August 8, 2022

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KAM Statement on Presidential Taskforce on Review of Power Purchase Agreements

KAM Statement on Presidential Taskforce on Review of Power Purchase Agreements

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On September 29th 2021, H.E. President Uhuru Kenyatta directed the Cabinet Secretary, Ministry of Energy to implement the recommendations of the Presidential Taskforce on Review of Power Purchase Agreements.

The Taskforce was constituted, following public concerns on the high cost of electricity for both individual consumers and enterprises.

Kenya Association of Manufacturers recognizes the Report as a positive and encouraging move for industry, and a significant milestone in the long-standing efforts towards the reduction of power costs to boost local manufacturing and investment in the sector.

The high cost of electricity in the country is attributed to various factors including expensive Purchase Power Agreements, high cost of fuel, multiple taxes and levies imposed on electricity bills, VAT and Fuel Cost Adjustment, as well as depressed demand growth – despite the increased power generation capacity, among others.

This has led to Kenya having one of the highest electricity tariffs in the region pushing up the cost of production for local industries and rendering the manufacturing sector uncompetitive. Presently, the tariff for industrial consumers stands at US cts 18/kWh, compared to Ethiopia US cts 4/kWh, Egypt US cts 6/kWh, Uganda US cts 12/kWh, Tanzania cts 7/kWh and South Africa US cts 9/kWh.

During KAM’s engagement with the President’s Taskforce on the Review of Power Purchase Agreements, we recommended among other requisites, the need for reduced end-user tariff, stability and reliability of the grid, planning with end-user tariff in focus, Kenya Power’s sustainability, net metering and fast-tracking of infrastructure projects.

The greenlight given by H.E the President to kickstart the implementation of this report is timely, and a favourable boost for the sector as many businesses are on a recovery track. The recommendations provided will play a critical role in lowering the overall cost of electricity. Particularly, in reducing system losses and aligning Power Purchase Agreements to the Least Cost Power Development Plan.

In this spirit, it is imperative that there is now focus on reviewing the taxes, levies, and charges on power bills for manufacturers to reduce the overall cost of power. As a country we need to get to US cts 9/kWh at least, in order to be competitive in the region and preserve our edge as an investor-attractive destination.

We will continue to further engage the government and other stakeholders towards this objective, and to achieving overall sustainable and stable policies on the cost, availability, and reliability of power.

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