The Energy Act, 2019 came into effect on 28 March this year, repealing the Energy Act, 2006, the Kenya Nuclear Electricity Board Order No.131 of 2012 (Order) and the Geothermal Resources Act. On the same date, the Petroleum Act, 2019 also came into effect repealing the Petroleum (Exploration and Production) Act.
As stated in its preamble, the purpose of the Energy Act is to consolidate laws relating to Energy, provide for National and County Government functions in relation to energy, establish energy sector entities, promote renewable energy, utilisation of geothermal energy and regulate midstream and downstream petroleum, coal activities and electricity.
The Petroleum Act, on the other hand, is essentially intended to provide a framework for the development and production of petroleum.
Generally, in addition to aligning the energy regulatory framework in Kenya to the global energy landscape, the new pieces of legislation are intended to: create increased competition; enhance the investment environment for grid, off-grid and micro-grid projects; and create a platform for achieving the Government development initiatives such as the Big Four agenda and Vision 2030.
National Energy Policy
A key aspect of the Energy Act is that it requires the Cabinet Secretary (CS) responsible for energy, in consultation with relevant stakeholders, to develop and publish a national energy policy (Policy). This Policy is to be reviewed every 5 years and within 3 months of the end of each financial year, the CS is also required to publish a report on the implementation of the Policy.
Further, national energy service providers and county governments are required to submit to the CS plans for the provisions of energy services and county energy plans respectively.
These plans are required to be integrated into a national energy plan to be reviewed every 3 years and, among other aspects, serve as a guide for energy infrastructure investments and also guide in the selection of appropriate technology to meet energy demand.
In relation to petroleum, the CS is also required to publish a national policy on petroleum operations reviewed every 5 years and similarly within 3 months of the end of each financial year publish a report on the implementation of the national petroleum policy.
National Energy Entities
The Energy Act establishes the following institutions:
- Energy and Petroleum Regulatory Authority (EPRA) – The EPRA replaces the Energy Regulatory Commission (ERC) and has broad functions including the regulation of dealing in: electrical energy (with the exception of licensing of nuclear facilities); petroleum and petroleum products (with the exception of crude oil); renewable energy; and coal bed methane gas and other energy forms.
- EPRA also has powers to designate a systems operator. The system operator is responsible for matching consumer demand with electrical energy supply and maintaining electric power system security. The system operator will have critical functions including managing the National Control Centre and giving directions to achieve efficiency in the operation of the electric power system. The Energy Act requires licensees to comply with the directions of the system operator.
- Energy and Petroleum Tribunal (Tribunal) – replaces the Energy Tribunal that existed under the repealed Energy Act. The scope of the Tribunal has been expanded to hear and determine disputes and appeals relating to the energy and petroleum sector arising under the Energy Act and any other legislation. Under the repealed Energy Act, the Energy Tribunal could only hear appeals from decisions of the ERC.
- Rural Electrification and Renewable Energy Corporation (Corporation) – The Corporation is the successor to the Rural Electrification Authority. The Corporation’s key functions include overseeing the implementation of the Rural Electrification Programme, managing the Rural Electrification Programme Fund and championing the development and use of renewable energy.
- Nuclear Power and Energy Agency (NPEA) – The NPEA replaces the Kenya Nuclear Electricity Board established under the Order. NPEA shall be the nuclear energy programme implementing organisation and responsible for the promotion and development of nuclear electricity generation in Kenya.
Renewable energy
Geothermal Resources
Part IV of the Energy Act on renewable energy also contains more detailed provisions on regulation of geothermal resources compared to the repealed Geothermal Resources Act including provisions on the licensing on extraction of geothermal resources The holder of a geothermal resource license shall be expected to pay a royalty on the value of the geothermal energy produced at a rate of between 1% and 2.5% for the first 10 years of production and a rate of between 2% and 5% during each year after such ten year period.
Renewable Energy Feed-in Tariff System
The Energy Act establishes a renewable energy feed-in-tariff system (FiT System) whose objective includes catalysing the generation of electricity through renewable energy sources. The regulations for the administration and implementation of the FiT System are not yet in place but may include regulations on: the technical and operational requirements for connection to the grid; duration of the feed-in-tariff approval; tariff to be paid by distribution licensees to licensees under the FiT System; and priority of purchase by distribution licensees of electrical energy generated using renewable energy sources.
Downstream Coal
The Act allows for a licence/permit to be obtained to carry out the production of energy from coal. While there are concerns with the use of coal as a high carbon fuel it appears that these resources are intended to be exploited.
Electrical Energy Licensing
Generation License - A generation license entitles the licensee to operate a specific generation plant and connect it to a distribution or transmission network (for example, KenGen). A key departure in the licensing of power generation is that generators of less than 1 MW for own use will no longer be required to obtain a licence for such generation.
Transmission License - A transmission license authorises the licensee to operate a transmission network and, if allowed by the license, to connect to another transmission or distribution network (for example, Kenya Electricity Transmission Company - KETRACO).
The introduction of transmission licensees opens up the power evacuation market to independent power transmission line operators. Independent power producers will now have the opportunity to not only plan for the generation of power, but also for the evacuation of such power from the power plant through third parties other than KETRACO.
Distribution License - A distribution license authorises the licensee to operate a system for conveyance of electricity from generation plants either directly or through the transmission network to consumers (For example, KPLC).
Retail Supply Licenses - A retail license authorises a person to supply electricity to consumers through a range of commercial activities including procuring energy from other licensees. The licensee shall be in the business of purchasing power, metering, billing and collecting the fees (for example, KPLC).
It is noteworthy that under the Energy Act consumers will also be entitled to install check meters for the purpose of verifying their power consumption and this may curb the reported problems of over-billing.
Local Content
The Energy Act imposes local content requirements on energy projects requiring every person carrying out any undertaking of works under the Act to comply with local content requirements in its operations. The Act requires approval by the EPRA of a local content plan which ensure that: first consideration is given to services provided within the County and goods manufactured in Kenya; qualified and skilled Kenyans are given first consideration with respect to employment at all levels of the value chain; and adequate provision is made for the training of Kenyans on the job. The EPRA is required to monitor and enforce local content plans.
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