KenGen to benefit from ERC fund

November 1, 2010

, NAIROBI, Kenya, Nov 1 – The Energy Regulatory Commission (ERC) is considering setting up a fund to cushion KenGen against penalties arising from non-delivery of power to the Kenya Power and Lighting Company (KPLC).

ERC Director-General Eng Kaburu Mwirichia told Capital Business that although no conclusive decisions had been reached, the establishment of a fund through which KenGen would be compensated in case of a drought was one of the options they were looking at.

“They (KenGen) have a minimum threshold of energy that they are required to sell every month. So when there is drought, they are not able to meet this threshold and are thus penalised,” the DG explained.

KenGen and KPLC signed a new Power Purchase Agreement (PPA) signed in 2008 which requires the generator to adjust its revenues downwards if and when it fails to supply the agreed amount of energy.

The inability to meet this obligation, occasioned by the poor rainfalls late last year, saw KenGen adjust its books by Sh1.25 billion which resulted in a 47 percent decline in its profitability for the full year ended June 2010.

Eng Mwirichia however said that although the agreement provides for the revision of some contentious issues, the ERC had not received any official application for a review.

“They have not approached us but it is something that we are aware of. During the signing of the agreement, we agreed that after three years there are some issues which may be re-looked at because we shall have had experience,” he explained.

But as the ERC continues to mull ways of addressing the hydrology risks, the DG disclosed that they were also looking at how other issues such as the introduction of the ‘time of use electricity billing’ would be implemented.

The Commission has forwarded to KPLC a proposal on how it should execute the electricity billing program which involves shifting power loads out of peak demands periods.

Eng Mwirichia revealed that KPLC was in talks with industrial companies under the umbrella of the Kenya Association of Manufacturers to develop mechanisms on how they can implement the method which promotes better energy use.

The utility company in the past failed to implement the strategy due to what industry players said was the lack of a clear structure on how to go about it.

“We had asked them to try on a sample basis so they are working on a program on how to try that before we can know whether we can implement it on a permanent basis,” he said adding that they intended to have the program implemented before the next PPA review in 2011.

By having some industries operate their machines outside the peak time of 8am, the firms would not only assist in reducing the energy peaks but would also lower the overall cost of generation.

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