The National Treasury and the Energy and Petroleum Regulatory Authority (Epra) now stand between Kenyans and lower power bills, with eyes on them to approve renegotiated contracts between Kenya Power and Independent Power Producers (IPPs).
This follows details that Kenya Power has concluded renegotiating punitive Power Purchase Agreements (PPAs) with the IPPs, striking deals aimed at lowering tariffs and converting the contracts to local currency.
The utility firm concluded renegotiating the terms during the year ending June 2025 and forwarded the renegotiated contracts to Treasury and Epra for review and approval, the Auditor-General has revealed.
The objective of renegotiating terms entered into between Kenya Power and several IPPs supplying it with electricity is to lower the high costs the power distributor has been incurring, which are passed on to Kenyans through high bills.
Some 2,234 employees of Kenya Power have retired since 2020
Photo credit: Francis Nderitu | Nation Media Group
“Management indicated that significant steps had been taken towards renegotiating unfavourable PPAs, where agreements had been secured to lower tariffs and shift contracts to Kenya Shillings,” Auditor-General Nancy Gathungu says.
The public auditor, however, reckons that Kenyans will not enjoy the benefits of the renegotiated terms until Treasury and Epra, the energy sector regulator, approve the new contracts to give them the legal backing.
Auditor-General Nancy Gathungu.
Photo credit: File | Nation Media Group
Ms Gathungu says that until the two bodies grant the approvals, electricity consumers will continue to bear the burden of high bills as IPPs continue selling electricity to Kenya Power at high costs, diluting lower prices from the State’s Kenya Electricity Generating Company (KenGen).
“However, the revised terms were yet to be formalised through approvals from Epra and the National Treasury. Until such negotiations are concluded and requisite approvals obtained, the disparities in costs between power supplied from KenGen and IPPs will continue to persist,” she says.
Epra’s Director-General Daniel Kiptoo did not respond to questions relating to the progress the regulator has made in approval of the renegotiated contracts.
During the year ending June 2025, Kenya Power purchased 14,472 gigawatt-hour (GWh) units valued at Sh144.66 billion from KenGen and IPPs.
The public auditor, however, continues to raise red flags over the high cost of power purchased from the IPPs as compared to the power KenGen supplies, though she did not provide figures for the year ending June 2025. The high cost of power supplied by IPPs has been attributed to punitive terms contained in power purchase contracts with the IPPs, most of which have been criticised.
At least two task forces in Parliament and the Presidency have recommended a review of the contracts between Kenya Power and the IPPs following investigations to establish the causes of the high cost of power supplied by IPPs.
In the latest annual report, Kenya Power said that foreign exchange losses have formed part of its power purchase costs, explaining the rationale for negotiating a switch of financing currency to the Kenya Shilling in the contracts with IPPs.
The company says that over the last seven years it was slapped with Sh18.3 billion in interest for delaying to pay IPPs their dues as agreed, mainly due to a shortage of hard currencies in which some of its loans are denominated.
The amount was paid during the year ending June 2025 as part of the Sh24 billion penalties on delayed payments, with other recipients being KenGen (Sh5.2 billion), and Sh0.9 billion was paid to the Kenya Electricity Transmission Company (Ketraco).
“The acute shortage of foreign currency in the market over the past two years drove up the outstanding obligations, especially considering that a significant part of power purchase is denominated in foreign currency. This was a situation beyond KPLC’s control and thus not avoidable,” Kenya Power said.
The utility firm reckons that contracts based on foreign currencies expose it to risks arising from fluctuations in exchange rates, which result in financial losses.
