Kenya Power, railways managers to face MPs over audit queries

The management of Kenya Power will face MPs on Tuesday over a number of audit queries raised by Auditor-General Nancy Gathungu in her report for the year ended June 2021

Based on the report, the controversial power purchase agreements (PPAs) are among the key issues which will be investigated by the National Assembly Public Investment Committee on Commercial Affairs and Energy, led by Pokot South MP David Pkosing.

Ms Gathungu pointed out that the PPAs account for 52 percent of the company’s’ operational cost.

“In the previous financial years, the management indicated that plans were underway to re-negotiate downwards the capacity charges on the existing PPAs, but there were no revisions during the year under review,” reads the audit report.

Ms Gathungu further said Kenya Power management indicated that plans were underway to align the commercial operation dates of the PPAs with the company’s medium-term power demand, such that there would be no excess power generation.

“However, until these strategies are implemented, the company will continue bearing the high fixed capacity charges. In addition, the capacity charge cost for independent power producers (IPPs) during the year under review was higher than the cost of the energy purchased, clearly indicating the IPPs were operating below their capacity, resulting in payment for idle capacity, which negatively impacts the profitability or sustainability of the company.

Also awaiting the Kenya Power team is the matter of the comparative cost of power purchased from the Kenya Electricity Generating Company (KenGen) and Independent Power Producers (IPPs)

Ms Gathungu noted in her report that it costs Kenya Power an average of Sh5.3 per KWh to buy power from KenGen and an average of Sh15.3 per KWh of power to buy it from IPPs.

“It was noted that the effective unit cost of power purchased from some IPPs was as high as Sh195 per KWh and Sh118 per KWh while the same was sold at an average of Sh15.66 per KWh by KenGen. The company, therefore, entered into very expensive contracts with IPPs and was in some instances selling power below the cost price,” Ms Gathungu says in her report that will be subject of discussion on Tuesday.

The lawmakers will also be seeking an explanation from Kenya Power on why power purchase payments showed that the capacity charge component of the energy paid to IPPs was always more than the charge for actual energy supplied, as the auditor-geeneral noted in her report.

Further, the Kenya Power team is expected to explain the loss variance of 2,899 Gigawatt hour (GWh) or 23.95 percent of units of electricity it purchased.

Kenya Railways, on its part, will explain the Sh1 billion in land compensation, paid out during phase one of the construction of the standard gauge railway (SGR) but which is not supported by any documentation.

In her report, Ms Gathungu says the list of beneficiaries, copies of national identity cards, personal identification number (PIN) certificates and title deed surrenders from the National Land Commission were not provided for audit review.

Also awaiting the Kenya Railways team is the matter of an overcompensation of Sh8.9 million made to several persons following construction of the SGR.