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Kenya

KPLC directed to undertake forensic audit on system losses from heavy fuel costs

NAIROBI, Kenya Sept 29 – Kenya Power and Lighting Company (KPLC) has been directed to undertake forensic audit on system losses from heavy fuel oils and ensure future Power Purchase Agreements (PPAs) are aligned to the Least Cost Power Development Plan.

State House Spokesperson Kanze Dena-Mararo said President Uhuru Kenyatta issued the directive after receiving a taskforce report he set up in March to review power purchase agreements entered into by Kenya Power and Lighting Company Limited and all electricity generators with a goal of renegotiating the energy prices and other terms downwards.

The task force, chaired by Kenya Pipeline board Chairman John Ngumi, further recommended a reduction of power tariffs by 33 per cent.

“The consequence of the proposed interventions is that a consumer who previously spent Sh500 per month on electricity shall by December 31, 2021 pay Sh330 per month,” a statement released by the President’s Press Office indicated.

In giving the directive the President noted that the existing risk allocation imbalances between KPLC and Independent Power Producers (IPPs) further exacerbated by poor contract management frameworks; and an uncoordinated institutional architecture that inadvertently contributes to enhanced operational costs passed on to consumers.

“The Taskforce recommendations include review and re-negotiations with IPPs to secure immediate reduction in PPA tariffs within existing contractual arrangements and KPLC to take the lead in formulation and related PPA procurement of the Least Cost Power Development Plan (LCPDP),” read the statement dispatched from State House, Nairobi.

In line with the constitutional imperative for transparency in the public sector, President Kenyatta directed that KPLC’s annual reports should henceforth include the names and beneficial ownerships of all Independent Power Producers with which it has contractual arrangements.

The head of state has further directed the State electricity provider to Fast-track the ongoing reforms to restructure it into a commercial entity that is both profitable and also capable of delivering efficient and cost-effective electricity supply to all consumers.

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The President said he had considered the Report of the Taskforce and noted that the key findings which included the lack of proper demand forecasting and planning lead to irreconcilable projections as against demand.

Towards this end the President directed KPLC to institute Due Diligence and Contract Management frameworks for PPA procurement and monitoring along the lines of the drafts provided by the Taskforce;

“The Taskforce recommendations include KPLC to institute one and five-year rolling demand and generation forecasts and associated models,” President Kenyatta stated.

KPLC is also to adopt standard PPAs and proposed Government Letters of Support (LOS) along the lines of the drafts provided by the Taskforce.

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