producers.
This comes after the Interior Cabinet Secretary Fred Matiangi met with the board of Kenya Power and its senior managers alongside Principal Secretaries in the Ministries of Energy and Treasury to come up with a new strategy to cut the high cost of electricity.
Matiang’i said the review of existing agreements will be prioritized in a drive to lower cost of electricity in the country.
“We are all concerned about the cost of power. Our bills are too high, and we have taken tough decisions to deal with challenges in this sector with the focus being the bringing down of the cost of power,” he said.
CS revealed that the Government had declared KPLC a “Special Project” and an inter-ministerial team set up to audit and oversight the power-distributor urgently.
“We are going to do a forensic audit of some of our systems and procedures at KPLC. We are working jointly at an inter-ministerial level to reduce the system losses including the theft of power. We will address all challenges that result in passing unnecessary costs to consumers,” he said.
A multi-agency team comprising of the DCI, Financial Reporting Center (FRC), Assets Recovery Authority and other investigative agencies will be assembled to investigate alarming system losses within KPLC, procurement practices, insider trading, conflict of interests and suspect transactions involving KPLC staff and others.
For a while, KPLC has been running at a loss, with all indicators pointing to ineffective Power Purchase Agreements (PPAs) that have left the company heavily indebted while ironically paying for excesses energy it does not need in take-or-pay arrangements blamed on poor negotiations and vested interests.
Besides high fixed capacity charges amounting to Shs.47 billion, the PPAs are bound by Commercial Operation Dates (CODs) that are not aligned with the company’s power demand.
This has often resulted in excess power generation even when the demand is low.
In the 2019/2020 Financial year, KPLC posted a loss before tax of Kshs.7 billion.
Its negative working capital position for the fourth consecutive year has also raised substantial doubt about its ability to sustain operations.
The system losses stood at 23.47 per cent, exceeding the 19.99 per cent limit approved by the Energy and Petroleum Authority (EPRA).
This is attributed to lack of internal control measures put in place to mitigate losses including governance.
The company’s obligations to pay for goods and services that were acquired from suppliers were also not met with a long outstanding balance of Shs.1.3 billion resulting to discontentment of financiers and suppliers.
Further, the company did not submit to the Unclaimed Financial Assets Authority Shs.1.2 billion of deposit refunds to consumers, unidentified receipts, unpaid customer electricity deposits, unpaid wayleaves compensation, and unclaimed dividends and stale cheques as required by the Unclaimed Financial Assets Act 2011.
Matiang’i exuded confidence that the proposed changes will yield the much-desired results and assured Kenyans that the unit cost of electricity billed to clients will soon go down.
This is part of recommendations by a Presidential appointed task-force on the review of the power purchase agreements between private investors in the energy sector and the State utility firm Kenya Power.
The taskforce on KPLC chaired by John Ngumi recommended the reduction of the cost of electricity by over 33 per cent within four months.
Matiang’i was accompanied by Principal Secretaries, Gordon Kihalangwa and Julius Muya, KPLC Board Chair Vivian Yeda, and Ag. KPLC Managing Director Rosemary Oduor.
