Negotiations have commenced on a contract to evaluate Kenya Power’s power purchase agreements (PPAs) signed over the years in order to reduce energy costs for families and businesses by 15% in the three months leading up to June.
In the aftermath of foreign enterprises’ objections to the planned review, the Ministry of Energy said on Tuesday that it has chosen negotiations over forcing independent power producers (IPPs) to decrease rates.
The objective is to reduce Kenya Power’s expenses and provide the utility room with the ability to reduce retail charges by 15% without incurring losses.
Kenya Power decreased retail pricing in January in order to reduce system losses, which are the percentage of electricity purchased from generators like as KenGen that does not reach households and businesses owing to power theft and network leakages.
After a task team created by President Uhuru Kenyatta discovered a substantial difference between the prices imposed by primary power producer KenGen and IPPs, the State pledged a comparable drop in a plan based on the evaluation of PPAs.
The IPPs, which are controlled by influential organizations such as the World Bank, objected to a unilateral drive to reduce the price at which they sell energy to Kenya Power, laying the ground for a judicial battle.
Fearing a court battle with big foreign investors, the State backed down and agreed to a negotiated settlement with IPPs.
The Ministry of Energy announced in a statement that “formal interaction between the Government of Kenya and independent power producers begun today [Monday] within the scope of the ongoing wide-ranging reforms in the energy sector.”
“These discussions have established good faith, provided comfort, and outlined a route to successful talks in the least amount of time.”
The cost of purchasing 200 units of energy fell from Sh5,185 in December to Sh4,373 in February, thanks to a 15% reduction announced in January.
In phase two of the study, the State intends to make comparable cuts.
Idle capacity charges, which reimburse power providers for electricity that is created but never consumed, are a common source of customer complaints about high electricity bills.
A typical power purchase agreement pays a power provider for any electricity generated, even if Kenya Power is unable to sell it to customers due to factors such as surplus production.
The cost of power is a major factor in new investment decisions.
Since President Uhuru Kenyatta took office in 2013, electricity costs have than quadrupled, going from Sh508 in July 2013 to Sh945 in December before decreasing to Sh769 in February.
The tariffs paid by KenGen and IPPs were found to be vastly different, according to a task commission created by the President.
Kenya Power purchased 46 percent of its electricity from state-owned KenGen for Sh41.1 billion, with wind farm Lake Turkana Wind and US-based geothermal business OrPower 4 Inc. rounding out the top producers.
The cost of power is a major factor in new investment decisions.
Since President Uhuru Kenyatta took office in 2013, electricity costs have than quadrupled, going from Sh508 in July 2013 to Sh945 in December before decreasing to Sh769 in February.
The tariffs paid by KenGen and IPPs were found to be vastly different, according to a task commission created by the President.
Kenya Power purchased 46 percent of its electricity from state-owned KenGen for Sh41.1 billion, with wind farm Lake Turkana Wind and US-based geothermal business OrPower 4 Inc. rounding out the top producers.