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LEGAL ALERT ON THE DRAFT ENERGY (ELECTRICITY MARKET,BULK SUPPLY, AND OPEN ACCESS) REGULATIONS, 2024

      Introduction:

      On 21 February 2024, the Energy and Petroleum Regulatory Authority (EPRA) released the Draft Energy (Electricity Market, Bulk Supply, and Open Access) Regulations, 2024 (the Proposed Regulations). The Proposed Regulations are aimed at governing the electric power, coal, renewable energy, and petroleum subsectors. They apply to the generation, importation, exportation, transmission, distribution, and retail supply of electrical energy in Kenya.

      Key Objectives:

      The objectives of the Proposed Regulations are as follows:

      • providing guidance on reviewing the electricity market;
      • governing operations and management of the electricity market, open access, and bulk supply;
      • promoting competition, efficiency, reliability, and service quality;
      • ensuring non-discriminatory open access to enhance competition;
      • attracting investment in energy infrastructure; and
      • enhancing accountability, transparency, and efficiency in the electricity market.

      Key Provisions:

      We set out below some of the key provisions in the Proposed Regulations:

      • The Electricity Market Structure: The Proposed Regulations provide for the conduct of a market review to be conducted by EPRA in consultation with the Cabinet Secretary responsible for energy (the Cabinet Secretary). EPRA is also required to involve stakeholders in the energy sector while undertaking the market reviews and subsequent guidelines. This review should be done within 3 years. Subsequent reviews should be undertaken at least once every five (5) years. Upon conclusion of the market reviews, EPRA is required to publish a report in the Kenya Gazette within 30 days of concluding the review. The first market review will be essential in informing Kenya’s electricity market structure and design.Once the first report is gazetted, EPRA in consultation with the Cabinet Secretary to issue and gazette guidelines on the structure of the electricity market within 6 months after gazettement of the market report.
      • Open access: transmission and distribution licensees will be required to provide ‘non-discriminatory open access” to their transmission or distribution system. This will enable any other licensees or eligible consumers to use the systems, upon payment of wheeling or use of system charges and other prescribe fees. Consumers will also have the liberty of selecting their preferred retail suppliers provided that the consumer has not entered into two supply contracts for the same premises.
      • Minimum roles: The Proposed Regulations outline the minimum roles of a generation licensee, transmission licensee, distribution licensee, retail supply licensee, eligible consumers and system operators all in an effort to promote equity and fairness in Kenya’s electricity market.
      • Tariffs: The Proposed Regulations require EPRA to prescribe generation and retail tariffs and charges for network service, wheeling, use of system and ancillary services. Licensees will be required to apply to EPRA for approval for approval of tariffs which will take effect on the commercial operation date under the respective commercial agreement. Licensees will be able to recover capital costs, O&M costs, depreciation, return on equity, other finance costs and taxes from the tariffs.
      • Bulk Supply: The Proposed Regulations set out a framework for bulk supply. Under the Proposed Regulations bulk supply shall be the supply of electrical energy by a licensee to another licensee and not to a consumer. The format of the bulk supply application and agreement are prescribed by the Regulations.
      • Non-compliance sanctions: Offences and penalties under the Proposed Regulations include giving false and misleading information at application stage and failure to comply with the regulations, orders or prohibitions of the Authority. The proposed sanctions where one is found liable are both custodial and non-custodial.
      • Dispute resolution: The Proposed Regulations require that where there are disputes and/or complaints that the internal mechanisms provided under the complaints and dispute resolution regulations. Additionally, a person aggrieved or dissatisfied with the decision of the Authority may appeal the same at the tribunal and then the High Court within 30 days of the Tribunal’s decision.

      Stakeholder Engagement Workshop:

      EPRA has scheduled a stakeholder engagement workshop on 4March, 2024, at the Sarova Stanley Hotel in Nairobi, running from 8:00 a.m. to 3:00 p.m. The workshop aims to provide a platform for stakeholders to gain insights into the Proposed Regulations and to express their views. The proceedings will be accessible remotely through Zoom, YouTube, and Facebook.

      Public Participation:

      Stakeholders and members of the public are encouraged to actively participate in the regulatory process. The Proposed Regulations can be accessed here. Comments can be submitted through email at info@epra.go.ke or physically delivered to EPRA’s regional and headquarter offices.

      Conclusion

      The Proposed Regulations signify a significant step towards enhancing the regulatory framework in the energy sector, promoting transparency, competition, and efficiency. Stakeholder input is crucial in shaping the final regulations, and interested parties are encouraged to participate actively in the upcoming workshop and submit their comments for consideration.

      Note: This legal alert provides a general overview and is not a substitute for legal advice. Stakeholders are advised to review the full text of the Proposed Regulations for comprehensive understanding and seek professional advice as needed.

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