Energy Committee Summons CS Ndungu Over Issuance of Letters of Support to IPP’s

The Cabinet Secretary (CS) for National Treasury & Economic Planning, Prof. Njuguna Ndung’u has informed the Energy Committee that the Office of the Attorney General makes Legal Clearance for letters of support to Independent Power Producers (IPPs).

The information is against the Attorney General’s assertion that his office wasn’t involved in the Power Power Agreements (PPAs).

Appearing before the Energy Committee chaired by Hon. Vincent Musyoka, CS Ndung’u told the legislators that the primary issuer of Government Support Measures (GSMs) which includes the letters of support to IPPs is the CS for National Treasury and Economic Planning.

While justifying issuance of letters of support to IPPs, CS Ndung’u told the Committee that it serves as a contingent Liability.

“The letters of support is mechanism used to protect the government as well the private sector,” said Prof. Ndung’u.

Members of the Energy were also concerned about the various taxation measures and levies impacting on the overall cost of power and how the same can be managed to offer relief to Kenyans.

In his response, Prof. Ndung’u informed the Committee that the only national tax charged on electricity is VAT at the rate of 16% and that removal of the same will introduce discrimination in the VAT tax regime.

He however recommended to the Committee that the reduction of the high cost of electricity should be on the Water Resource Management Authority (WARMA) Levy, Energy Regulatory Commission (ERC) Levy and the Rural Electrification Program (REP) Levy.

Accompanying the CS Treasury, the Director General for Private Public Partnerships, Mr. Chris Kirigua cited the need to review the PPAs.

“There is need for review of the contracts. We need to look at the contracts and what was provided in the beginning. If it is established that something is wrong, it shouldn’t be tolerated,” said Mr. Kirigua.

Members of Energy Committee further raised a concern on the economic impact of the high cost of electricity in the country, an issue that the Committee said that it is a major cause of investors leaving the country to invest in Tanzania and Ghana.

On this, the Treasury CS noted that it is not only the high cost of power but also the recurrent power outages in the country.

Energy Committee is expected to retreat to write a report after a rigorous engagement with various stakeholders in the Energy Sector on the causes of high cost of power in the country and the measures to reduce the same.

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