House approves increased Govt role in power firm

Chairman of the Committee on Energy, Communications and Information Mr James Rege. The committee recommended that the Government proceeds with the conversion of the redeemable shares approved by Treasury to ordinary shares and retain them so as to raise its stake to 75 per cent. Photo/FILE

By CAROLINE WAFULA
Posted Wednesday, August 25 2010 at 13:23

Parliament has passed a resolution requiring the Government to increase and retain its ordinary shares in the Kenya Power and Lighting Company at least 51 per cent.

The House made the resolution as MPs expressed hope that the move will help bring down the cost of electricity which is currently seen as too high to consumers.

There has been concern that Kenyans are being ripped-off paying more for power than they actually should pay.

The Energy Communications and Information committee of Parliament having looked into the ownership and status of the company recommended that the Government converts some of its non-cumulative preference shares in KPLC to ordinary shares so as to control at a majority shares to make it a parastatal.

Treasury has approved plans by KPLC to convert some 87,120,000 of the 7.85 per cent redeemable non-cumulative preference shares into ordinary shares at a ratio of 1:1. The conversion will raise the Government stake to 75 per cent.

Reports have indicated that the Government had, however, planned to float rights issue and renounce its right so as to maintain its current stake at 40.4 per cent.

75 per cent stake

In its report debated and passed by the House, the committee chaired by Eng James Rege recommended that the Government proceeds with the conversion of the redeemable shares approved by Treasury to ordinary shares and retain them so as to raise its stake to 75 per cent, thus qualifying the company as a parastatal.

The House approved that the Government's shareholding be determined by the shares held in the name of the Permanent Secretary, Treasury and not other state agencies who might later on dispose their shares without approval from Treasury.

The committee further recommends that the Government increases its subsidies for the transmission and operation costs so that they are not reflected in the tariffs and the consumer bills.

The matter came to the floor in April by way of a question that was raised by Mumias MP Mr Benjamin Washiali on the relationship between KPLC and the Rural Electrification Authority.

MPs have also been asking questions on the high cost of electricity given the huge bills that consumers are forced to pay.

Concern has been raised on the status of ownership of the company with MPs asking whether it was a parastatal or a private company.

The Speaker Kenneth Marende consequently directed that the parliamentary committee takes up the matter for investigation and report back to the House.

Vice chair of the committee Mr Maina Kamau moved the report before it was adopted.

Cheap energy

Seconding, Rarieda MP Mr Nicholas Gumbo said cheap availability of energy and economic power have a very close correlation.

He said agreements with independent power suppliers and producers should be closely scrutinised.

Supporting the report findings are recommendations, Gichugu MP Martha Karua lauded the conversion of shares saying it will reflect the true position of Government.

"Forty per cent shareholding is totally incorrect and is meant to give other shareholders who are not a majority shareholders power of decision making in the company," she argued.

The MP said power is a vital resource and there is no reason why Government should not be a majority shareholder.

"This report should be implemented immediately," she said.

The report tabulates dividends to various shareholders up to 2009. It shows that the Government was the largest beneficiary with Sh 1 billion while all the rest put together had less than a half a billion.

Ms Karua said consumers were being swindled through exorbitant power costs.

She said the high cost of power was due to the current arrangement between the company and independent suppliers and recent reduction in cost has only benefited large consumers like companies.

"It is unfair to allow badly negotiated contracts to negatively affect the lives of Kenyans," Ms Karua said.