Members of Parliament have summoned the Cabinet Secretary for National Treasury, John Mbadi, to explain the unauthorised transfer of state agencies under the Ministry of Energy to the newly formed National Infrastructure Fund (NIF).
The Energy Committee has suspended the hearings on the Ministry of Energy and Petroleum's 2026/27 fiscal year budget estimates, claiming that they have been significantly reduced following the transfer.
The committee, chaired by Nakuru Town East MP David Gikaria, noted that transferring the Kenya Electricity Generating Company (KenGen), Kenya Power (KP), Kenya Electricity Transmission Company (Ketraco) and Geothermal Development Company (GDC) to the NIF without the necessary approvals violates their mandate.
The impromptu reclassification of state agencies has sparked intense resistance from Energy Principal Secretary Alex Wachira and Petroleum Principal Secretary Mohamed Birik. The two PSs had appeared before the committee to present their budget estimates for next year.
The two PSs openly protested against the transfer of the agencies, which led to the immediate postponement of the scheduled budget review meetings.
Committee members warned that moving the agencies into a different docket would severely shrink the Ministry of Energy's operational budget, putting several multibillion-shilling, donor-funded projects under the ministry at immediate risk of stalling.
“It will be unwise for us to sit here and approve a budget for recurrent expenditure only. This is unacceptable. We want the National Treasury Cabinet Secretary and his Principal Secretary to come here and clarify this matter,” said Mr Gikaria.
According to him, moving the agencies and their budgets to the NIF, which is yet to be operationalised, is illegal and risks causing job cuts at the Ministry. The Parliamentary Budget Office (PBO) has criticised this move for disrupting the constitutional budget-making cycle.
In the 2026 Budget Policy Statement (BPS), which was approved by the National Assembly in March 2026, the State Department for Energy had an expenditure ceiling of Sh78.3 billion for the 2026/27 fiscal year, including Sh13.3 billion for recurrent expenditure and Sh64 billion for development expenditure.
Following the transfer of the GOEs to NIF, however, the Ministry's budget estimates before the House were slashed to Sh315.2 billion, including Sh13.3 billion for recurrent expenditure and Sh18.2 billion for development.
The BPS allocated the State Department for Petroleum Sh30.23 billion, including Sh20.4 billion for recurrent expenditure and Sh9.84 billion for development projects.
These estimates have been reduced to Sh22.4 billion for recurrent expenditure, with no allocation for development projects.
Mr Wachira, the Energy PS, has warned that donor-funded projects risk folding unless this move is reversed.
“We already have obligations to undertake,” said PS Wachira, adding that, “If the budget is not reinstated as it was in the BPS, all the projects in the counties and those where the government is a counterpart funder will fold.”
The National Assembly Budget and Appropriations Committee (BAC), in its report to the House, observed that NIF lacks clarity on how it will coordinate infrastructure development with parent ministries and oversight agencies such as Parliament, Controller of Budget and Auditor General.
“This calls for the need to address concerns regarding the potential oversight gaps, fragmented planning and inefficiencies, which could undermine the effectiveness of infrastructure investments and delay the implementation of priority projects,” BAC, chaired by Alego Usonga MP Samuel Atandi, says in its report to the House.
To address financing constraints in the infrastructure sector, the government established NIF through an NIF Act. The Fund is supposed to act as an independent investment vehicle. Its structural objective is to aggregate public resources and tap private capital to fund strategic national projects without accumulating expensive public debt.
However, integrating entire energy parastatals without explicit parliamentary or ministerial sign-offs has raised serious jurisdictional and administrative red flags in Parliament.
The movement of KenGen, KP, Ketraco and GDC, including their budgets, left only the Rural Electrification and Renewable Energy Corporation (Rerec) in the State Department for Energy.
Ketraco was in December 2025 slapped with a Sh10 billion garnishee order in dispute with Instalaciones Inabensa SA that froze 17 bank accounts.
The Petroleum State Department saw the government sell its 65 percent stake in Kenya Pipeline Company (KPC) through the Initial Public Offer (IPO), which closed in February 2026, leaving the department with the financially crippled National Oil Corporation of Kenya (NOCK) and the Energy and Petroleum Regulatory Authority (EPRA).
“We are treading on dangerous grounds. Even if we want to transition to NIF, it has to be gradual. We are asking that the budget be reinstated,” said PS Wachira.
The constitution and the Public Finance Management (PFM) Act state that the budget-making cycle shall be such that the BPS shall be presented to Parliament for consideration and adoption.
Once adopted, the BPS recommendations form the basis for the preparation of printed estimates.
However, with the slashed budgets of the two government agencies, the National Treasury has disrupted the process of budget making, which can easily be challenged in court.
Acting Petroleum PS Mr Mohammed Birik noted that the National Treasury’s move compromises the multibillion-shilling projects, among them oil exploration activities in South Lokichar, Turkana and the enhancement of access to Liquid Petroleum Gas (LPG).
“We might not be able to operate. This move puts us in an awkward position. The development budget is the core mandate of the Petroleum State Department,” said Mr Birik adding, “You cannot explore, produce oil without compensating the local community.”
To reduce transmission losses across the national grid, the BPS had recommended that the government rehabilitate and modernise transmission assets.
This included expanding high-voltage transmission lines and substations and strengthening energy infrastructure, which now lie in limbo following the National Treasury's move.
The rehabilitation was designed to enhance efficiency, reliability and capacity, with the broader goal of achieving 100 percent electricity connectivity over the medium term, “thereby supporting economic growth and equitable access to power across the country”.
The BPS had also planned to increase the national power generation capacity by an additional 10,000 megawatts (MW), which now risks stalling.
The planned increase was to be achieved through a mix of geothermal, wind, solar and hydroelectric projects.
“This expansion aims to support industrial growth, improve energy security and ensure a reliable and sustainable power supply to meet the country's growing demand,” reads the approved BPS.
The high cost of power in the country, which has been partly attributed to tariffs and contractual arrangements with IPPs, will likely escalate with the National Treasury decision.
This is notwithstanding that the BPS had no policy pronouncements on the role of Independent Power Producers (IPPs).
“Without clear guidance on how IPPs will be integrated, managed or regulated, the planned expansion risks further increasing generation costs and potentially limiting the affordability of electricity for businesses and households.”
