Page 9 - AfrElec Week 13 2022

AfrElec POLICY AfrElec

Kenyan government in talks

with IPPs over second 15%

price reduction

KENYA KENYA’S government has begun negotiations as well as the cancellation of all unconcluded
with independent power producers (IPPs) to PPA negotiations.
review existing power purchase agreements The task force also discovered that there was
(PPAs) in a bid to secure reductions in electric- a huge disparity between the tariffs charged
ity bills for consumers, the country’s Ministry of by IPPs and those of the majority state-owned
Energy has said in a statement. Kenya Electricity Generating Co. (KenGen), the
The government intends to cut the electricity country’s largest power producer.
tariffs for end-consumers of Kenya Power and However, the IPPs had so far opposed the
Lighting Co. (Kenya Power) by at least 15%, proposals, saying that they would amount to
while also taking due account of the risk of losses a breach of contract and would result in huge
to companies. losses.
A 15% tariff reduction was carried out in “[Today,] formal engagement between the
January of this year. The government has now Government of Kenya and independent power
engaged in dialogue with the IPPs, rather than producers commenced within the framework of
attempting to force through a move that was the ongoing wide-ranging reforms in the energy
likely to end in a legal battle. sector. These conversations have established
The move is in line with the recommenda- good faith, forged comfort and clarified a path-
tions of a 15-member presidential task force that way to successful negotiations in the shortest
was set up to review the cost of electricity in the time possible,” the Ministry of Energy said in a
country, as part of efforts to attract foreign direct statement, as cited in The Kenyan Wall Street.
investment (FDI) and encourage industrial The PPAs allow power producers to be paid
growth in the country. for any electricity produced, even if it does not
The report recommended renegotiation with reach the final consumer for reasons such as
IPPs to secure an immediate reduction in PPA transmission losses or power theft.™
tariffs within existing contractual arrangements,

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