The Path to the ‘Ultimate’ Electricity And Supply Industry – Drawing Lessons From Kenya

Mwelwa Kenneth Chibesakunda MBA , Lusaka, Thursday, 18 July 2024 — A number of parallels can be drawn from different countries within Africa on how power sector reform has been the enabler of resolving countless challenges that have besieged several African countries that are currently faced with power deficits. Zambia’s story of the current energy woes in not unique and one must sift through the different moments different countries have faced in their power sector reform journey to not just re-invent the wheel, but to also have a better view of what options, and their respective impact, they have had when faced with power challenges.

Drawing from lessons learned from Zambia’s Joseph Kapika’s, and South Africa’s Anton Eberhard’s, research into power sector reform of six African countries it is clear that what Zambia is facing has been experienced before in other jurisdictions.? According to the duo, inadequate electricity generation capacity and unreliable power supply were the perennial problems in Kenya for over a decade in the late 1990s. In Kenya’s case, what was clear was a lack of integration between planning and implementation which was a common problem for many electricity and supply industries (ESIs).

Just like Zambia, Kenya also had an over dependence on hydro which dominated the country’s generation capacity. Coincidently, they too faced acts of climate with the recurring droughts of the 1990s. Kenya’s response to these was to commission independent power producers whose introduction translated into an acceleration of the price of electricity, albeit now prices are deemed as reflective of the cost of producing and delivering electricity to consumers. A healthy ESI.

In terms of fiscal response, Kenya inevitably began to bridge the gap between planning and implementation. This required enacting legislation which ensured that the true costs of electricity production were allocated appropriately to attract investment in the sector. Kenya’s portrait of a progressive ESI saw the establishment of an independent regulator, and the unbundling and liberalisation of the electricity sector.

Curiously, when one reads through Zambia’s Electricity Act of 2019, the regulatory regime required to ensure a “Kenyan Type ESI” is beginning to take shape. The country has taken a significant step towards transforming its electricity sector with the introduction of a new Act aimed at regulating the generation, transmission, distribution, and supply of electricity. The new legislation seeks to enhance the security and reliability of electricity supply, promote transparency, and ensure the protection and safety of consumers and the public.? The Act provides a comprehensive framework for the electricity sector, covering various key aspects. The Act aims to regulate the electricity sector by facilitating the sale and purchase of electricity both locally and internationally, promoting efficient development and operation of electricity infrastructure, and defining the roles and responsibilities of participants in the sector. This will ensure a streamlined and organised electricity market, encouraging investment and growth.

Furthermore, the Act also establishes a multi-year tariff framework, providing clarity and predictability for investors and consumers alike. Additionally, it outlines guidelines for risk allocation and revenue management, ensuring that risks and rewards are shared fairly among stakeholders. Finally, the Act prioritises consumer protection and public safety, guaranteeing access to reliable and affordable electricity while ensuring the well-being of citizens.

For security of supply, the Act must ensure that there is a competitive market structure for the generation, supply and distribution of electricity. This was something Kenya’s government mooted in their 2004 national energy policy when the government realised that despite earlier measures of reform, much deeper cohesion between fiscal planning and industry implementation was key. Ultimately, an effective ESI requires the narrowing of this gap for us to achieve security of supply and sustainable energy access for all.