NAIROBI, Kenya – Members of Parliament have proposed capping wholesale electricity prices for new power purchase agreements (PPAs) at $0.07 (Sh9.04) per kilowatt-hour, in a bid to protect consumers from rising power bills and pave the way for new energy projects.
The proposal, contained in a report by the National Assembly’s Committee on Energy, seeks to make electricity more affordable while setting the stage for lifting a seven-year moratorium on new PPAs.
The ban, first imposed in 2018, has restricted the entry of new power producers into the market.
Committee chairperson David Gikaria said the pricing cap was informed by global benchmarks and forms part of broader reforms aimed at stabilising power costs.
“Two of the critical things we agreed with the ministry are that the price should not exceed seven US cents for any new PPA. This will cushion Kenyans from high electricity prices,” Gikaria said. “We also agreed on a flexible model where PPAs can be denominated in either shillings or dollars.”
The inclusion of shilling-denominated contracts is expected to eliminate the foreign exchange fluctuation charge — a key driver of high electricity tariffs — since most existing PPAs are dollar-based.
The moratorium, lifted briefly by the Cabinet in 2022 before being reinstated by MPs in 2023, was meant to allow a review of past agreements that had locked consumers into expensive contracts.
Some independent producers currently sell electricity to Kenya Power at up to Sh56 per kWh, compared to Sh3.83 for local hydropower and Sh8.44 for imported Ethiopian hydropower, according to official data.
MPs are expected to debate the committee’s report this week, potentially clearing the way for new investments in generation capacity amid growing fears of power shortages.
“The report is ready. Once it’s scheduled by the House Business Committee, we expect adoption by Thursday, October 9, which will allow the moratorium to be lifted,” Gikaria said.
Kenya has recorded seven new electricity demand peaks in 2024, pushing the country to rely more heavily on imports from Ethiopia, Uganda, and Tanzania.
Imported power more than doubled from 644 million kWh in June 2023 to 1.53 billion kWh in June 2024.
Kenya Power currently imports up to 200 Megawatts (MW) from Ethiopia under a 25-year agreement and is in talks to add another 50–100MW to meet peak-hour demand.
With the national reserve margin now below four per cent — far below the recommended global range of 20 to 35 per cent — lawmakers warn that failure to lift the moratorium could trigger electricity rationing and stall industrial growth.
