07/07/2009

ENERGY ACT 2006 ENHANCEMENT OF ACCESS TO ELECTRICITY By Eng. KipKirui Korir R.

B.Sc. (Hons.) Elect. Eng. R Eng., MIEK Projects Engineer, KenGen

Reform and restructuring of Kenyas electricity sub-sector commenced in the 1990s The objective was to separate the policy function from regulatory and commercial functions; and introduce arms length commercial relationship between the sector utilities i.e. separate the generating function from the transmission and distribution

Enactment of the Electric Power Act, 1997 The unbundling of the then vertically integrated utility Kenya Power and Lighting Company (KPLC) into a public sector generation company (KenGen) and a transmission and distribution company (KPLC) Entry of new players in the generation function, referred to as Independent Power Producers (IPPs) All power generated sold to KPLC in bulk for transmission and distribution; each generating utility entered into a PPA with KPLC.

Retention of the policy making initiative by the minister of energy The establishment of an independent regulator Electricity Regulatory Board (ERB) to regulate the sub-sector

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Liberalization of the generation aspect while generally leaving the transmission and distribution under KPLC monopoly Kenya Power & lighting Company Ltd (KPLC) which is charged with the duty of transmitting power from the generating stations and distributing same to consumers, hence making it the only buyer of electricity power from the generating firms; creating a possible bottle-neck i.e. buy from many and sell to many with no competition to yourself.

Set, review and adjust tariffs for all entities who transmit or distribute electrical energy for sale Ensure genuine competition where this is expected Approve power purchase, transmission and distribution contracts between and among electric power producers, public electricity suppliers and large retail customers Enforce environmental, health and safety regulations in the sub-sector Investigate stakeholder complaints Investigate tariff structure

Came into force on 1st July 2007; and subsequently the Electric Power Act 1996 was repealed. The Act is intended to amend and consolidate the law relating to energy sector as a whole, provide for the establishment, powers and functions of the Energy Regulatory Commission and the Rural Electrification Authority. This Act opens up the functions currently being performed by KPLC and paves the way for entry of other players in the transmission and distribution of electricity The Act empowers the minister to establish a Rural Electrification Fund to support the electrification of rural areas; the Act also specifies sources which contribute to the fund.

This Act paved the way for the establishment of the following institutions:
Energy Regulatory Commission Rural Electrification Authority Network Service providers Network Users Energy Tribunal

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The Energy Regulatory Commission as established by The Energy Act 2006 is the successor of the Electricity Regulatory Board Functions and Objectives of the Commission are:
Regulate
importation, exportation, generation, transmission, distribution, supply and use of electrical energy importation, exportation, transportation, refining, storage and sale of petroleum and petroleum products production, distribution, supply and use of renewable and other forms of energy

Functions and Objectives of the Commission (cont.):

Maintain a list of accredited energy auditors Monitor and ensure the observance of the principles of fair competition in the energy sector Collect and maintain energy data Prepare indicative national energy plan

Protect the interests of consumer, investor and other stakeholders

The Commission has powers to :

Issue, renew, modify, suspend or revoke licences and permits for all undertakings and activities in the energy sector Make proposals to the Minister on necessary regulations of the energy sector Formulate, enforce and review environmental, health, safety and quality standards for the energy sector in coordination with other statutory authorities enforce and review regulations, codes and standards for the energy sector Set, review and adjust electric power tariffs and tariff structures Approve electric power purchase and network services contracts for all persons engaging in electric power undertakings Examine and approve energy meters used or intended to be used; and prescribe requirements for accreditation of persons with appropriate skills to check accuracy of energy meters installed in residential, commercial or industrial premises

Investigate complaints or disputes between parties with grievances over any matter required to be regulated under this Act Prescribe energy audit intervals Impose sanctions and penalties on persons who are in breach of any provisions of this Act Grant licenses, in coordination with other statutory authorities, for sustainable charcoal production. prescribe the form and manner in which any application for a licence or permit or amendment thereof or objection thereto shall be made and the fees payable in respect of any such application

prescribe the conditions which may be attached to the grant of licences or permits under this Act

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The Rural Electrification Authority is established under section (66) of the Energy Act 2006 REA is intended to enhance growth and expansion of the electricity distribution network It is a public corporation under the Ministry of energy and managed by a board of directors Duties and responsibilities of the Rural Electrification Authority (REA) mainly are:
Manage the rural electrification programme fund Develop and update the rural electrification master plan

Duties and responsibilities (cont.)

Manage the delineation, tendering and award of contracts for licences and permits for rural electrification

implement and source additional funds for the rural electrification programme
Promote use of renewable energy sources including but not limited to small hydros, wind, solar, biomass, geothermal, hybrid systems and oil fired components taking into account specific needs of certain areas including the potential for using electricity for irrigation and in support of off-farm income generating activities

This refers to the person who engages in the activity of owning, controlling or operating a transmission or distribution system pursuant to a licence or permit granted under this Act. By virtue of this definition, the Act facilitates entry of other players to compete with KPLC in the provision of:
Design and construction of new distribution substations and lines Operation and maintenance of the electricity distribution network

Connection of new customers to the grid Billing of new and existing customers

It is envisaged that entry of new players will create a healthy competition that would lead to reduced connection charges and hence connect more of the Kenyan population to the grid network. The competition resulting from entry of new players into the distribution side of the sub-sector is envisaged to result in reduced connection charges. If the connection charges were to drop substantially it would lead to more consumers being connected to the grid. Essentially a situation is being foreseen where the consumers can migrate from one service provider to another one, just like it is happening in the mobile telephones sub-sector.

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The Energy Act 2006 defines a network user as a person licenced to generate, transmit, distribute or supply electrical energy or a large retail consumer. Among the existing network users would be KPLC, KenGen, IberAfrica, Orpower4, Mumias Sugar and other generating utilities. The Act facilitates entry of other entities as Network Users which would create healthy competition and widen scope of available competitively-priced electric power.

Existing independently run mini-hydros will also feel encouraged to enter into negotiations with large scale consumers on possibility of supplying them with electricity. Entry of more players on the generating function will lead to increased installed capacity and hence more system stability and reliability

The Act empowers the Minister to promote the development and use of renewable energy technologies, including but not limited to biomass, biodiesel, bio-ethanol, charcoal, fuel wood, solar, wind, tidal waves, hydropower, biogas and municipal waste. The Act specifies the ways and means by which the Minister will promote development and use of renewable energy technologies, and these include:
formulating a national strategy for coordinating research in renewable energy Provision of enabling environment for research, development and implementation of renewable energy technology Encourage cooperation with other stakeholders and development partners in the use of renewable energy Promote co-generation by sugar millers

The Act directs that the players in the energy sector liaise closely with the Kenya Bureau of Standards to ensure adherence to standards Create awareness for efficient use of energy and conservation Promote consultancy, research and development in energy conservation The Act empowers the ERC to offer incentives to investors who take deliberate measures to ensure energy conservation by use of additional capital investment to improve efficiency ERC is to classify consumers by type, amount of energy consumed or conservation measures put in place

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The Act empowers ERC to carry out inspection in factories and other premises to ascertain efficient use of energy and conservation measures in place. Large consumers e.g. factories and commercial buildings are required to put in place energy audit programmes and specify measures put in place to conserve energy. It is an offence for owners of such premises to fail to audit their consumption or conserve energy.

The government in collaboration with KPLC, REA and development partners has foreseen the construction of many distribution lines in the country side; KPLC has outsourced a good percentage of distribution line construction works this is most likely to have been prompted by the realization of possible effects that would come with the operationalization of The Energy Act 2006. Rural Electrification Authority ensures rapid electrification of rural areas by virtue of it developing a rural electrification master plan; supervising design and construction of distribution lines.

The Act offers many opportunities for Engineers in the energy sector and more so in the electrical sub-sector. More opportunities means competition amongst the various utilities for the engineers in the market and this will lead to increased remuneration for the engineers with each player trying to hold on to the Engineers on its service. Hopefully this will have a positive knock-on effect on the issue of brain drain. The more professionals we retain the faster we are likely to develop our economies.

As a result of the expected competition, focus among the service providers will be on quality and reliability, hence benefiting the consumer. It is also expected that service providers will introduce into the market incentives on their tariff structures which generally will encourage energy conservation and more consciousness on the need for energy audits. Availability and reliability of electrical energy is naturally expected to spur increased investments by manufacturing sector leading to economic growth and expansion of opportunities for trade and employment.

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The restructuring of the electricity subsector brought about by the Energy Act 2006 was a deliberate initiative to enhance access to electricity to the general population while ensuring good quality workmanship and service provision. Energy conservation and loss reduction measures put in place would result in more available capacity

Sustainable exploitation of geothermal energy in a regulated market: a case study of Kenyas electricity sub-sector F. O. Nyang Operation costs and capital expenditure in Kenyas electricity sub-sector David Kemei The Electric Power Act, 1997 The Energy Act, 2006