Kenya’s energy policy is set out in Sessional Paper No. 4 of 2004 (the Energy Policy). The Energy Policy provides for the regulation of the entire energy sector including electric energy, petroleum and renewable energy. With respect to the regulation of electricity, the policy contains a detailed raft of measures which include:
- the development of a competitive market structure for the generation, supply and distribution of electricity;
- the establishment a rural electrification authority; and
- the promotion of entry of private entities into the sector and the creation of a new energy regulator.
The policy guidelines under the Energy Policy were effected through the Energy Act, 2006 (the Energy Act). The Energy Act is currently the primary law governing the energy sector in Kenya. The Energy Act provides for the establishment of the Energy Regulatory Commission (ERC) as the single regulatory agency with the responsibility for economic and technical regulation of the energy sector. A number of regulations and guidelines have been promulgated under the Energy Act, including:
- the Energy (Electricity Licensing) Regulations 2012, which set out the requirements to be fulfilled by any person desiring a licence or permit authorising him or her to take part in the generation, transmission, distribution or supply of electrical energy in Kenya;
- the Electric Power (Electrical Installation Work) Rules 2006, which provide the requirements for the licensing of electricians and electrical contractors; and
- the Energy (Complaints and Dispute Resolution) Regulations 2012, which provide the mechanisms through which the ERC resolves complaints and disputes between a licensee and its customers.
Since the publication of the Energy Policy in 2004, a number of changes have taken place that have presented new challenges and opportunities for the Kenya energy sector. These include growing concerns over climate change, Kenya’s new constitution adopted in 2010 and the long-term development blueprint, Vision 2030, adopted in 2008. This has necessitated the review of the Energy Policy with the government issuing a Draft National Energy and Petroleum Policy dated June 2015. The policy framework proposed under the Draft National Energy and Petroleum Policy is reflected in the Energy Bill, 2017, which has been published and will soon be before Parliament for debate.
The ERC is mandated under the Energy Act to come up with national energy plans. In line with this, the ERC established a committee with responsibility for preparing and updating the Least Cost Power Development Plan (LCPDP), which is a 20-year development plan updated annually. The LCPDP is instrumental in identifying possible investments in the generation and transmission of power in the energy sector in Kenya; it also places a focus on coming up with techniques on how the demand for power can be met cost effectively.
The Ministry for Energy and Petroleum issued a Feed-in Tariff (FIT) Policy in March 2008 (the FIT Policy) (which was later revised in December 2012) relating to the generation of power through wind, biomass, small-hydro, geothermal and solar. The FIT Policy seeks to promote the generation of electricity from renewable energy sources and allows a power producer to sell renewable energy generated electricity to an offtaker at a predetermined tariff for a given period of time. We, however, understand that the ERC is currently drafting new regulations to move away from the current FIT regime to a system based on competitive auction for renewable energy projects. Currently, the FIT Policy allows the award of projects without a requirement for tendering.
There are also numerous other laws which have an impact on the energy sector. Key among these include the Land Act, 2012, the Public Finance Management Act, 2012, the National Construction Authority Act, 2011, the Environmental Management and Coordination Act, 1999, the Public Private Partnerships Act 2013 and the Geothermal Resources Act, 1982.
The institutional framework in the Kenya electricity sector includes:
- the Ministry of Energy and Petroleum: this is the government ministry in charge of creating energy policies and setting the strategic direction for the growth of the energy sector;
- the Energy Regulatory Commission: an independent body set up under the Energy Act to regulate the energy sector. Its functions include: issuing licences and permits for all undertakings in the energy sector; proposing regulations to the minister; enforcing compliance with sector regulations; setting and reviewing electric power tariffs and tariff structures; and approving all contracts for the sale of electrical energy (ie, power purchase agreements), transmission or distribution services;
- the Energy Tribunal: an independent statutory tribunal set up under the Energy Act to hear appeals from the decisions made by the ERC;
- the Rural Electrification Authority (REA): set up under the Energy Act and mandated to accelerate the pace of rural electrification across the country;
- the Kenya Electricity Generating Company Limited (KenGen): a state corporation in charge of generating the majority of the electricity consumed in Kenya. Currently, KenGen produces about 72 per cent of electric power in Kenya with the remaining amount generated by independent power producers (IPPs). KenGen is listed on the Nairobi Securities Exchange (NSE) after the government of Kenya sold 30 per cent of its stake in the company in 2006;
- the Kenya Power and Lighting Company Ltd (KPLC): KPLC’s mandate is the transmission and distribution of electricity. In exercising this mandate, it is responsible for purchasing electrical energy in bulk from KenGen and other IPPs through bilateral agreements or through power purchase agreements approved by the ERC. The government has a controlling stake at 50.1 per cent of shareholding with private investors at 49.9 per cent. Kenya Power is listed on the NSE;
- the Kenya Electricity Transmission Company Limited (KETRACO): KETRACO is a wholly state-owned company tasked with developing the national transmission grid network and facilitating trade in electric power through its transmission network. It is the current policy for all new transmission infrastructure to be constructed, owned and operated by KETRACO; and
- the Geothermal Development Corporation (GDC): GDC is a wholly state-owned company established under the Geothermal Resources Act, 1982 to fast-track the development of geothermal resources in Kenya. Its mandate includes drilling steam wells, providing steam for the generation of electric power, managing geothermal reservoirs and entering into steam supply contracts with IPPs.
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