Kenya Power breaks budget with Sh14bn fuel tender
Kenya Power offices on Aga Khan Walk in Nairobi.
What you need to know:
- Kenya Power awarded the tender to a company that quoted a price of Sh14.37 billion, which was way above the budget that the company had set aside for the tender.
- Under the law, accounting officers must ensure that there is enough budget for the procurement of a good, service or work before a tender is issued and signed.
The Auditor-General has put Kenya Power on the spot for awarding a tender to a fuel supplier for more than double what the company had budgeted.
Auditor-General Nancy Gathungu says the company had budgeted Sh7.6 billion for the tender to supply 62,040,000 litres of fuel for its off-grid stations for two years.
Kenya Power awarded the tender to a company that quoted a price of Sh14.37 billion, which was way above the budget that the company had set aside for the tender. Ms Gathungu said that this was a breach of the law.
“Despite the tenderers quoting prices above the budget, the Evaluation Committee in a report dated November 22, 2023, recommended award to the most responsive bidder who had quoted a price of Sh14,379,262,976,” said Ms Gathungu.
The Public Procurement and Asset Disposal Act, 2015 requires every parastatal to prepare a realistic annual procurement plan.
Under the law, accounting officers must ensure that there is enough budget for the procurement of a good, service or work before a tender is issued and signed.
“This was contrary to Section 53(8) of the Public Procurement and Asset Disposal Act, 2015, which provides that the accounting officer shall not commence any procurement proceedings until satisfied that sufficient funds to meet the obligations of the resulting contract are reflected in its approved budget estimates. In the circumstances, management was in breach of the law,” said the Auditor-General.
Kenya Power purchases millions of litres of fuel each year to run its off-grid stations, which serve millions of customers.
The company runs 30 major off-grid stations across the country to serve far-flung locations that are not connected to the national power grid. These stations have a total installed capacity of 27.867 megawatts (MW).
Wajir has the largest off-grid station, which has a capacity of 4.5MW. Other towns with significant capacities are Mandera, Marsabit, Moyale and Habaswein.
The tenders to supply fuel to these stations are lucrative and are often the subject of big contests between oil marketing companies.
As the customers who get power supply from these off-grid stations cannot afford to pay for this expensive electricity on their own, the cost is shared equally among all consumers across the country.
This is done through a pass-through cost called the Fuel Energy Charge, which is set each month by the Energy and Petroleum Regulatory Authority (Epra).
In the same audit, which covered the financial year 2023/24, the Auditor-General also revealed how Kenya Power employees colluded with security guards and fuel tanker drivers to steal 1,183,583 litres of diesel worth Sh207.65 million meant to power its off-grid stations in Turkana County.
Ms Gathungu revealed that the theft took place over a 26-month period between October 2021 and December 2023, while Kenya Power said an internal investigation into the matter was underway.
