While Kenya’s power sector has made huge strides in recent years, it continues to face major challenges including high electricity tariffs, a loss-making utility, and low-quality service. These issues prompted President Kenyatta to constitute a task force in March 2021 to review existing electricity sector contracts, or Power Purchase Agreements (PPAs), and recommend actions to reduce prices.
To date, Kenya Power has signed at least 42 PPAs with private developers. But apart from some basic information, very little detail is available to the public regarding how each contract was procured, its cost structure and resulting electricity price, or the impacts on Kenya’s broader power system.
Enhanced transparency throughout the procurement process would: improve cost-competitiveness and encourage price reductions; enable better consideration of projected impacts on power stability and quality; improved public accountability and governance; and better safeguards for environmental and social priorities.
Key recommended reforms to enhance transparency include:
- Ensuring that procurement of all new power capacity is done through a competitive and transparent process.
- Requiring issuance of a public notice of the intention to sign a PPA.
- Providing access to key details of the PPA itself during a public comment period, and to the full PPA within one year of commissioning.
Disclosure should ensure that critical information on the structure of the PPA is publicly available. Ideally, this would include disclosure of the full PPA, but at the very least should include project location, installed capacity, generation capacity factors, ownership structure, specific technology, energy charges, capacity charges (where applicable), deemed generation charges, payment formulas, pass-through costs, implications on public finance (including sovereign guarantees), taxes, potential penalties, environmental and social impacts, and exit options. PPA disclosure has the potential to play a critical role in mitigating further escalation of electricity costs in Kenya.