Outrage as cash-strapped Kenya Power pay Sh90billion to Rabai Power, a private electricity producer since 2010

The government has paid Sh90 billion to an Independent Power Producer (IPP), Rabai Power since signing a secretive Power Purchase Agreement (PPA) with lose making utility firm, Kenya Power, the sole electricity distributor, in 2010.

While appearing before the National Assembly Committee on Energy, Rabai Power Finance Manager Zablon Okwoku revealed that the company charges Sh8 per kilowatt as a variable charge excluding fuel and other related costs.

The meeting was convened by lawmakers who were outraged by the amount charged by Rabai Power saying Kenya Electricity Generating Company (KenGen) which produces about 75 per cent of electricity consumed in the country, is much cheaper.

“Energy charge is 0.0063 Euros per kilowatts hour, excess starts are 394 Euros per start, and the fuel charge varies from time to time between Sh8-12 per kilowatt hour,” Okwoku said.

He was hard pressed by members of the committee led by Garissa Township MP Aden Duale to explain why the company received Sh2.6 billion capacity charge from Kenya Power in the 2019/2020 financial year.

“You are paid 2.6 billion shillings even in the previous years. Why were you paid that money? You are paid that money and what Kenya Power does is that it transfers that payment it has given you to the ordinary Kenyan’s bill. This is why electricity bills are very high in this country,” Duale stated.

His sentiments were echoed by Gem MP Elisha Odhiambo who termed the 20-year deal between Kenya Power and Rabai as “total theft.”

“Why would you keep fuel and wait to give back fuel when you are closing the plant? It looks like there is an insider business in this company. Capacity charge is hot air because they are paid for supplying nothing,” Odhiambo retorted.

In the Power Purchase Agreement, Rabai Power is expected to supply electricity to the Kenya Power for 20 years ending in 2030 then give its thermal plant back to the country’s electricity distributor.

Okwoku added that the agreement is an investment that is expected to make profit through interest

“It is just like a loan. If you take a loan, you must pay it back, in installments, principle plus interests. Then after 20 years, Kenya Power will repossesses the plant,” he said.

Duale however interjected arguing Rabai Management was taking the arrangement as a favour yet the government provided the land where the plant sits on and pays for fuel security storage.

Rabai is ranked as one of the most expensive suppliers of electricity to Kenya Power, a situation which has been linked to skyrocketing electricity bills in the country.

With the hiked fuel prices in the September-October review, electricity bills are set to soar signaling tough economic times in the country.

The Energy and Petroleum Regulatory Authority Tuesday hiked pump prices by Sh9.5 average.

EPRA announced the pump prices for super petrol, diesel and kerosene would increase by Sh7.58, Sh7.94, and Sh12.97 per litre respectively in Nairobi.

After a long back and forth debate between the MPs and Okwoku, the committee resolved to request for Rabai’s financial audit and invite Kenya Power officials to explain why it committed to such an expensive agreement with a company whose shareholders are majorly foreigners.

In June this year, while appearing before the Public Investments Committee (PIC) of the National Assembly, Ngugi cited Non-Disclosure Agreements and confidentiality clauses in declining to reveal the owners of beneficiary  firms and 17 Power Purchase Agreements (PPAs) that committed the lose making entity to the shady dealings through what appeared to be an apparent protected looting of public coffers.

The committee chaired by Abdulswamad Nassir heard that taxpayers have no means or right to scrutinise how their money is spent to buy power generated by private producers.

However, Abdulswamad ordered Kenya Power to disclose the identity of the owners of power producer firms which pocketed Sh50.2 billion in sales to the utility in the year to June 2020.

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

It is not clear why Kenya Power opts to buy power from individual producers without giving national power producer, Kenya Generating Company (Kengen) which the former owes billions of shillings in debt.

“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.

According to Kenya Power records, 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.

Reports indicate that the contracts were so secretive that even the Auditor-General said they had never seen them. The PIC however maintained that the secrecy was unconstitutional as the company was a public company.

While appearing before the committee, Ngugi said he would need a court order and consent from the contractors to make the contracts public.