Government takes charge of Kenya Power as it starts reforms

The Government has declared Kenya Power a “special government project” as it takes a more hands-on approach in the affairs of the power distributor.

Interior Cabinet Secretary Fred Matiang’i yesterday announced that the government had initiated a restructuring process at the troubled electricity distributor with plans to cut power costs by 30 per cent by December.

Matiang’i said an inter-ministerial team had been set up to “audit KPLC and oversight urgent reforms in the company”. This will mean the government will increasingly play a bigger role in over-sighting the company in which it has a 50.1 per cent stake and is a critical player in the running of the economy being the sole power distributor.

He also announced a planned forensic audit of Kenya Power’s systems that will be spearheaded by the Directorate of Criminal Investigations (DCI). The audit is expected to reveal the extent of the rot in the country’s electricity sector and might claim officials, current and former, within the company as well as the industry who may have had a hand in bringing down the firm.

Matiang’i also announced the suspension of pending and ongoing negotiations between Kenya Power and Independent Power Producers (IPPs) that are planning new power plants.

This comes a week after the mini cabinet reshuffle that saw Monica Juma named the CS Energy while Gordon Kihalangwa was moved to the ministry as the new Principal Secretary. Charles Keter who was the CS Energy became the CS Devolution while Joseph Njoroge until then PS Energy was has been moved to Transport as the PS.

The CS spoke yesterday after meeting with the board and management of Kenya Power during he said there were discussions that he termed lengthy and deep.

Following the talks, Matiang’i said, KPLC together with other government agencies would not commence implementation of the recommendations by the taskforce formed in March to look into the Power Purchase Agreements (PPAs) Kenya Power has with IPPs.

Among the recommendations of the taskforce that was chaired by John Ngumi include a reduction in the cost of power by 33 per cent – which President Uhuru Kenyatta directed be done within three months – and renegotiation of PPAs.

“The focus, which we should not lose, is to bring down our electricity bills. Work has started to deal with challenges in the sector with the aim of reducing the cost of power. We have been given a deadline of 90 days by the President we have begun this work today and I am confident that we will achieve the target,” said Matiang’i.

“We are all concern – most of all the President is concern - about the cost of power. Our bills are too high.”

The Government also put a freeze on the contracting of additional IPPs and ordered Kenya Power to review existing PPAs in a bid to lower the cost of power.

Matiang’i said the decision was in line with the recommendations of the taskforce that was set up following widespread concerns of high electricity bills. He also noted that the

 “We have taken certain tough decisions especially in relation to the PPAs. Effective today, we have suspended any negotiation on any new PPAs. We are going to deal with PPAs that we have in place. We are going to a forensic audit on systems and procedure sat KPLC,” he said.

“We are also going work at reducing system losses – theft of power and so on. We want to address all challenges that result in the high cost being passed to consumers. Our bills are unsustainable.”

The CS also said a multi-agency team comprising of the DCI, Financial Reporting Center (FRC), Assets Recovery Authority and other investigative agencies to be assembled to investigate high system losses within KPLC.

Electricity system losses are the different between what the firm buys from power producers and what it sells to consumers. This has been on a climb over the last decade and according to Kenya Power data, they have risen to 23.4 per cent as of June 2020, rising from 18 per cent over a seven-year period. The company recover the losses from consumers in monthly power bills.

The multi-agency team will also look into procurements practices, insider trading, conflict of interests and suspect transactions involving KPLC staff and others

“We have agreed with the board on a very aggressive method of reviewing even the billing system to ensure that it addresses some of the challenges that we have. The raft of measures will lead us to the destination that we desire which is lowering the cost of power,” he said.

“It could well be that certain decisions made in the past, we may have missed on aspects that we should have noticed earlier.”

Kenya Power registered a Sh939 million loss after tax, which the Interior Ministry in a statement yesterday attributed to ineffective PPAs that “have left the company heavily indebted while paying for excesses energy it does not need in take-or-pay arrangements blamed on poor negotiations and vested interests”.