[2008-09-22]  KenGen – KPLC Tariff Wars: KenGen Wins Round One
For the recent couple of years Kenya Electricity Generating Company (KenGen) and Kenya Power Lighting & Company (KPLC) have been fighting over power tariff charges between them. In mid 2006, KenGen had sought to bill KPLC under the terms of an old Interim Power Purchase Agreement or Sh2.36 per Kwh (Ksh1.76 from KPLC and Ksh.0.60 Government subsidy) that had been revised downwards in 2003 to help KPLC turn back to profitability.

Last Thursday, the energy industry arbitrator suspended application of new lower wholesale power tariff charge to KPLC by KenGen for two months, meaning power KenGen won the first round of a battle pitting it against regulator Energy Regulatory Commission (ERC) and KPLC over the draft Power Purchase Agreement.

The Energy Tribunal ordered KLPC to pay KenGen 95% of the tariff and deposit the rest in a joint account held by both players. However, the payments will only be made for the two months of the interim order. In the new tariff structure, called the capacity charge rate regime endorsed by ERC, KPLC was supposed to pay 80%of the amount based on ‘contracted capacity’ and negotiate the remainder with KenGen based on power outages and ‘other interruptions’ to power generation.

KenGen moved the case to a tribunal for arbitration accusing ERB for trying to force it to sign a supposedly defective long term power agreement with KPLC that reduced its charges from Ksh.2.36 per kWh to Ksh.2.19 per kWh. KenGen says that there were no sufficient provisions for depreciation and taxes, prudent levels of operating and maintenance costs, among other operational details, in determining and approving the charge rates. This it says infringes the provisions of Clause 43 of the Energy Act 2006.
The Energy Tribunal is enshrined in the Energy Act 2006. All disputes in tariffs in the energy sector of Kenya are referred to this tribunal. In 2005, during KenGen’s IPO, transactional advisor PriceWaterHouseCoopers (PWC) recommended revaluation of its assets to ensure that it carried fixed assets values in their books that accurately reflected shareholder value. As a result, KenGen’s depreciation increased from Sh2 billion (US$30m) to Sh3.45 billion ($51m).

The tribunal promised that the implementation of these orders will not lead to increased electricity charges to the consumers.

Source: NAIROBIST