KENYA Law and Practice Contributed by: Mary Waithiegeni Chege, Mary Anne Wachira and Joy Odhiambo, EMSI & Associates
2. Market Structure, Supply and Pricing 2.1 The Wholesale Electricity Market The Energy Act does not specifically list whole- sale supply as a licensed activity, and the Energy Policy only references the wholesale electricity market once in recognition of Kenya’s undevel- oped legal, regulatory and institutional frame- work for a competitive wholesale electric power market. However, the definition of the electricity market in the Energy Act includes the sale of electri- cal energy to retail licensees for resale to con- sumers, while “bulk supply” is defined to mean the supply of electrical energy by a licensee to another licensee for the purpose of enabling the supply of electrical energy to consumers. The Energy Act also provides for the execution of bulk supply agreements, and requires EPRA to review the electricity market on a regular basis with a view to enhancing competition, improving efficiency, increasing reliability and security of supply and improving the quality of service by all licensees. All PPAs currently incorporate capacity pay- ments on a take-or-pay basis as well as energy charges. The tariff for bulk supply is approved by EPRA in accordance with the regulation on electricity tariffs and the Energy Act. In line with the Power Market Study in the Elec- tric Power Sub-Sector, 2021, the proposed Ener- gy (Electricity Market, Bulk Supply and Open Access) Regulations anticipate that the elec- tricity market shall consist of a wholesale and a retail market, with the former being comprised of generation licensees and other licensees who will trade through the intermediary of an opera-
tor, while the retail market shall purchase from the wholesale market and supply to consumers. 2.2 Electricity Imports and Exports Imports and exports of electricity are permitted, subject to licensing by EPRA. Electricity imports account for 6.4% of the ener- gy mix under a 200 MW PPA with Ethiopia Elec- tricity Power (EEP) and bilateral energy exchange contracts with Uganda Electricity Transmission Company Limited (UETCL) and Tanzania Elec- tricity Supply Company Limited (TANESCO). All tariffs and ancillary costs in PPAs require prior approval by EPRA. End user pricing is influenced by pass-through charges, which are imple- mented to cover additional expenses incurred in the generation, transmission and distribution of electricity that are not included in the base tariff. Such charges include: • the Fuel Energy Charge (FEC); • Foreign Exchange Rates Fluctuations Adjust- ments (FERFA); • the Water Resource Authority (WRA) levy; • inflation adjustments; and • taxes and levies. 2.3 Supply Mix of Electricity As of December 2024, the installed generation capacity was 3,236 MW, with a net effective interconnected capacity of 3,082 MW, inclusive of wind and solar. The installed capacity is over 90% renewable and is composed of 940 MW of geothermal, 838 MW hydro, 605.8 MW fossil fuels, 435 MW wind, 212.5 MW solar, 200 MW import and 2 MW co-generation. The total generation was 7,222.37 GWh, with geothermal being the leading contributor of power to the national grid, accounting for
165 CHAMBERS.COM
Powered by FlippingBook