Parliament Rejects Lifting of Moratorium on Power Purchase Agreements to Address High Electricity Costs

The National Assembly has firmly rejected the Ministry of Energy’s request to lift the moratorium on Power Purchase Agreements (PPAs) with Independent Power Producers (IPPs). The decision, announced following a two-day retreat for parliamentary leaders in Naivasha, signals an intensified legislative focus on reducing electricity costs a challenge that has increasingly impacted both investors and local industries. The retreat, held at Enashipai Spa, underscored the need for reforms in the energy sector to mitigate the high cost of power, which is cited as a deterrent to economic growth and foreign investment.

The Ministry of Energy argued that lifting the moratorium on new PPAs was critical to expanding Kenya’s power generation capacity, meeting growing demand, and achieving energy reliability. Parliament, however, emphasized that existing agreements with IPPs were largely responsible for the high cost of electricity in the country. These costs, they argued, were not only inhibiting economic growth but also increasing the burden on Kenyan consumers. The retreat’s outcome revealed a commitment by parliamentary leaders to continue enforcing the moratorium and explore alternative ways of addressing energy costs.

Background and Need for Reform

The issue of high energy costs in Kenya has persisted for years, partly due to the structure of PPAs signed with IPPs. These agreements have locked Kenya into long-term payments, often pegged to the dollar, making electricity tariffs vulnerable to fluctuations in foreign exchange rates. Consequently, local industries and investors face high operational costs, while domestic consumers experience significant increases in electricity bills. Parliament’s decision to uphold the moratorium is, therefore, a move to revisit and reform the energy agreements that have, over time, become a financial burden.

The Speaker of the National Assembly, Moses Wetangula, affirmed that parliament would partner with the Kenya Private Sector Alliance (KEPSA) to address the challenges investors face in the current energy landscape. Wetangula acknowledged that while the high cost of electricity is an ongoing challenge, the legislative body is committed to implementing laws that create a more favorable environment for investors. This partnership with KEPSA is anticipated to catalyze collaborative solutions aimed at reducing production costs, spurring job creation, and bolstering Kenya’s economic competitiveness.

In his address, Speaker Wetangula also highlighted the increasing number of court cases targeting various projects across the country. He noted that while some of these cases are warranted, a large number are stalling development and curbing growth. To address these challenges, Wetangula emphasized the need for legal reforms, including the enactment of a new whistleblower protection law. Such legislation would support efforts to combat corruption in public procurement and infrastructure projects while providing legal protection to investors willing to uphold quality standards.

Energy Committee’s Stance on Moratorium and PPAs

Eng. Vincent Musyoka, the Mwala MP and Chair of the Departmental Committee on Energy, played a pivotal role in steering discussions on the moratorium. Musyoka revealed that an extensive report on the cost of energy has been prepared and will soon be presented in parliament. The report, he added, underscores that there is no substantial basis for lifting the moratorium on new PPAs under the current terms. According to Musyoka, the existing PPAs lack sufficient cost controls and have led to disproportionately high energy tariffs that have negatively impacted Kenya’s economic landscape.

Musyoka further proposed that if the moratorium were to be lifted, stringent conditions should be imposed. For example, IPPs with existing solar and wind energy installations would be required to add energy storage solutions. Such measures could harness excess energy produced during off-peak hours for later use, thus smoothing out supply and reducing costs associated with peak demand.

The proposal also underscores a shift in parliamentary thinking towards integrating renewable energy sources with backup energy storage. Energy storage systems, which have seen significant advancements in recent years, could enhance the reliability and sustainability of Kenya’s renewable energy grid. By adopting such innovative solutions, Kenya can better balance supply and demand, reduce dependency on fossil fuels, and ultimately lower electricity costs.

Kilifi North MP’s Insights on the Moratorium

Kilifi North MP Owen Baya echoed Musyoka’s sentiments, asserting that the moratorium was initially instituted due to the unfavorable terms of PPAs. Baya criticized the agreements, stating they have made electricity prohibitively expensive for Kenyans and created obstacles for economic growth. According to Baya, the primary focus should remain on addressing the high cost of electricity, which has eroded investor confidence in Kenya.

“The high cost of power is the main issue that needs to be tackled if we are to restore Kenya’s position as a favorable destination for investors. We cannot continue with the current PPAs which, rather than benefiting Kenyans, are costing them more than necessary,” Baya said. His remarks were met with broad support from parliamentary leaders who agreed that until the issues surrounding existing PPAs are resolved, lifting the moratorium would only deepen the existing challenges within the energy sector.

KEPSA’s Response and the Role of Technology

Robert Manyara, a KEPSA representative who attended the retreat, commended parliament’s stance and emphasized the need to leverage technology to address some of these challenges. According to Manyara, technological advancements can play a transformative role in increasing production, creating jobs, and ultimately reducing the cost of production for local industries.

KEPSA has been at the forefront of advocating for energy sector reforms, particularly by encouraging investments in technology that enhance efficiency and sustainability. Manyara reiterated that innovative approaches such as incorporating smart grids, real-time energy monitoring, and automation—could optimize energy use, reduce waste, and improve overall productivity.

Long-Term Implications for Kenya’s Energy Sector

The National Assembly’s decision to maintain the moratorium on new PPAs marks a pivotal step towards re-evaluating Kenya’s energy sector priorities. While the Ministry of Energy’s push to expand power generation is important, parliamentary leaders have made it clear that any new agreements must first address the fundamental issues that have historically driven up electricity costs. By enforcing conditions such as mandatory energy storage for renewable sources and reviewing existing PPAs, parliament is signaling a move towards a more sustainable and affordable energy future.

The commitment to creating investor-friendly legislation, as underscored by Speaker Wetangula, signals an open door for private sector collaboration. KEPSA’s involvement and the acknowledgment of technology’s role in shaping a competitive energy landscape suggest a multi-faceted approach to solving the energy crisis. As parliament moves forward with its reforms, the partnership between the private sector and government will be crucial in aligning Kenya’s energy infrastructure with the demands of a modern, investor-friendly economy.

Furthermore, the emphasis on legal reforms and transparency, particularly through the introduction of a whistleblower protection law, could pave the way for a more transparent and accountable public procurement process. This, in turn, could address the corruption issues that have plagued the energy sector and ultimately ensure that funds are used more efficiently to support national development.

Conclusion

The decision to uphold the moratorium on Power Purchase Agreements sends a clear message that Kenya’s parliament is prioritizing the welfare of its citizens and the stability of its economy. With energy costs a top concern for both consumers and businesses, the need for long-term, sustainable reforms is more urgent than ever. By keeping the moratorium in place, lawmakers are calling for a thorough review of existing contracts and a pivot towards a more sustainable, efficient, and cost-effective energy system.

The path forward for Kenya’s energy sector will undoubtedly require innovative solutions, strategic partnerships, and legislative reforms. However, if parliament’s current stance is any indication, Kenya is on track to build an energy sector that not only meets its growing demand but also fosters a conducive environment for economic growth and investment.