Kenya Power wants the Energy and Petroleum Regulatory Authority (Epra) removed from the power purchase agreement (PPA) negotiations to minimize the oversupply of electricity in the market.
The electricity distributor which has been at loggerheads with the energy sector regulator over the delayed revision of electricity tariffs, wants a separate entity to be established to oversee the signing of power deals which have overburdened it due to the excess supply that must be paid for.
In a confidential letter to the Ministry of Energy, Kenya Power also blames the approach taken by Epra to tackle the challenge of excess supply through delayed project commercialization dates for the already signed PPAs.
“The sectors’ approach towards addressing the issue of excess generation as recently guided by EPRA, is shifting of commercial operation dates and introductions to take and pay clauses in PPAs,” reads the letter seen by Business Daily.
“It is noteworthy that with the current slow growth in peak demand, the shifting of project Commercial Operations Dates (CODs) will not address the imminent oversupply challenges.”
According to Kenya Power, EPRA has also expressed fears that the county had overcommitted to power generators something that may prove difficult for the sustainability of the business under stagnated tariffs and lagging demand for electricity.
The energy regulator is believed to have agreed to some 34 PPAs which are expected to inject about 1,891 megawatts into the national grid in the next five years.
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The State power distributor is set to make matters worse since it will be forced to pay for the energy generated even if it will lack consumers to use it as stipulated by the take-or-pay deals.
Kenya Power is now asking for a new entity to be established to engage power generators in signing the new deals, indicating its displeasure with how EPRA has allowed such deals to be signed.
“Clearly a different model is required that will deliver revenues for these projects at the same time reduce retail tariffs as per government policy. One option is to create a separate entity dedicated to entering into PPAs with generators on behalf of the government,” the power retailer wrote.