Kenya is in talks to end the electricity exchange agreement with Uganda and replace it with an outright purchase from the neighbouring country that continues to produce excess power.
Nairobi has approached Kampala to turn the deal into a Power Purchase Agreement (PPA) in what will mirror an arrangement with Ethiopia.
Kenya and Uganda, through their state-owned electricity distribution companies, have a power exchange deal where the country that imports more from the other pays at the end of a given period.
Increased supply of hydropower, which is the cheapest of all sources in the national grid, is key to the country’s efforts of lowering electricity bills besides cutting reliance on dirty thermal plants.
“Uganda recently completed two big hydropower plants and now has excess power. There are discussions between Kenya Power and its Ugandan counterpart to lock this excess power through a PPA,” Daniel Kiptoo, the Director-General of the Energy and Petroleum Regulatory Authority said on Thursday.
Generation deficits have made Kenya to be a net importer in the exchange agreement with Uganda, prompting the latest push to convert the deal into a PPA.
Kenya imported 55.85 million units of power from Uganda between January and March this year and exported a paltry 10.65 million units in the same period.
Electricity imports between January and March this year hit an all-time high of 408.78 Gigawatt-hours (GWh), but most of this power is from Ethiopia.
The move for a PPA with Uganda comes at a time when Kenya has ramped up imports from Ethiopia to boost increased generation from the country’s dams and geothermal sources, helping lower bills on consumers.
For example, Ksh1,000 is now fetching 32.9 units, up from 32.2 last month while customers are getting 16.5 units for Ksh500, up from 16.1 units for the same amount last month.
Locally generated hydropower is the cheapest in the national grid, with a unit retailing at Ksh3.83, followed by a unit of geothermal power at Ksh10.28 while a unit of imported hydroelectricity was at Ksh10.69 as of February this year.
Kenya currently has a 25-year PPA with Ethiopia with the power priced at $0.065 (Sh8.6) per kilowatt. Kenya will however be allowed to renegotiate the tariff from 2027 at the earliest in line with the agreement.
However, the tariff that Kenya Power is targeting in the proposed PPA with the Uganda Electricity Distribution Company Limited (UEDCL) and the validity period remains undisclosed.
