Senators have passed the Energy Act Amendment Bill 2023 to provide for transparency in energy purchase agreements. Should the National Assembly pass the proposed legislation as it is, then Independent Power Producers (IPPs) will not be granted generation licences if they do not disclose their beneficial owners.

In addition, the dispatcher will be mandated to prioritise power from cheaper green generators over thermal sources.

Sponsored by Nairobi Senator Edwin Sifuna, the Energy Amendment Bill seeks to bar the operator from granting generation licences to any entity that does not disclose its beneficial owners. Senate’s passage of the Bill comes amid the House’s probe into contracts signed by 11 IPPs.

Kenya Electricity Generation Company (KenGen), the highest power producer, supplies Kenya Power with electricity at a cost of Sh5 per kilowatt, while the IPPs charge between Sh10 and Sh28.

This even as consumers pay for Value Added Tax (VAT), Fuel energy charge, Forex charge, Water Regulatory Authority (WRA) charge, Energy Petroleum Regulatory (EPRA) charge and inflation adjustments from the tokens they purchase, an amount that has a several-fold effect in raising the cost of electricity.

The amendment proposes that an energy purchase agreement shall comply with the principles of public finance enshrined in Article 201 of the Constitution, which includes openness and accountability, public participation in financial matters and good governance to ensure that public funds are used in a prudent and responsible way.

Prudent stipulations

The Bill, which has now been sent to the National Assembly for their input, further provides that the purchasing entity shall, prior to procurement of electrical power, conduct a feasibility study to identify whether there is enough demand for electricity purchase that cannot be met by the existing production.

In addition, the entity shall ensure the process of procurement of electrical energy complies with the procedures set out in the Public Procurement and Asset Disposal Act and ensure that priority is given to dispatchable generation with a sustainable base load at the point of dispatch.

“A purchasing entity shall prepare and maintain a register of generating entities it has entered into energy purchase agreements with and the entity’s beneficial ownership and publish the names of the same on its website and in the annual audit report,” reads part of the Bill.

According to the Bill, the register is prepared within 90days from the date of operation and will be open for inspection by members of the public in accordance with section 5 (1) (e) of the Access to Information Act.

“The Authority shall not approve an energy purchase agreement which fail to comply with this section,” the Bill provides.

Sifuna argues that the rationale for disclosure of beneficial ownership information is to create an accurate public disclosure regime that provides transparency in the beneficial ownership and control structures of companies.

“This aids in not only promoting investor confidence and good corporate governance practices but also in uncovering tax evasion schemes, money laundering practices, corruption schemes, and other illegal activity involving either one or more companies,” said Sifuna.

The Nairobi legislator further argues that the purchase of power from private energy generators by Kenya Power is subject to principles of public finance as envisaged under Article 201 of the Constitution, which include openness and accountability.

Critical information

He insists that the disclosure of beneficial ownership of energy generators should be compulsory to a procuring entity when the company participates in public procurement and assets disposal and to a contracting authority when the company participates in a public-private partnership.

“Energy plays a critical role in enabling social, economic and environmental sustainability. Access to affordable energy is important in achieving sustainable development goals in health, education and agriculture to improve living standards,” said Sifuna.

The lawmaker further stated that Health, education and agriculture are devolved functions whose viability is directly impacted by the high cost of energy.