Members of Parliament have launched a fresh bid to forcibly lower the prices at which power producers sell electricity to Kenya Power, in the latest push to reduce the cost of electricity.
The National Assembly Energy Committee gave all thermal power producers, Lake Turkana Wind Power, Kipeto Energy and OrPower up to December next year, to provide details on amounts paid to them by Kenya Power and the outstanding balances.
The details from the nine IPPs will be used to determine the prices at which the power producers will sell electricity to Kenya Power for the remainder of their contracts, in what is expected to trickle down to consumers in the form of reduced power bills.
Electricity prices have surged over the past three years with the cost of 50-kilowatt units (kWh) jumping 37.8 percent to Sh1,275.05 last month from Sh925.08 in November 2021 while 200 kWh rose 11.97 percent to Sh5,714.88 from Sh5,103.91 over the same period.
“The report should determine the actual cost of setting the power plants, cost of running them, which includes the capacity charges, amounts paid since inception in view of the initial investment costs and amounts owed to the IPPs which shall form the basis of tariff charges that should be levied for the remaining period of the PPAs,” the committee says in the report currently before Parliament.
“Failure to comply within 12 months will lead to termination of their respective PPAs (Power Purchase Agreements).”
The IPPs will disclose the details to the Auditor-General, who will then carry out an audit to reveal billions of shillings that the power producers have pocketed from Kenya Power.
It remains to be seen whether Parliament will make good its threat given the dire consequences of terminating the PPAs. Taxpayers will be forced to compensate those affected by the contract cancellations.
The directive marks the second time in under three years that the government is seeking to force independent power producers (IPPs) to reduce wholesale prices to Kenya Power after a similar bid that was launched two years ago flopped.
Kenya had in 2022 tried to force IPPs to lower their wholesale prices in a bid to offer customers a 15 percent cut on power bills. Lowering the prices was meant to afford Kenya Power space to give consumers discounts without hitting its profits.
But the government dropped the plan in fear of upsetting investors who are behind the IPPs and instead offered incentives like extending the validity of the PPAs for any IPP that would agree to lower its prices.
The targeted IPPs contributed nearly a quarter of the electricity that Kenya Power bought from producers in the year that ended June 2024.
Turkana Wind Power accounted for 9.6 percent (1,326 GWh) that Kenya Power bought from IPPs in the year ended June 2024, while OrPower supplied 793 GWh (5.7 percent) from its geothermal plants. Kipeto Energy —which is a wind plant— accounted for 2.9 percent or 404 GWh.
Kenya Power has PPAs with six thermal plants and bought 678 GWh from them or 4.95 percent of the 13,684 GWh that the electricity distributor bought from IPPs and imports from Ethiopia and Uganda in the year to June 2024.
Most of the PPAs in Kenya are valid for between 20 to 30 years. Between 2019 and last year, at least two thermal power plants have been retired upon expiry of their PPAs with Kenya Power.
Thermal power plants are largely behind costly power due to the Fuel Cost Charge that the plants are paid to cater for fuel costs. The surcharge is the biggest component on consumer bills.
