MPs reject Energy Ministry’s plea to lift PPA ban, call for stronger safeguards first

Members of Parliament (MPs) have rejected a proposal from the Ministry of Energy and Petroleum to lift the moratorium on Power Purchase Agreements (PPAs), citing concerns over inadequate safeguards to protect taxpayers from potential exploitation by private investors.

The Ministry had approached Parliament with a request to lift the moratorium specifically on coal-fired power plants, stressing the urgency of expanding power sources to meet Kenya’s increasing energy needs.

According to the Ministry, anticipated growth in power consumption necessitates a diversification of sources, with coal plants positioned as a stable and cost-effective complement to existing hydroelectric power.

The MPs who chair key committees—including departmental, audit, appropriations, and select committees—however voiced strong objections to the ministry wanting the moratorium on power purchase agreements lifted.

The legislators insisted that the Ministry must first implement stringent measures to prevent projects from disproportionately favouring investors at the expense of public interest.

They similarly maintained that no relaxation of the moratorium should proceed until sufficient protections are established to ensure that any new agreements prioritize taxpayer welfare and national interests.

The MPs spoke during the National Assembly leadership retreat with Energy and Petroleum Cabinet Secretary Opiyo Wandayi, Principal Secretary for the State Department of Energy, and Kenya Power Managing Director and CEO, Dr. (Eng.) Joseph Siror in Enashipai Resort and Spa, Naivasha.

Led by Mwala MP Eng. Vincent Musyoka, who chairs the National Assembly’s Departmental Committee on Energy, the members expressed concern over the Ministry’s inadequate safeguards, saying there is currently no substantial basis for lifting the moratorium on Power Purchase Agreements (PPAs).

Musyoka also emphasized that Parliament, as the people’s representative, must be fully involved in PPA-related decisions.

He cited the recent shifts in indicative tariffs as an example, noting that the indicative tariffs gazetted in 2012 for wind power stood at 12 Ksh/kWh.

However, shortly after, Lake Turkana Wind Power project secured a PPA at 16 Ksh/kWh over a 20-year term—higher than the forecasted tariffs intended to provide long-term savings.

Recently, tariffs for wind were gazetted at 5.8 Ksh/kWh, illustrating that earlier contracts could have been three times cheaper.

 Musyoka further criticized the handling of the Lake Turkana Wind Project, intended as one of Kenya’s Vision 2030 flagship projects, revealing that 20 motions were initially tabled to prevent power shortages through this initiative.

Musyoka confirmed to Parliament that the Committee has completed its report.

 “It was not without cause that Hon. Jane Kagiri tabled a motion leading to a moratorium on new PPAs. The question is whether those initial concerns have been addressed. The answer is no," he said.

The legislator proposed that if the moratorium is lifted, Independent Power Producers (IPPs) with existing wind and solar installations should be required to add backup energy storage to harness excess energy produced during the day for peak demand.

Endebess MP Robert Pukose, who chairs the Departmental Committee on Health, added that before Parliament could consider lifting the moratorium on Power Purchase Agreements (PPAs), the Ministry must disclosed the power purchasing agreements.

“We could want the ministry to first reveal how much they are paying for the power purchasing from various power producers, such as KENGEN and the rest. How much are you paying per unit? Are able you to give us, this that we can have an involved decision?" he posed.

Emuhaya MP Omboko Milemba further argued that the reason why the moratorium was put in place was because the Power Purchase Agreements (PPAs) were so bad and they were making Kenyans pay more.

Milemba said that the Energy Ministry must clarify what strategies they have put in place to deter exploitation by PPAs, which he said, Kenya Power,  does not want to deal with that.

“How do you expect the parliament to go and remove this moratorium? Unless you deal with the power agreements with this, which have been looked at as things that were never exposed clear. They are very expensive, they are hidden, and they are not talked about. You must demystify the whole power,” he said.

However, Kenya Power Managing Director & Chief Executive Officer Dr. Siror said all the new power budget agreements, which are even the ones that were signed the last are the cheapest, as per technology.

According to Dr. Siror, what drives the cost of the power is dependent on the technology that is used.He clarified that the most expensive energy source currently in use is thermal power, with Kenya’s priciest power generated at the GT plant in Muhoroni, costing around 7 US cents per kilowatt-hour (kWh).

"Interestingly, the cheapest thermal power in Kenya, at 6.97 cents per kWh, isn’t Kenyan—it’s sourced from geothermal energy, specifically from Olkaria. In this cost breakdown, 4.9 cents go to the developer and 2 cents cover operational expenses. Other geothermal projects in Menengai are also priced similarly at around 7 cents per kWh, with 5 cents for the developer and 2 cents for operations," Dr. Siror explained.

He also highlighted that price disparities across technologies partly reflect changes in technology costs over time. For instance, solar plant construction costs from a decade ago are significantly higher than today's due to reduced equipment and installation expenses.

To address these variations, the Director General has provided updated cost guidelines per technology—whether geothermal, hydro, or solar—to ensure standardized pricing moving forward.

“Once the moratorium is lifted, any new agreements will adhere to these guidelines, ensuring that costs are controlled and aligned with current technology advancements,” the Kenya Power MD said.

Energy and Petroleum Regulatory Authority (EPRA) Chief Executive Officer, Daniel Kiptoo Bargoria, additionally announced that EPRA has gazetted indicative tariffs by technology for the second time.

The first issuance of these tariffs occurred in December 2021, and they were updated most recently on April 17, 2024.

These tariffs cover a range of energy sources, including small hydro, wind, and renewables such as biomass, providing a structured guideline for cost expectations across various technologies.

“As regulators, we are not operating in a ‘black box’ when it comes to negotiations between utility companies and Independent Power Producers (IPPs),” Bargoria said.

“We are bound by law to ensure that the agreements comply fully with legal standards and that the resulting tariffs are fair and reasonable for all stakeholders.”

The CEO affirmed that investors have continued to register in the sector since consumers are not charged for costs that haven’t actually been incurred, and EPRA been aligning these costs accordingly.

“As the regulator, we are responsible for thoroughly reviewing and analyzing financial budgets before advancing any Power Purchase Agreement (PPA) design. Equally important is the oversight from PPA signing through to project construction, ensuring that project costs align with actual commercial operations.

If certain costs, initially estimated based on international benchmarks, are not incurred during construction, those expenses are removed from the final costs, as demonstrated here,” he explained.

Energy CS Wandayi on his part assured MPs that the benefit the country is getting from the Energy Act 2019, is that EPRA as the regulator is able to publish indicative tariffs that will involve any negotiations between IPPs and Kenya Power.

However, Ruaraka MP Tom Kajwang’ said Parliament seeks equitable distribution of energy resources nationwide and seek transparency in the terms of negotiations with Independent Power Producers (IPPs).

According to Kajwang’ recent discussions, such as those involving Adani group with Ketraco, underscore the necessity of scrutinizing these agreements.

“We are committed to avoiding any unfavourable deals that could arise from lifting the moratorium without proper oversight. Therefore, it's essential to thoroughly understand the engagement terms between regulatory agencies and IPPs to ensure fairness and national interest alignment,” Kajwang' said.