NAIROBI, Sept. 29 (Reuters) – Kenya’s President Uhuru Kenyatta has ordered the cancellation of all ongoing and incomplete power purchase agreements negotiated with state-owned distributor Kenya Power (KPLC.NR), his office said Wednesday.
The president has also replaced the energy minister, a spokesman said.
The cancellation is part of a series of recommendations from a team he set up in March to review the agreements. Continue reading
“The recommendations of the task force include: immediate cancellation of all unfinished negotiations on power purchase agreements,” said a statement from the presidential office.
Kenyatta said future power purchase agreements with the government must be in line with their Least Cost Power Development Plan, which emphasizes the use of renewable energy sources.
Consumers in the East African economy often complain of high electricity bills, some of which can be attributed to idle capacity charges that electricity producers compensate for electricity they generate but never use.
Under a typical electricity purchase agreement, an electricity producer is paid for every electricity produced, even if Kenya Power is unable to sell it to consumers due to excess production.
The Kenyatta office said the review team found that there is a large discrepancy in tariffs between the main electricity generator, Kenya Electricity Generating (KenGen) (KEGN.NR), and independent electricity producers.
KenGen’s prices were much lower than the independent electricity producers. Kenya Power gets most of its electricity from the state-controlled KenGen.
“The President … notes that there is a lack of adequate forecasting and planning of demand, leading to inconsistent forecasting of demand,” the statement said.
Kenyatta’s office said that as a result of some of these measures, electricity tariffs were expected to drop 33% over the next four months.
Kenya Power posted a pre-tax loss of ATS 7.04 billion (US $ 63.88 million) for the fiscal year ended June.
Of the ATS 87.5 billion sales cost incurred during the reporting period, capacity fees paid to power generators accounted for 47.5 billion, or 54%, officials said.
($ 1 = 110,2000 Kenyan shillings)
Reporting by George Obulutsa; Adaptation by Ayenat Mersie and Jason Neely
Our Standards: The Thomson Reuters Trust Principles.