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No end in sight to high power bills

BUSINESS
By Macharia Kamau | October 20th 2021

Kenyans will continue paying dearly for electricity after the Attorney General’s (AG) office said there is little room to wiggle out of expensive contracts that Kenya Power signed with some of the independent power producers (IPPs).

This came even as the AG protested being left out of the negotiations that resulted in the signing of some of the costly power purchase agreements (PPAs) that are exposing Kenyans to high bills.

Solicitor General Kennedy Ogeto yesterday told MPs that after reviewing the agreements that Kenya Power signed with IPPs, the Office of the AG had concluded that it would be difficult to get out of a number of those contracts.

This means Kenyans will continue to grapple with high costs of power until the contracts run their full course.

The government has been exploring ways of lowering the cost of power, with President Uhuru Kenyatta having promised Kenyans a 33 per cent reduction in costs by December.

The contracts, mostly with thermal IPPs, would be punitive to Kenya Power and by extension electricity consumers, were they to be terminated.

“Some of the PPAs cannot be terminated or reviewed unilaterally by Kenya Power, and can only be terminated if the IPPs fail to meet their obligations,” Mr Ogeto said when he appeared before the National Assembly’s committee on energy.

“KPLC’s unilateral termination would constitute a breach of contract and an act of default.”

The Solicitor General was specific that the PPAs between Kenya Power and five IPPs - Rabai, Gulf, Thika, Triumph and Muhoroni – are extremely difficult to get out of.

In case of termination, Kenya Power may be required to pay damages equal to the total project costs, less assumed depreciation, he said

Another of the PPAs with Iberafrica Power, Ogeto said, was easier to get out of, requiring Kenya Power to initiate a review process that would hopefully lead to a mutual agreement to retire the power plant.

“If they cannot reach an agreement within six months, KPLC may exercise its right to terminate and issue a 12-month notice for termination,” he told the committee chaired by Nakuru Town East MP David Gikaria.

The contracts that Kenya Power has with Kenya Electricity Generating Company (KenGen) – which has two thermal power plants in Kipevu – appear the easiest to get out of but would also be time consuming, requiring the former to give the State-owned power producer a 24 months’ notice.

Ogeto said the AG’s office had reviewed the thermal PPAs on request by the Energy ministry, which had sought advice on the implication of terminating the contracts in 2017, and later in 2019.

The MPs said the AG ought to have been fully involved, noting that many of the PPAs were deliberately designed to protect certain interests.

emacharia@standardmedia.co.ke

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