New autonomous office to approve all power projects

Energy sector stakeholders.
Photo credit: Pool I Nation Media group

A one-stop-shop office will be created to approve all power projects in proposed reforms to clear inefficiency and bureaucracy that impedes investments in the critical energy sector.

The Energy ministry said the proposed independent office will serve as a one-stop shop clearing house for independent power producers (IPPs) seeking to set up new power plants in the country.

“Establish an independent and centralised one-stop shop clearing house for energy projects to enhance efficiencies, foster transparency, and reduce the contracting time for projects,” the ministry said in a newly published white paper.

The present approval process for permits for IPPs is windy and creates room for inefficiency and graft.

Performance guarantee

It starts with the IPPs getting approval from the Energy ministry after which they proceed to the National Treasury for a State-backed performance guarantee.

In addition, the IPPs are required to obtain a letter of support from the Attorney-General’s office before signing a power purchase agreement with Kenya Power.

While the ministry in the past used to float public tenders for the procurement of IPPs after which a select few would be approved, the process has become increasingly opaque in recent years with the tenders no longer publicly floated.

For instance, Kenya Power early this year told Parliament that it is Lake Turkana Wind Power (LTWP), now the second largest supplier of electricity to the utility firm, which first approached the State for the construction of its multi-billion shilling 310 megawatts (MW) wind farm in Marsabit.

The Office of the Attorney-General has also variously complained of being sidelined in the IPP procurement process by only being forwarded the letters of support by the Treasury for signing without being involved in the negotiations or being furnished with the contract documents.

Procuring producers

But now, the white paper has proposed for the State to set up an office that will undertake the entire process of procuring producers to sidestep government cartels that are embedded in the current procurement regime that has seen the approval of expensive power projects.

The paper however does not specify the exact roles of the proposed office, but it should ordinarily involve identifying power supply gaps in the market, floating tenders publicly for interested bidders, competitively selecting the winners, and securing government guarantees for the winners to enable them secure funding from lenders.

It says Kenya will borrow lessons from other countries that have established such offices including South Africa, whose IPP Office undertakes the procurement process for private power producers.

IPPs supply the most expensive power which is choking consumers with high costs due to the costly contracts entered into with the government.

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