Government Takes Control of KPLC in Reforms to Cut Electricity Costs

KPLC has been declared a special government project in a restructuring process that could see the cost of electricity drop.

According to the Interior Cabinet Secretary, Dr. Fred Matiang’i, an inter-ministerial team has been set up to audit and oversight KPLC.

The decision, according to the CS, is in line with the recommendations of the Presidential Task Force on the Review of PPAs entered into by KPLC following widespread concerns of high electricity bills.

“We are all concerned about the cost of power. Our bills are too high, and we have taken tough decisions to deal with challenges in this sector with the focus being the bringing down of the cost of power,” Dr. Matiang’i said.

The oversight team comprises the DCI, Financial Reporting Center (FRC), Assets Recovery Authority, and other investigative agencies.

They will investigate the alarming system losses within KPLC, procurement practices, insider trading, conflict of interests, and suspect transactions involving KPLC staff and others.

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KPLC has been running at a loss, with all indicators pointing to ineffective Power Purchase Agreements (PPAs) that have left the company heavily indebted while ironically paying for excess energy it does not need in take-or-pay arrangements blamed on poor negotiations and vested interests.

Apart from the high fixed capacity charges amounting to 47 billion shillings, the PPAs are bound by Commercial Operation Dates (CODs) that are not aligned with the company’s power demand.

This has often resulted in excess power generation even when the demand is low. In the 2019/2020 Financial year, KPLC posted a loss before tax of 7 billion shillings.

Its negative working capital position for the fourth consecutive year has also raised substantial doubt about its ability to sustain operations.

The system losses stood at 23.47 percent, exceeding the 19.99 percent limit approved by the Energy and Petroleum Authority (EPRA).

This is attributed to a lack of internal control measures put in place to mitigate losses including governance.

The company’s obligations to pay for goods and services that were acquired from suppliers were also not met with a long outstanding balance of 1.3 billion shillings resulting in the discontentment of financiers and suppliers.

Further, KPLC did not submit to the Unclaimed Financial Assets Authority 1.2 billion shillings. These were the deposit refunds to consumers, unidentified receipts, unpaid customer electricity deposits, and unpaid wayleaves compensation.

It also included unclaimed dividends and stale cheques as required by the Unclaimed Financial Assets Act 2011.

Dr. Matiang’i stated that the proposed changes will yield the much-desired results and assured Kenyans that the unit cost of electricity billed to clients will soon go down.