Averting a Looming Power Crisis

The National Assembly has lifted a long-standing freeze on signing new Power Purchase Agreements (PPAs) with Independent Power Producers (IPPs), a decisive move aimed at preventing a potential electricity generation crisis in Kenya. The vote, which took place on the evening of Wednesday, November 12, 2025, saw lawmakers adopt a proposal from the parliamentary Committee on Energy to end the moratorium that has been in effect since 2018.

The freeze was initially recommended by a presidential task force in 2021 to allow for a thorough review of existing contracts amid public outcry over the high cost of electricity, largely blamed on expensive deals with IPPs. However, the policy led to a standstill in the development of new local power generation capacity. This stagnation forced Kenya to become increasingly reliant on electricity imports from neighbouring Ethiopia and Uganda to meet rising demand and avoid power rationing, a situation the Ministry of Energy and Kenya Power warned was unsustainable. According to reports, the share of imported electricity in the national grid surged to 10.6% in the year ending June 2025, a significant jump from 4.87% in the previous year and just 1% in 2021.

New Conditions for Power Producers

While lifting the ban, Parliament has introduced stringent new conditions for future agreements. A key requirement is the capping of wholesale electricity prices at USD 0.07 (approximately KES 9.04 at current exchange rates) per kilowatt-hour (kWh). This measure is intended to lower consumer power bills and ease operational costs for businesses. Furthermore, MPs have stipulated that the new deals can be denominated in either Kenya Shillings or US Dollars, addressing concerns about foreign exchange risks that have previously contributed to high power costs.

The decision follows intense lobbying from the executive, with Energy Principal Secretary Alex Wachira and Kenya Power CEO Dr. Joseph Siror urging MPs to end the freeze. They argued that without new local generation, Kenya remained vulnerable to disruptions, such as a major drought affecting hydropower generation in the neighbouring countries it relies on for imports. National Assembly Majority Leader Kimani Ichūng'wah stated on Wednesday evening, “As leaders, we have a responsibility to adopt this addendum. As we promised the private sector, we are now addressing the matter.”

The High Cost of Independent Power

The debate over PPAs has been central to Kenya's energy policy discourse for years. The moratorium was a direct response to findings that IPPs, while supplying a smaller portion of electricity to the grid, accounted for a disproportionately large share of Kenya Power's power purchase costs. For instance, an audit report for the 2022 financial year revealed that IPPs supplied 37% of the power but received 59% of the payments, while the majority state-owned KenGen supplied 63% for only 41% of the cost. This disparity meant taxpayers could have saved billions of shillings.

Data from the year ending June 2024 further illustrated the price gap: electricity from IPPs cost an average of KES 21.16 per kWh, more than double KenGen's KES 9.78 per unit. The 2021 Presidential Taskforce on the Review of Power Purchase Agreements was established to tackle this issue, recommending the renegotiation of existing contracts and a halt to all unconcluded PPA negotiations.

The Path Forward

The Cabinet had previously lifted the moratorium in February 2023, but Parliament swiftly reinstated it, arguing more time was needed to scrutinize the existing contracts. This latest parliamentary decision to lift the freeze signals a new chapter for Kenya's energy sector. It seeks to balance the urgent need for increased generation capacity with safeguards to protect consumers from inflated electricity prices. The implementation of the new price caps and currency denomination options will be critical in determining whether this move successfully stimulates investment in the energy sector while ensuring affordable and reliable power for all Kenyans. The focus now shifts to the Energy and Petroleum Regulatory Authority (EPRA) and Kenya Power to implement these new directives and negotiate contracts that align with the country's long-term energy security and economic goals.