Energy Committee Explores Exit Strategy For Independent Power Producers
The Energy Committee chaired by Hon. Vincent Musyoka has hinted that it will consider an exit strategy for IPPs should they be rigid on reducing their tariffs as a way of reducing the cost of electricity in the country.
In a meeting with representatives drawn from KETRACO, KPLC, EPRA, REREC, WARMA, KENGEN, Office of the Auditor General (OAG) and National Treasury, Members of Energy Committee sought the opinion of the stakeholders on ways to reduce the cost of electricity in the country and the exit clauses should the committee recommend so.
The heated debate on doing away with IPPs arose after the Deputy Auditor General, Mr. Anthony Mwangi disclosed the findings of the audit report on all entities in the energy sector.
Mr. Mwangi told the committee that the capacity charge for Independent Power Producers charged for the last 2 years were higher than the cost of the energy purchased and that the IPPs were operating below their contracted capacity resulting in payment for idle capacity.
After having carried out a comparative analysis on the purchase cost of power from KENGEN and IPPs, the OAG revealed that there was a disparity in the charges and that power from non-state owned producers was more expensive.
Mr. Mwangi further informed the Committee that the basis for determination of normal losses by EPRA was not clearly supported and that the change from one year to another was not documented.
The OAG report confirmed the concerns that members of Energy Committee had on the disparity in the tarrifs charged by IPPs which is seen as a major factor to high electricity cost and punitive to Kenyans.
“What is your opinion then on the exit strategy as the Office of the Auditor General, considering the criminality malpractices in the structuring of contracts?,” asked Hon. Musyoka.
In his response, Mr. Mwangi alluded that although the cost of nullification of Power Purchase Agreements hadn’t been worked on, but he advised the Committee to form a team which should look at the exit clauses.
According to the KPLC MD Eng. Joseph Siror, a better way to eliminate the capacity charge and enable Kenya access cheap power is through the establishment of Power Auction Centers.
However, Eng. Siror assured the Committee that going forward, KPLC will only sign PPAs that reflect value for money and with better tariffs.
In his closing remarks, Hon. Musyoka asked for collaborative efforts by all stakeholders to address the high cost of electricity.
“We either work together to bring the cost of electricity down or we perish all of us,” said Hon. Musyoka.
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