Energy reforms to set off ripples in various sectors

Pump attendant fueling a car at Shell Petroleum Station on Kenyatta Avenue in Nairobi on Wednesday, April 14, 2021. PHOTO | DENNIS ONSONGO | NMG

In his Mashujaa Day speech, President Uhuru Kenyatta promised that as a part of the federal government’s financial stimulus plan, there can be a discount in the price of electrical energy by 30percent earlier than the Christmas vacation.

The President made reference to the John Ngumi-led Taskforce on Assessment of Energy Buy Agreements that was set as much as tackle issues in regards to the excessive price of electrical energy, and which just lately submitted its suggestions as to how the envisaged discount of energy prices might be achieved.

The suggestions of the duty power embody a raft of reforms a few of which is able to seemingly have a ripple impact on investments in different sectors.

One of many areas which may be affected is the framework governing public-private partnerships (PPPs). Energy initiatives by unbiased energy producers are thought of to be PPPs, and variety of them have been included in Kenya’s PPP pipeline.

One of many suggestions of the duty power is that KPLC ought to disclose in its annual report, the helpful possession of all unbiased energy producers. This might simply find yourself being replicated throughout PPP initiatives in different sectors equivalent to transport and healthcare, with different state companies and public entities additionally being required to publish the helpful homeowners of the counterparties to their PPP preparations.

Whereas there are already proposed amendments by a PPP Invoice that’s at present earlier than Parliament, together with a requirement for public entities to publish particulars of any PPP contracts entered into, this might find yourself being prolonged to incorporate particulars of helpful possession of the personal get together significantly since energetic use of helpful possession information in public procurement is claimed to enhance service supply by enabling public entities to conduct higher due diligence on their contractual counterparties.

PPPs can also be impacted by the proposed modifications across the framework governing the issuance of presidency help measures for infrastructure initiatives. These embody authorities letters of help, that are ordinarily issued by the Nationwide Treasury to personal traders and lenders collaborating within the growth and/or financing of public infrastructure as a credit score enhancement instrument to cowl the political threat.

Whereas authorities letters of help are binding, they don’t seem to be thought of to be sovereign ensures and don’t, subsequently, require parliamentary approval previous to issuance. The presidential job power has proposed that authorities letters of help and different State help measures ought to solely be issued as a final resort, as an example with respect to uninsurable dangers, and with the approval of Parliament.

Implementation of this proposal will seemingly result in a coverage shift within the issuance of presidency help measures, not solely within the energy sector but additionally in different sectors. The requirement for parliamentary approval previous to the issuance of such authorities help measures may even imply that the method of acquiring the identical can be extra rigorous and time-consuming.

Different gamers which may be affected by the suggestions of the duty power are industrial and industrial entities excited about producing energy for their very own use. One of many suggestions of the presidential job power is that such entities ought to solely be granted an influence era licence in the event that they intend to generate energy utilizing renewable applied sciences.

If this suggestion is to be strictly carried out, industrial or industrial customers who might want to generate energy utilizing non-renewable applied sciences (whether or not wholly or partially) threat being denied a era licence. The duty power has additional proposed {that a} coverage be handed governing the era of energy for their very own use and gamers on this space ought to subsequently count on elevated regulation, coming at a time when KPLC has been experiencing heavy grid defection from its industrial customers.

Current media experiences reveal that some notable industrial and industrial customers equivalent to Centum Funding Firm Ltd (by its affiliate Two Rivers Energy Firm Ltd) and East African Breweries Restricted are wanting into ramping up their energy era capabilities.

Whereas it’s reported that these entities intend to depend on renewable applied sciences equivalent to solar energy, there are different industrial and industrial customers at present producing their very own energy utilizing non-renewable applied sciences and these could also be adversely affected by the transfer to solely license gamers that generate energy utilizing renewable applied sciences.

Lastly, in response to the 2021 Finances assessment and outlook paper that was just lately revealed, the Nationwide Treasury is at present creating public funding pointers on the prioritisation of ongoing initiatives and analysis of all new initiatives, with the purpose of making certain alignment to Kenya’s developmental agenda.

The continued energy sector reforms might impression the general public funding pointers being developed to the extent that the duty power has beneficial that the Nationwide Treasury solely approve funding for energy initiatives which can be aligned to the Least Value Energy Growth Plan, which units out the federal government’s priorities with respect to the vitality sector.

A replication of this normal precept throughout different sectors will be certain that public spending is focused and aligned to the related sector insurance policies and Kenya’s developmental aims on the whole.

From the above, the well-known Kiswahili saying “ukiona cha mwenzako chanyolewa, chako kitie maji” involves thoughts. Loosely translated, which means that whenever you see your companion getting shaved, put together to be shaved as properly.

Within the context of the continued energy sector reforms, it follows that gamers in different sectors ought to prepared themselves for the ripple results of the implementation of the far-reaching suggestions of the Taskforce on Assessment of Energy Buy Agreements.