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Through its Vision 2030, the Kenyan government is planning to increase generation capacity to 23,000 megawatts (MW) by 2030 to meet growing electricity demand and reduce constraints in economic growth. The need to diversify the generation mix has led the Government of Kenya (GoK) to focus on the development of wind and geothermal generation capacity. Kenya is believed to have renewable energy potential including 7,000 MW of geothermal and other renewables such as wind, biomass, and solar.
In 2019, the Energy and Petroleum Regulatory Authority (EPRA) was established as the successor to the Energy Regulatory Commission (the ERC, established in 2007) to oversee the country’s energy sector. Among other responsibilities, it is tasked to regulate the electricity sector, petroleum and related products, renewable energy, and other forms of energy generation. It also protects the interests of consumers, investors, and other sector stakeholders.
With support from the United States Agency for International Development (USAID) and Power Africa, NARUC works to strengthen EPRA’s regulatory frameworks and technical capabilities. The Kenya Energy Regulatory Partnership supports wider efforts by the GoK and Power Africa development partners to add new connections, manage the continued increase in supply of generation, and create a more reliable grid through improved regulatory frameworks and practices. Since 2016, the partnership has supported EPRA on a variety of energy sector topics, including but not limited to:
In 2022, NARUC will share best practices with EPRA on mini-grid regulation and mini-grid tariff setting.
Tariff Setting and Design
Kenya’s Vision 2030 was established in 2008 as a national long-term development policy that aims to transform Kenya into a newly industrializing, middle-income country that provides a high quality of life to all its citizens. This will be accomplished through achieving several goals, of which the energy sector has been identified to play a significant role. In working toward such goals, EPRA is focusing on developing cost-reflective tariffs, which will help to create an enabling environment for investment and ensure power adequacy, reliability, and accessibility.
Time-of-Use (TOU) Tariffs
In 2018, NARUC held a peer review workshop convening representatives from EPRA and other energy sector stakeholders to discuss the implementation of EPRA’s time-of-use (TOU) tariff – which was approved in December 2017. TOU tariffs can be used by utility providers to alleviate demand during peak periods by charging an increased rate within the typical peak consumption time periods.[1]
Given a significant planned increase in supply, EPRA designed a TOU tariff for large industrial and commercial customers with two goals in mind: 1) incentivize shifting operations to late night hours to balance the load and ease peak demand, and 2) incentivize more consumption of electricity, which would decrease the oversupply. During the activity, NARUC experts reviewed and provided targeted technical feedback on EPRA’s TOU tariff, including how to conduct monitoring and evaluation and adjust the tariff after the end of the two-year pilot project period. Since the tariff’s implementation, it has increased demand outcomes and savings by manufacturing, as large industrial customers have been able to take advantage of operating during times of the day when the rate is lower, allowing their goods to be created and sold at less cost. As of January 2021, over 2,000 firms/manufacturers and water companies are taking advantage of and benefitting from the TOU.
Uniform System of Accounts (USoA)
In 2019, NARUC held a technical workshop convening a group of representatives from EPRA and other energy sector stakeholders to discuss best practices in adapting and implementing a Uniform System of Accounts (USoA).[2] During the workshop, NARUC discussed the need for a data collection template, which is one of the documents that comprises a USoA. It allows utilities to submit their financial data in a predetermined format with all costs broken down by specific categories, which creates uniformity and allows for easy analysis as well as increased transparency with regard to utility spending. Following the workshop, EPRA reported that it plans to use the recommendations and lessons learned to develop a national USoA that will allow all electric utilities to report financial data more easily.
Transmission Open Access Framework
For the last five years, the introduction of competition has been one of the main goals of energy sector reform in Kenya. One of the GoK’s key objectives to bring about such competition is to develop a third-party open access framework through which consumers have access to the transmission and distribution network and can obtain electricity directly from generators rather than from the local electricity distribution company. In 2019, NARUC provided technical assistance to EPRA to consider as it started to draft a Transmission Open Access Market Framework and Rule. Implementing an open access market will assist Kenya as it works to achieve its long-term goal of regional cross-border electricity trade, allow greater competition in the electricity sector, and provide more transparent rules for dispatch and costs for cross-border trade.
Following stakeholder consultation, in 2021 NARUC further supported EPRA by conducting a peer review of the draft Transmission Open Access Market Framework and Rule. During this peer review, NARUC experts provided detailed feedback on EPRA’s current documents as well as targeted information on the issues of system stability, cost causation, independent oversight of procurement, and the role of a national grid code in unbundling. The recommendations and lessons learned from these activities provided EPRA with new considerations as they work to finalize the regulation.
Grid Reliability
The Energy Act, 2019 provides EPRA with the power to prescribe standards relating to the reliability and quality of electricity supply. To fully take advantage of this, EPRA envisions a future where regulations giving guidance on this subject will be formulated and enforced as part of the national grid code.
To assist on this matter, NARUC experts engaged with EPRA and energy sector stakeholders in 2020 to discuss monitoring and reporting on grid reliability, how to identify common reliability metrics, and reporting options to track reliability and quality trends. Following the activity, participants gained an increased capacity to identify key performance indicators and use long-term data to set transparent baseline performance standards. In addition, they built consensus around effective enforcement provisions for reliability performance. Most recently, EPRA reported that lessons learned from the activity were applied to the preparation of the Draft (Electricity Reliability, Quality of Supply & Quality of Service) Regulations, 2021.
Gender Equity in the Kenyan Energy Sector
NARUC continues to support gender equity in the Kenyan energy sector through the Women in Energy Regulation Internship Program. Through this program, cohorts of two recent female graduates or young professionals intern with EPRA and complete substantive work for a period of six months (e.g., investigating and preparing reports on electricity-related accidents, participating in stakeholder meetings for draft energy regulations, monitoring generation and transmission projects, etc.).
This internship program is designed to foster interest in the energy sector and allow interns to acquire the foundational technical skills, professional experience, and institutional knowledge needed to pursue a career in the sector and become attractive candidates for employment at the host commission, other regulatory agencies, or regulated entities such as electric utilities. Following the completion of the program, many participants have expressed interest in pursuing careers in the energy sector. EPRA has extended the length of three of its internships and has gone on to hire an intern into a full-time position as an Assistant Energy Planner.
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[1] “Time of Use Energy Metering (TOU).” Accuenergy. https://www.accuenergy.com/application-solutions/time-of-use-metering/
[2] A USoA is an accounting system designed to identify and categorize the costs of providing service and provide a basis for calculating the level of revenue needed to cover utility costs. For more information, see “Regulatory Accounting: A Primer for Utility Regulators.” NARUC. https://pubs.naruc.org/pub.cfm?id=EE6402E5-155D-0A36-31F8-36FEBB6D4E44
Project Dates: 2016-Present
Primary Partners:
Kenya Energy and Petroleum Regulatory Authority