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Kenya: ERC introduces framework to open up energy market

The Energy Regulatory Commission (ERC) seeks to establish a fund to cushion operators of mini-grids from high costs as part of regulations to encourage investors to generate, transmit and sell electricity in remote areas at affordable retail prices.

According to the Daily Nation, ERC director general Pavel Oimeke said the establishment of a fund would ensure uniform electricity tariffs for mini-grids across the country based on fair return on investment.

Oimeke underlined that varying additional costs due to factors such as location will be shouldered by the proposed fund.

“The cost of a tariff for a mini-grid is quite high because you are doing generation, distribution and billing,” he said. Read more: President Kenyatta to inaugurate East Africa’s largest solar plant

He added: “Right now, the government is funding transmission lines through Ketraco and we have Kenya Power and REA (Rural Electrification Authority) doing distribution. So the cost that people are paying (for electricity) now is not the true cost.”

Oimeke said the regulator would be seeking consent within the government, including ministries of Energy and the Treasury, regarding the amount and source of funds before developing a framework for implementation.

“For the framework for an access fund [proposed] for mini-grids, we first need to have an agreement within government on how it will be funded. Is it from you the [electricity] consumer or exchequer, so we have a uniform tariff,” he said.

Tariff approval

ERC currently requires firms to have a permit to operate a power plant and a tariff approval to sell electricity under sections 27 (2) and 45 of the Energy Act 2006.

Oimeke explained that the processes of securing a permit for a power plant and tariff approval are long and that proposed regulations will ease it for investors in mini-grids.

“We can’t get the grid to every corner of the country; [otherwise] we will have spaghetti wires all over. There are isolated areas where we want people to have some mini-grids to supply energy to those people.

“We have a general framework, and we have licensed about 10 of them [mini-grid operators]. But we are now working on mini-grid regulations,” Oimeke said.

Babalwa Bungane
Babalwa Bungane is the content producer for ESI Africa - Clarion Events Africa. Babalwa has been writing for the publication for over five years. She also contributes to sister publications; Smart Energy International and Power Engineering International. Babalwa is a social media enthusiast.