Power deals freeze to be lifted by end of June

Lawmakers froze new PPAs in April 2023, saying that the moratorium would allow for a fresh investigation into the existing contracts. 

PPAs have come under increased scrutiny amid concerns that a majority of deals Kenya Power inked with independent power producers (IPPs) are largely to blame due to high wholesale prices.

The freeze came barely six months after the Cabinet had lifted the freeze imposed in line with recommendations of a presidential task force.

Read: Energy ministry lobbies MPs to lift freeze on power deal

Kenya Power has on several occasions sounded alarm bells over the dwindling spinning reserves with the country faced with rationing given that the rise in electricity demand has not been matched by increased generation locally.

“Hopefully, by the end of June, we are seeing a high possibility that Parliament will have lifted the moratorium. However, it might come earlier,” said Mr Wachira on the sidelines of the electric mobility conference in Nairobi.

Spinning reserves the amount of electricity available above the demand—has shrunk to less than four per cent, underlining the dire state of Kenya’s electricity supply. Global best practices say that the range should be between 15 percent and 35 percent.

The low reserves have increased the possibility of widespread rationing or countrywide blackouts, especially when demand peaks at night. This risk would be more pronounced if there is a major disruption on the line from Ethiopia.

The freeze on the new PPAs has exposed Kenya Power, forcing the utility to turn to Ethiopia for more power, especially during the peak demand at night. Kenya Power seeks to tap between 50-100 megawatts more from Ethiopia to help avert power rationing when demand peaks.

The utility is allowed to import up to 200 megawatts from the Horn of Africa economy.

The utility was recently forced to load shed parts of western and Rift Valley by knocking off about 170 megawatts from the system to secure the grid and avoid a countrywide blackout. 

Parliament reversed the Cabinet’s decision to lift the moratorium on PPAs in April 2023, saying this would allow for scrutiny of the existing deals.

It, however, remains unclear if Parliament has completed the investigation and what actions it will take, especially on the existing PPAs.
Kenya has in the past failed in attempts to force the IPPs to lower their wholesale prices at which they sell electricity to Kenya Power.

 Lowering of these prices would have given Kenya Power legroom to lower retail prices without sinking into losses.

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