Mr John Ngumi. FILE PHOTO | NMG President Uhuru Kenyatta has appointed a task force to review power purchase agreements (PPAs) signed between Kenya Power and all electricity generators with a goal of renegotiating the energy prices and other terms downwards.
The team will be chaired by boardroom veteran John Ngumi and will have 15 other members drawn from the private and public sectors including retired judge Aaron Ringera, former PricewaterhouseCoopers executive Anne Eriksson and James McFie.
Review of the PPAs comes after it emerged that Kenya Power has signed contracts committing it to take more electricity than it can sell, leaving it to pay onerous capacity charges to energy producers even when their plants are idle.
“The trms of reference of the taskforce shall be to … undertake a comprehensive review and analysis of the terms of PPAs entered into by the Kenya Power and Lighting Company Limited (KPLC),” reads part of a gazette notice announcing the formation of the team.
“Review the take-or-pay approach applied under the PPA structure and recommend a viable pay-when-taken (merchant plant) approach, or any other viable payment structure, for use in independent power generation projects.”
Other objectives include reviewing the allocation of risk between the independent power producers and the electricity distributor.
There will also be an audit of the operations of the power producers, with the government threatening to terminate the contracts of those found to have broken the country’s laws or taken advantage of Kenya Power.
The taskforce will serve for a period of six months from March 29, 2021 or for such longer period as may be specified by notice in the Kenya Gazette.
During the tenure of the taskforce, all pending issuance or renewal of power purchase contracts and negotiations will remain suspended.
The government expects that lowering fixed charges in the energy contracts will offer financial relief to Kenya Power and also bring down power bills for consumers.