NAIROBI, Kenya – The government is proposing a new levy on fuel and electricity to finance infrastructure projects in Kenya’s energy sector.
According to the Ministry of Energy, the funds will be channelled into a new Consolidated Energy Fund (CEF) to support major projects such as power transmission lines, hydropower dams, renewable energy research and training initiatives.
Energy Cabinet Secretary Opiyo Wandayi said the fund will draw revenue from multiple sources, including budget allocations by Parliament and contributions from energy sector players — which could translate into new charges on fuel and electricity consumers.
“The sources of the fund shall be pursuant to Section 216(2) of the Energy Act and include appropriations from Parliament and contributions from energy sector players,” Wandayi said in the Petroleum Policy for 2025–29.
“The fund shall support development of critical infrastructure such as transmission lines, hydropower dams, promotion of renewable energy initiatives and research and human capacity development.”
The new levy is part of broader reforms under the ministry’s 2025–2029 sector plan, aimed at easing reliance on public borrowing and donor funding.
Currently, the government funds energy projects through loans, grants, and taxes. But with rising debt and shrinking fiscal space, many projects have stalled or slowed down, forcing the ministry to explore alternative financing mechanisms such as Public-Private Partnerships (PPPs) and now the CEF.
Parliament is expected to allocate an initial Sh500 million to the fund. Additional revenue will come from government securities, fines imposed by the Energy and Petroleum Regulatory Authority (EPRA), and assets recovered from corruption or criminal activities in the sector.
Kenyan consumers already shoulder several energy-related levies. These include the Roads Maintenance Levy (Sh25 per litre of petrol and diesel), the Petroleum Development Levy (PDL) (Sh5.40 per litre of petrol and diesel and Sh0.40 per litre of kerosene), and the Rural Electrification Authority (REA) Levy, which adds 5 per cent to the cost of every electricity unit consumed.
The Ministry said the proposed fund is part of a wider reform drive to consolidate petroleum-related finances and better manage issues such as decommissioning of infrastructure, development of common user facilities, and community projects in education and health.
“As part of ongoing reforms, Kenya proposes to establish a petroleum consolidated fund to manage sector issues such as decommissioning of petroleum infrastructure, development of common user facilities, education, and health services, among others,” the ministry said.
The proposal will undergo stakeholder consultations before being presented to Cabinet and Parliament for approval.
