Nairobi, September 29 (Reuters)-Kenyan President Uhuru Kenyatta's office said on Wednesday that it has ordered the cancellation of all ongoing and unfinished negotiations with the national distributor Kenya Power Company. Power purchase agreement.
A spokesperson said that the president also replaced the energy secretary.
The repeal is part of a series of recommendations made by a team he established in March to review the agreement. read more
The president’s office said in a statement: “The recommendations of the working group include: immediately cancel all outstanding power purchase agreement negotiations.”
Kenyatta said that future power purchase agreements with the government must comply with its lowest-cost power development plan, which emphasizes the use of renewable energy.
Consumers in East African economies often complain about high electricity bills, partly because of charges for idle capacity, which are used to compensate for electricity generated by generators that have never been used.
According to a typical power purchase agreement, the electricity producer will get paid for any electricity produced, even if the Kenyan Power Company cannot sell it to consumers due to overproduction and other reasons.
The Kenyatta office stated that the review team found a huge difference between the electricity prices charged by the main electricity producer Kenya Power Generation Company (KenGen) and independent electricity producers.
KenGen's price is much lower than that of independent power producers. Kenya Power purchases most of its electricity from KenGen, which is controlled by the state.
The statement said: "The President… noticed… the lack of proper demand forecasting and planning, resulting in irreconcilable demand forecasting."
The Kenyatta office stated that due to some of these actions, electricity prices are expected to fall by 33% in the next four months.
The Kenya Power Company’s pre-tax loss for the fiscal year ending June was 7.04 billion shillings (63.88 million U.S. dollars).
Officials said that of the 87.5 billion shillings cost of sales incurred during this period, 47.5 billion or 54% was paid to power producers for capacity.