Puzzle of State firm selling electricity to Kenya Power in dollars
Rural Electrification and Renewable Energy Corporation chief executive Peter Mbugua when he appeared before the Senate Energy Committee.
Senators were yesterday shocked to learn that Kenya Power purchases electricity from a government agency in dollars.
This emerged as the Rural Electrification and Renewable Energy Corporation (Rerec) came under fire for engaging in commercial production of electricity, in violation of the law.
Appearing before the Senate Committee on Energy, Rerec CEO Peter Mbugua said the agency was selling 54.65 megawatts of power generated by Garissa Solar Power Plant to Kenya Power in dollars.
Mr Mbugua said they would continue to bill Kenya Power Sh7.4 ($5.09 cents) per kilowatt per hour for the next 20 years.
The Rerec boss said they started billing Kenya Power in November 2018 and the utility firm owes them Sh600 million in 14 unpaid invoices.
“We are billing Kenya Power because the plant is still our asset and the money we get is used to pay KenGen for operating and maintaining the power plant as well as to offset the loan taken to put up the power plant,” said Mr Mbugua.
As per the loan contract signed in 2015, the plant was put up at a cost of Sh10. billion (513 million Chinese Yuan) and had a seven-year grace period, which lapses in July, after which the loan will be repaid in 26 instalments.
The session chaired by Elgeyo Marakwet Senator William Kisang heard the money Rerec collects goes to an escrow account that has more than Sh2 billion, which will be used to repay the China Exim bank loan and operation costs to KenGen.
Nairobi Senator Edwin Sifuna wondered why the two public agencies could not denominate the contract in Kenya shillings.
Independent power producers (IPPs) have widely been blamed for high electricity prices.
Despite supplying only 28 per cent of the power, the IPPs account for 47 per cent of Kenya Power’s purchase costs.
In answer to a question by Kakamega Senator Boni Khalwale, Mr Mbugua said billing in dollars has no effect on the cost of electricity unless Kenya Power decides to review its tariffs.
He added that the deal between Rerec and Kenya Power was negotiated in dollars because of the easy convertibility of the currency.
Narok Senator Ledama Olekina wondered why Rerec was still billing Kenya Power even after handing over the plant.
Maintenance
Mr Mbugua said they handed over the operation and maintenance of the plant to KenGen in 2021 and paid an annual fee of about Sh200 million for running the station. However, the assets still remain under Rerec.
“Which law gives you the mandate to set up solar power generation plants? You are not supposed to do what you are doing in Garissa,” said Senator Sifuna.
However, the CEO said the Garissa project began in 2015 before the current law came into effect.
