This archive report was first published on 30 September 2021.
President Uhuru Kenyatta has directed the Ministry of Energy to implement the recommendations of the Presidential Taskforce on Review of Power Purchase Agreements, aiming to reduce power costs by 33% by December 25, 2021.
As of August 2021, power bills in the country had hit a three-year high, prompting the need for intervention. The John Ngumi-led taskforce was created in March to review Kenya Power's contracts with Independent Power Producers (IPPs), which have long been blamed for the expensive cost of power and the distributor's losses.
The taskforce recommended re-negotiation of Kenya Power's agreements with power producers to secure an immediate reduction in Power Purchase Agreements (PPA) tariffs within existing contractual arrangements. This would involve reducing the consumer tariffs from an average of KES 24 per Kilowatt hour to KES 16 per Kilowatt hour, a reduction of two-thirds of the current tariff.
According to the Office of the President, the cost reduction will result in consumers paying an average of Ksh330 per month, down from Ksh500. The taskforce also recommended the immediate cancellation of all unconcluded negotiations of PPAs and ensuring all future PPAs are aligned to the Least Cost Power Development Plan (LCPDP).
The taskforce further highlighted the need to reform Kenya Power to make it competitive. It recommended that KPLC be restructured into a commercial entity that is both profitable and capable of delivering efficient and cost-effective electricity supply to all consumers.
Notably, the taskforce also recommended that KPLC undertake a forensic and system audit on the procurement and system losses arising from the use of Heavy Fuel Oils (HFOs). To boost transparency, the taskforce further recommended that KPLC's annual statements include the names and beneficial ownerships of all IPPs with which it has contractual arrangements.
