Consumers Federation of Kenya raises red flag after launch of ‘IPP lobby’ group

Friday, October 29th, 2021 00:00 | By
Integrity Centre. Photo/File

Consumers Federation of Kenya (Cofek) yesterday warned an electricity stakeholders lobby against subverting attempts by President Uhuru Kenyatta’s to cut the cost of power in Kenya.

Electricity Sector Association of Kenya (ESAK) which was formed in 2019 was suddenly launched this week following pressure to cut power prices in the country which culminated in a taskforce to investigate the expensive power purchase agreements considered to spike power prices.

Cofek warned ESAK against reinforcing uncompetitive behaviour at the expense of consumers and the economy.

“Cofek hopes that ESAK does not fit the bill for a cartel protection entity. Indeed, any attempts to deploy the new lobby to frustrate the current electricity sub-sector clean-up will be fiercely resisted,” Cofek said in a statement.

Kenya’s high cost of electricity has hurt the economy by spiking costs which has even forced manufacturers to shift base to neighbouring countries. This has also ensured that the manufacturing base remains thin leading to perennial unemployment.

Speaking during the launch ESAK chair George Aluru said his first order of business is to address the negative publicity around IPP participation in the power sector, and to outline an agenda around delays in licensing and approvals, leading to high development costs.

Myriad challenges

“The association is seized with a myriad of challenges, chief of them being how to support economic growth by attracting investment in electricity while ensuring sustainability where the customer, utilities, and generators all benefit equally,” said Aluru.

The intends to look at the lack of stability in laws, especially around taxation, as well as supporting the current focus on the financial stability of Kenya Power, the sole off-taker of locally generated electricity capacity.

The launch coincides with c’s directive to reform Kenya Power and offer transparency and accountability into the shadowy Independent Power Producers (IPPs) and the skewed Power Purchase Agreements (PPAs).

Part of the recommendations in the John Ngumi led report by the, Presidential task-force on Power Purchase Agreements is that power purchase agreements with especially both diesel and renewable energy producers is that their tariffs should match Kengen tariffs.

Matching Kengen tariffs means that most of them will slash their tariffs by half. However Kengen is one of the most profitable companies in Kenya and in the region, meaning the proposal is not that bad.

“These IPPs are leeches to the Kenyan consumer. Rather than publicly announcing that they will voluntarily cut tariffs in the PPAs as directed by President Kenyatta, they have grouped together with the sole aim of fighting the government attempt to sanitize the sector. As such, we must call them out for what they are,” said the consumer lobby group.

However, there are concerns that this will harden the battle when IPPS go to court arguing that the agreements with KPLC were mutual and their investments were based on terms agreed upon by Kenya Power.

“Every IPP must be made individually accountable for its’ PPA with Kenya Power. No group dynamics here,” said Cofek.

The consumer federation said every IPP should defend and negotiate their dealings as per contract. Government should not accept negotiations with ESAK.

In any case,  Cofek said, going by the officials of ESAK, none appears to be a beneficial owner of the large and offending IPPs.

Cofek said it will do everything in its’ power to ensure that contractual breaches by IPPs around the PPA’s and their real owners are unmasked and perpetrators made accountable. 

The Stephen Mutoro-led organisation called on the Competition Authority of Kenya and the Ethics and Anti-Corruption Commission to act fast and investigate the real motive behind ESAK.

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