Power connection

Kenya has been ranked as the top country in the world in reducing households without electricity.

| File | Nation Media Group

Why Kenya Power is now a ‘special state project’

Ailing Kenya Power is now a special state project.

The government on Thursday moved to stop the mess at the struggling energy giant when it ordered detectives to unearth the rot in one of the most strategic parastatals.

The mismanagement dimming the lights of the national power supplier threatens key sectors of the economy as the cost of electricity in Kenya remains one of the highest in the world.

The intervention seeks to pull the firm from the brink of bankruptcy and will see its operations – from recruitment, management to procurement – come under close scrutiny.

Crisis meeting

The decision came after a three-hour crisis meeting convened by Interior Cabinet Secretary Fred Matiang’i with Kenya Power board led by chairman Vivienne Yeda and acting managing director Rosemary Oduor.

Energy Principal Secretary Gordon Kihalangwa, his Treasury counterpart Julius Muia and Anne Eriksson, a member of the Presidential task force on the Review of Power Purchase Agreements (PPAs) also attended.

While Dr Matiang’i fell short of declaring Kenya Power headquarters a crime scene, he ordered a forensic audit to uncover financial dealings that border on fraud and sabotage.

A multi-agency team made up of detectives from the Directorate of Criminal Investigations, Financial Reporting Centre, Assets Recovery Agency and other agencies will camp at the firm.

The scrutiny comes after claims that some workers have been colluding with large electricity consumers to either lower or evade paying bills, with brazen power theft making half of the company’s losses.

Power purchase agreements that have punished consumers to expensive electricity will be evaluated. The investigators will also look into notorious multibillion-shilling tenders that have continued to plague the company, insider trading, conflict of interests by top management at the company and dubious deals by the company’s workers.

“We are going to undertake a forensic audit of the systems at KPLC and the billing system to ensure that it addresses some of these challenges that we have,” Dr Matiang’i, who is also the chairman of the Cabinet sub-committee on Kenya Power, said in a press briefing. 

“I am confident that some of the measures we have agreed on to implement the report of the taskforce will lead to reduced and affordable power bills.”

Being the nation’s sole power distributor, its smooth running is central to the government’s plan for cheap and reliable energy.

But years of mismanagement have led accumulation of a mountain of debt and multibillion-shilling annual losses, with the latest being Sh7 billion.

In its report to President Kenyatta last week, the task force led by John Ngumi found huge differences between the cost of buying electricity from the State-owned power generator KenGen and Independent Power Producers (IPPs). There were also glaring disparities as regards who is given priority to dispatch electricity to the national grid. 

Electricity demand

It also found a mismatch in government projections of national growth in electricity demand, leading to an expensive expansion of the power grid with the actual demand growth recorded during the forecast period.

Further, the report found that poor contract management frameworks have left Kenya Power bearing all the risk in the agreements with PPAs – thereby placing the IPPs at a legal advantage.

Review or cancellations of such contracts is costly, on top of high operational costs emanating from poor coordination of faculties at the firm.

A source at the meeting said the government is keen to expedite implementation of the recommendations made by the task force, with a meeting by all state agencies in the energy sector convened to agree on how to lower power costs.

Dr Matiang’i also directed Kenya Power to immediately suspend ongoing and pending negotiations with all current or planned PPAs, and a review of the existing agreements. 

“For the last six months, we have been working with the board (of KP) to ensure that some of the things the board wants done are done quickly. You will notice shortly that some of the changes are going to result in better performance of KP and most importantly lead to affordable energy,” he said.

“I am confident that will achieve the target we were given by the President. He is concerned by the high cost of power and we have had to take very tough decisions regarding PPAs.”

Reduce costs

In a statement released by State House spokesperson Kanze Dena, President Kenyatta said the task force’s recommendations will reduce costs by 33 per cent within four months.

Plagued by rising operational costs, mounting debt, corruption allegations and stunted growth of power demand, it remains to be seen the effect of the lower cost of electricity means for revenue performance of Kenya Power, which is currently relying on financial support from the government.

This as former Energy Cabinet Secretary Charles Keter last month revealed Kenya Power had withdrawn its application for a new tariff from the energy regulator that would have seen power bills increase by 20 per cent in its bid to increase revenues amid stagnating demand for electricity.

“Currently as we speak there is no application for a tariff review. The last one was withdrawn because Kenya Power had a new board and they wanted to review some of the issues and they have not come back with it,” Mr Keter said.

The company had blamed reluctance by the Energy and Petroleum Regulatory Authority (Epra) to review the electricity tariff that was set in 2018 for derailing its bid to grow revenue to cut its reliance on borrowing to stay afloat at a time it is raking in huge annual losses.

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