Energizing Kenya: Addressing Power Costs and Investor Concerns as CS Ndungu is kept on the radar

The Cabinet Secretary (CS) for National Treasury & Economic Planning, Prof. Njuguna Ndung’u, recently informed the Energy Committee about the process involving Legal Clearance for letters of support to Independent Power Producers (IPPs). This revelation contradicts the Attorney General’s claim that his office was not involved in the Power Purchase Agreements (PPAs). During the session chaired by Hon. Vincent Musyoka, CS Ndung’u clarified that the issuance of Government Support Measures (GSMs), including letters of support to IPPs, falls under the jurisdiction of the CS for National Treasury and Economic Planning.

In justifying the issuance of these letters of support, CS Ndung’u emphasized that they function as a mechanism to safeguard both the government and the private sector. According to him, these letters serve as a contingent liability, providing necessary protection for both parties involved.

Members of the Energy Committee expressed concerns regarding the impact of various taxation measures and levies on the overall cost of power. They discussed ways to manage these costs to provide relief to the citizens of Kenya. In response, Prof. Ndung’u clarified that the only national tax imposed on electricity is the 16% Value Added Tax (VAT). He argued against its removal, citing concerns about introducing discrimination within the VAT tax regime. Instead, he recommended focusing on reducing costs related to the Water Resource Management Authority (WARMA) Levy, the Energy Regulatory Commission (ERC) Levy, and the Rural Electrification Program (REP) Levy.

Accompanying the CS Treasury, Mr. Chris Kirigua, the Director General for private-public partnerships, highlighted the necessity of reviewing the existing PPAs. He stressed the importance of scrutinizing these contracts to identify discrepancies and rectify them, emphasizing a zero-tolerance policy for any irregularities.

Additionally, committee members expressed their worries about the economic repercussions of high electricity costs in Kenya. They noted that this issue has been driving investors away, with neighboring countries like Tanzania and Ghana becoming more attractive investment destinations. In response, CS Ndung’u acknowledged the impact of not only the high cost of power but also the recurring power outages in the country, both of which are contributing to this concern.

The Energy Committee plans to engage in further discussions with stakeholders in the Energy Sector to thoroughly investigate the causes of the high cost of power in Kenya. Subsequently, they will collaborate to formulate effective measures aimed at reducing these costs and promoting a more investor-friendly environment in the country.