Members of Parliament have renewed efforts to push major electricity producers to lower the wholesale rates they charge Kenya Power, a move aimed at reducing electricity costs for consumers.
The National Assembly’s Energy Committee has directed Energy and Petroleum Cabinet Secretary Opiyo Wandayi to develop, within 12 months, a policy framework that will guide the government’s plan to renegotiate power purchase agreements (PPAs) with large electricity generators.
According to the committee, the revised policy should establish a transparent framework for least-cost power procurement, regular reviews of PPAs and competitive procurement of electricity generation. It says the framework should support ongoing efforts to lower electricity prices while safeguarding power supply, contractual obligations and investor confidence.
Lawmakers believe lower wholesale electricity costs would enable Kenya Power to reduce retail tariffs without exposing the utility to financial losses. However, the proposal faces legal and commercial hurdles, as existing PPAs are binding contracts and any attempt to alter them without mutual agreement could expose the government to costly legal disputes.
The renewed push comes as the government seeks to maintain the recent decline in electricity prices and ease pressure on households ahead of next year’s General Election. Official data show that the average cost of consuming 200 kilowatt-hours of electricity fell to Sh5,476.34 last month from Sh5,738.52 during the same period last year.
Also Read: Court Upholds KPLC’s Termination of Sh410 Million Poles Supply Deal
Independent power producers (IPPs) have consistently opposed attempts to revise long-term supply agreements. In 2022, they rejected a government proposal to reduce wholesale tariffs intended to support a 15 per cent cut in retail electricity prices.
Major producers, including Lake Turkana Wind Power (LTWP), argued that lowering agreed tariffs would significantly reduce their revenues. Earlier this year, geothermal producer Ormat Technologies echoed similar concerns, revealing that Kenya Power had requested more favourable pricing under existing PPAs and warning that any changes to the agreements or Kenya Power’s financial position could negatively affect its business.
LTWP supplies about 10 per cent of the electricity purchased by Kenya Power annually, making it one of the country’s largest independent generators, while Ormat remains among the leading producers of geothermal power.
The parliamentary proposal comes just weeks after the government suspended the implementation of revised retail electricity tariffs, citing the need to shield consumers from higher living costs. The new tariff structure had been scheduled to take effect this month but was put on hold amid concerns it could trigger public backlash.
