Forensic audit to examine rot at Kenya Power

And so, in a September 27, 2021 report to the President, he decried the “lack of cooperation” from the power firm, which denied them access to crucial documents. These included tender evaluation reports for thermal plants and data relating to the monitoring of fuel charges.

Monopoly

Mr Ngumi and his team had to use other means to get the data, opening a can of worms that has exposed the degree of rot at Kenya’s power utility monopoly and raised questions about the extent of mismanagement there.

While power purchase accounts for 66 per cent of Kenya Power’s total revenue, the task force concluded that this was not adequately monitored. More so, the firm was purchasing very expensive power from the independent power producers (IPPs) compared to the amount it spent on KenGen, the state-run electricity generator.

Also, while IPPs account for only 25 per cent of Kenya Power’s total output, they account for 47 per cent of power purchase costs. Shockingly, while KenGen supplies 72 per cent of the power, it accounts for only 48 per cent of the purchase costs.

Expensive power purchase deals

The question of why executives who run the country’s energy sector have continued to enter into expensive power purchase agreements that hurt consumers has never been addressed, and the task force hopes its recommendations will lower consumer tariffs from an average of Sh24 per kilowatt hour to Sh16 within four months.

In his report to the President, Mr Ngumi said it was “near-inconceivable” that Kenya Power was not adequately monitoring the IPPs “to confirm that it is paying for what it gets”, and recommended the appointment of a “commercially minded” administration.

How a company in which the government has a 50.1 per cent controlling stake could refuse to cooperate with a presidential taskforce must have intrigued Mr Ngumi, who has now told President Kenyatta that “this speaks to an attempt to defeat efforts aimed at streamlining the sector”.

Mr Ngumi believes the insolence was a case of “management helplessness, incompetence or defiance” and advises that reforms are “urgently needed” in the organisational structure at Kenya Power, including its procurement and finance departments, to make it fit-for-purpose.

Corruption and underhand deals

This week it was not lost on observers that shortly after receiving the report, the President reshuffled his Cabinet and transferred Energy Cabinet Secretary Charles Keter and Principal Secretary Joseph Njoroge to new docket and brought in former Defence CS Monica Juma, assisted by Maj Gen (Rtd) Gordon Kihalangwa as PS. The thinking is that these two will clean up the mess in the power sector.

The second major recommendation was that Kenya should bring to an end the secrecy surrounding its power purchase agreements (PPAs), which have been riddled with corruption and underhand deals.

“Underpinning our recommendations is the goal of having a rational, fair, predictable, consistent and accountable power purchase agreement procurement and monitoring process,” said Mr Ngumi in the report. “If we continue with what has been a capricious way of arriving at decisions, we will find ourselves forever constituting task forces to get us out of self-made problems.” It is worth noting that the government has constituted four task forces on PPAs in the last four years alone.

The taskforce recommended that the Energy CS should suspend all expressions of interest and feasibility studies reports for IPPs and accused the Ministry of Energy of failing to publish the National Energy Policy of 2018.

The Saturday Nation understands that a forensic audit will now be conducted to determine how the existing PPAs were entered into and how they are monitored. Another audit on all key Kenya Power customers will determine the causes and extent of system loses.

Following these revelations, it appears no proper planning has been done on the country’s power needs, and as a result, Kenyans pay for power they hardly use as the bodies tasked to moderate consumer tariffs appear keen to protect the IPPs.

“The investor protection focus appears predominant over consumer interest,” notes the Ngumi task force report, which accuses the Energy and Petroleum Regulatory Authority (Epra) of restraining itself from processing Kenya Power’s tariff review applications.

The task force also found that the Ministry of Energy was involved at various stages in the electricity procurement, generation and distribution value chain, beyond the policy spectrum and “outside its mandate”. It was also involved in procurement of large energy projects such as coal.

The team told the President that the Ministry of Energy’s policy mandate “precludes it from participating, and in fact leading, procurement processes”, and that “this aspect of its current operations is an overreach of its functions”.

It also said that powers given to the Cabinet Secretary for Energy to approve geothermal prospecting licences, which come with a guaranteed issuance of PPA, has led to “compromising the integrity of PPA terms”.

Mr Ngumi recommended that Epra should stop playing any part in the procurement process of power generation projects as it is supposed to be neutral. As a regulator, it is supposed to review and approve the PPAs.

In order to address theft of power by large consumers, the task force recommended that all meters should be placed outside customer premises, and that power should be metered from transformers to determine whether there is leakage.

Another anomaly was found in the workings of the state-owned Rural Electrification and Renewable Energy Corporation (Rerec), whose mandate is to bring remote rural areas, considered commercially unviable, onto the grid. But with no clear definition of what constitutes rural areas, there appears to be an overlap, with Kenya Power performing similar functions.

In the convoluted arrangement, Rerec builds the infrastructure and hands it over to Kenya Power for operation and maintenance, but the funds allocated for this are not adequate.

It also emerged that Rerec had now entered into power generation projects and was behind the Garissa Solar Plant, but had to outsource the operational resources from KenGen.

“It is unclear to the task force why the role of Rerec has evolved into power generation for sale to the national grid as the same can efficiently be undertaken by either KenGen or IPPs,” notes the report.

[email protected]; @johnkamau1