E. Africa states review contracts with power producers

Tuesday March 19 2019


Nairobi. East African governments are reviewing power purchase agreements with independent power producers (IPPs) as part of efforts to lower the cost of energy and attain universal electricity access.

Private investors own and operate plants that generate power for sale mostly by using diesel, an expensive fuel whose cost is passed on to consumers in the form of inflated monthly electricity bills, contributing to the high cost of doing business in the region. In Rwanda, for example, the government plans to use diesel-generated power to either cover peak demand or serve as a reserve to hedge against the short-term unavailability of generation capacity or imports.

This is because about 80 per cent of the retail electricity tariff amount goes towards recovering the cost of generating electricity.

Rwanda’s Energy Sector Strategic plan (2013-2018) says using thermal power to serve peak load and backup power demands would help the country reduce over-reliance on IPPs and lower the cost of electricity. Rwanda is seeking to ensure universal electricity access by 2024.

In Uganda, the government plans to review the concession model it has used to run the electricity sector over the past 15 years, with the private investors planning to revert power generation activities to the state-owned Uganda Electricity Generation Company Ltd (UEGCL).

The government plans to end a power generation deal with South Africa’s Eskom after it failed to deliver on its contractual arrangements.

Last year, Tanzania’s President John Magufuli blamed costly diesel-fired plants operated by IPPs and emergency power producers for the exorbitant electricity charges, which are beyond the reach of ordinary people. According to the US Agency for International Development, Tanzania’s high reliance on expensive thermal and emergency generation sources has added to the sector’s financial unviability.

In Kenya, President Uhuru Kenyatta in 2016 called for a review of the power purchase agreements with the IPPs in a bid to terminate those stifling plans to reduce the cost of power as the country seeks to feed more renewable energy such as geothermal, wind, coal and solar into the national grid. (NMG)