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 could 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 deal with issues concerning the excessive price of electrical energy, and which lately submitted its suggestions as to how the envisaged discount of energy prices might be achieved.

The suggestions of the duty drive embody a raft of reforms a few of which can probably have a ripple impact on investments in different sectors.

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

One of many suggestions of the duty drive 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 corresponding to transport and healthcare, with different state firms and public entities additionally being required to publish the helpful house owners of the counterparties to their PPP preparations.

Whereas there are already proposed amendments by way of a PPP Invoice that’s presently 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 non-public social gathering 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 may additionally be impacted by the proposed adjustments across the framework governing the issuance of presidency assist measures for infrastructure initiatives. These embody authorities letters of assist, that are ordinarily issued by way of the Nationwide Treasury to non-public traders and lenders taking part within the growth and/or financing of public infrastructure as a credit score enhancement instrument to cowl the political danger.

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

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

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

If this advice is to be strictly applied, industrial or industrial customers who could want to generate energy utilizing non-renewable applied sciences (whether or not wholly or partially) danger being denied a technology licence. The duty drive has additional proposed {that a} coverage be handed governing the technology 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 stories reveal that some notable industrial and industrial customers corresponding to Centum Funding Firm Ltd (by way of its affiliate Two Rivers Energy Firm Ltd) and East African Breweries Restricted are trying into ramping up their energy technology capabilities.

Whereas it’s reported that these entities intend to depend on renewable applied sciences corresponding to solar energy, there are different industrial and industrial customers presently 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 keeping with the 2021 Finances assessment and outlook paper that was lately revealed, the Nationwide Treasury is presently growing public funding pointers on the prioritisation of ongoing initiatives and analysis of all new initiatives, with the intention of guaranteeing alignment to Kenya’s developmental agenda.

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

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

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

Within the context of the continuing 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.