Monicah Juma explains talks with IPPS, Kenya Power reforms

Boss Talk

Monicah Juma explains talks with IPPS, Kenya Power reforms


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Monica Juma’s tenure as Minister of Energy and Petroleum is coming to an end, less than a year in the ministry.

From October, when the career diplomat took over at Kawi House, overseeing reforms at Kenya Power and reducing consumers’ electricity bills topped her priority list.

However, she has been reticent on the difficult issue of pressure to get the big independent power producers (IPPs) to give up some of their lucrative oil billions in the power price cut. Below are excerpts from her exit media briefing.

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President Uhuru Kenyatta promised a 30 percent cut in electricity prices. The first 15 percent cut was implemented in January, but even as he leaves, consumers have yet to receive the second cut. Wholesale prices offered by the IPPs are key to this cut, what is the status of negotiations?

So far, three IPPs operating in the variable renewables space have signed up for lower tariffs that were in line with our expectations.

We also work with larger IPPs. Four of these major IPPs, operating across different technologies, have already proposed short- and medium-term tariff reduction solutions. Negotiations are underway to arrive at optimal solutions for Kenya.

Apart from the cuts in electricity costs, there is talk of reforming the state’s utilities to enable it to improve services and also increase its revenue. What is the status of the reform agenda at Kenya Power?

There has been a conversation around limiting and improving the governance of various strategic government entities, and that includes KPLC. We cannot be competitive as a country if we have power that is overpriced.

That is why we are going through this reform agenda, which is careful. We have many discussions around the sector, not just KPLC. KPLC is just an off-taker, there are other discussions that we need to have around the cost of power generation.

We must look at reforms around operation and maintenance, reforms in the form of government, technology. The conversation with the IMF continues and it is in line with the same ambitions – power that is sustainable, cheap and reliable to drive our development.

Businesses and households have criticized Kenya Power’s unreliable electricity supply for years. How far are we in solving this problem?

The institutional reforms in the power sector, not only with Kenya Power but also with KETRACO [Kenya Electricity Transmission Company Limited], [Rural Electrification and Renewable Energy Corporation] and EPRA [Energy and Petroleum Regulatory Authority] has begun to improve the reliability of electricity.

The incidents of power outages decreased by more than 50 percent from 283,976 in 2020 to 113,385 in July 2021. We look forward to this year’s data, but we can already see that the overall trend is very good.

What are some of the short-term goals the ministry is looking at with the Kenya Power reforms?

The improvement in the company’s financial performance in the financial year ending June 2021 shows that reforms are already bearing fruit. But there is still much work to be done to restore the KPLC to an operationally efficient, financially stable utility.

Efforts are being made to establish business processes that improve efficiency. We are looking at our infrastructure. This is the key to reducing losses, which are at a high percentage of around 22 percent. We have a way to bring these down initially by five percent. We are also looking at the entire service chain to support this ambition.

The Ministry has recently published the Energy White Paper. What are the key takeaways for consumers from this policy document?

The White Paper proposes a new electricity tariff plan that gives users control over their electricity bills and the introduction of smart tariffs and meters. Consumers will be able to track when electricity prices are at their cheapest and plan consumption.

Through the smart tariffs, consumers will have more control, choice and flexibility over their energy consumption depending on time needs, urgency and shifts in market prices that reflect demand and supply dynamics.

Advanced smart meters will track price trends to help consumers choose when to use electricity by showing comparable prices.

Kenya, in collaboration with the Italian company Eni, has opened a biofuel refinery in Mombasa that will use vegetables to produce oil. Where will the effect of this plant be?

The biofuel plant in Mombasa has the potential to position us as a fast mover in terms of biofuel and through it we have the opportunity to make jet fuel for ourselves and the region in less than five years from today.

We are gathering raw materials for the refinery. Now we are talking about about 25,000 farmers who are already involved in the delivery of the seeds in 10 counties and will be expanded to 15 counties in October when the rains begin.

With its optimal capacity, we are talking about influencing 250,000 farmers in ASAL areas. The counties that have difficulty producing many other things must now be put to use for things that are relevant to their ecosystems.

The International Monetary Fund said Kenya should scrap the fuel subsidy scheme by October. The Bretton Woods institution says the subsidy has disrupted budget planning, a view shared by the Treasury. Can you say authoritatively that the subsidy will be discontinued within the IMF time frame?

It is true that we work closely with development partners in the pursuit of development, and this is happening all over the world.

It is also true that everyone wants us to develop a fiscal framework that is sound. That is the government’s intention and that is the mandate of international financiers, especially the World Bank and the IMF. The question of whether or not to grant a grant is a matter of modality.

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