What must be done to address deep-rooted rot in Kenya’s power sector

Hindpals Jabbal

 

Until 1997, Kenya Power – a publicly quoted company with 51 per cent government shareholding – was a single, vertically integrated company responsible for generation, transmission and distribution of power.

But 22 years ago, as part of “restructuring”, a deal was negotiated between the government and World Bank to create two companies: Kenya Power and the Kenya Electricity Generating Company (KenGen).

Several other agencies and entities were created to enhance competition within the sector, accelerate power development and keep electricity tariffs low using direct government subsidies.

However, their entry, apart from making a significant dent in the Exchequer, has created a plethora of new challenges.

The challenges range from overlapping functions and responsibilities to inefficiencies in human and material resources, unhealthy competition, inherent turf wars and poor project implementation.

In addition, some of them have become conduits of mega corruption.

Seeds of mega corruption, after all, are sown at the top level, when new institutions are created or existing ones merged to suit vested interest; appointments made on a political basis; new projects initiated out of thin air; deals cut on an adhoc basis; and tenders awarded to the chosen few.

In the 1997 restructuring, Kenya Power was made responsible for transmission, distribution and supply of electricity, while KenGen was made responsible for generation of electricity.

It was also agreed that Independent Power Producers (IPPs) be invited to participate in all future generation projects in competition with the State-owned KenGen.

Kenya Power, being the only off-taker, was made responsible for negotiating and signing all Power Purchase Agreements (PPAs) with KenGen and IPPs before these were passed on to Electricity Regulatory Board (ERB), the then regulator, for ratification and final approval.

In 2006, the old Electric Power Act (Cap 315) was repealed and a new one enacted as Energy Act 2006, under which the Energy Regulatory Commission (ERC) was established as a successor to ERB.

The Rural Electrification Authority (REA) was also established, under this act, for development and acceleration of rural electrification programmes in Kenya.

Production drilling

And then in 2008, two new entities were created: the Geothermal Development Company (GDC), hived off KenGen, as a special purpose State company responsible for geothermal resource exploration, appraisal and production drilling in the new areas. It would then supply steam to KenGen and the IPPs licensed by the Ministry of Energy to generate electricity using geothermal resources.

KenGen was left with the responsibility of drilling activities and resource development within the Olkaria area.

Another State-owned company, the Kenya Transmission Company (Ketraco), was hived off Kenya Power, and given the responsibility of planning, design and construction of new transmission power lines and sub-stations at 132 kilovolts (kV) and above, including future interconnections with neighbouring countries.

Kenya Power, however, was left with the responsibility of designing and constructing transmission lines within its own areas.

In addition, it also operates and maintains the entire transmission and distribution network, including that of Ketraco.

In 2012, the Kenya Nuclear Energy Board (KNEB) – which has since been renamed the Nuclear Power and Energy Agency (NuPEA) ­– was established to promote and develop nuclear energy.

And now, in the revised Energy Act (2019), ERC – renamed Energy and Petroleum Regulatory Authority (EPRA) – is no longer an independent regulatory commission established under an Act of Parliament. It is under the direct jurisdiction of the Ministry of Energy and Petroleum, and its roles have substantially been changed.

Also, the names and functions of other institutions reporting to the Energy ministry have been changed. The Rural Electrification Agency, for instance, is now the Rural Electrification and Renewable Energy Corporation (REREC).

All these entities report directly to the Energy ministry, which is headed by a Cabinet secretary. All their managing directors and board members are appointed or approved by the CS. Only the non-executive chair persons of the boards are appointed by the president – but even then, with advice from the CS.

Further, the ministry’s PS or their representative, sits on the board of each and every institution, which means the ministry has the space to influence, coerce or arm-twist various decisions.

These decisions include hiring and firing of senior management staff, least-cost planning, selection of IPPs, award of contracts and setting electricity tariffs.

It is time the country streamlined and restructured all institutions within the power sector to make them more autonomous, cohesive and accountable – removing undue political interference.

And these institutions must be delinked from the parent ministry as an appointing authority. Unless an overhaul of the institutional structure of the Kenya power sector is undertaken, we can as well say goodbye to Vision 2030, the Big Four agenda, and now the Building Bridges Initiative.