Fresh efforts to lower electricity bills are underway after Members of Parliament reopened the debate on the prices Kenya Power pays electricity producers, with lawmakers now pushing the government to renegotiate long-term power purchase agreements they believe are keeping consumer bills high.
The National Assembly Energy Committee has instructed Energy and Petroleum Cabinet Secretary Opiyo Wandayi to prepare a policy that will guide the government's plan to review the existing agreements with major electricity producers. The committee says the framework should be completed within 12 months after Parliament adopts its report.
According to the lawmakers, the policy should provide a clear path for buying electricity at the lowest possible cost while allowing regular reviews of power purchase agreements and encouraging competitive procurement of electricity generation.
“The Cabinet Secretary for Energy and Petroleum shall, within 12 months of the adoption of this report, revise the policy to provide a clear framework for least-cost power procurement, periodic review of power purchase agreements (PPAs) and competitive procurement of electricity generation,” the committee says in the report tabled on June 2.
“The framework shall promote transparency, affordability and value for money, while supporting the government's ongoing efforts to reduce the cost of electricity through the renegotiation of legacy PPAs, without compromising security of supply, contractual obligations or investor confidence.”
If implemented, the plan could give Kenya Power room to reduce electricity charges without exposing the company to more financial pressure. Even so, the proposal faces a major hurdle because the agreements with independent power producers are protected by legally binding contracts, making any forced changes likely to trigger court disputes.
The renewed push comes as the government seeks to keep electricity prices on a downward path and cushion consumers from the high cost of living ahead of next year's General Election.
Official figures show that the average bill for customers using 200 kilowatt-hours (kWh) of electricity dropped to Sh5,476.34 last month from Sh5,738.52 recorded during the same month last year.
Independent power producers have previously resisted attempts to review the prices they charge Kenya Power. They have maintained that changing the agreed tariffs would affect the financial returns expected from their investments.
A similar attempt by the government in 2022 to persuade the producers to lower wholesale tariffs failed after the firms rejected the proposal, despite plans to reduce electricity prices by 15 percent.
Lake Turkana Wind Power was among the companies that opposed the proposal, saying a review of the existing tariffs would reduce its earnings.
Earlier this year, American-owned Ormat Technologies also pointed to the challenge facing the government's plan to renegotiate the agreements.
“In addition, Kenya Power recently requested more favourable rates on its existing PPAs with it. Any change in Kenya Power’s financial condition or the terms of our agreement with Kenya Power may adversely affect us,” Ormat said when it released its financial report.
Lake Turkana Wind Power is the third-largest supplier of electricity to the national grid, providing about 10 percent of the electricity Kenya Power buys every year, while Ormat is the country's second-largest producer of geothermal power.
The latest proposal also comes weeks after the government suspended the planned review of retail electricity tariffs over fears that higher charges would increase the cost of living. The new tariffs had been expected to take effect this month before the plan was put on hold.