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Proposals for Opening Up the Energy Sector to New Business Models in Kenya

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By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Sustainable Development Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), The African Arbitrator of the Year 2022, Kenya’s ADR Practitioner of the Year 2021, CIArb (Kenya) Lifetime Achievement Award 2021 and ADR Publisher of the Year 2021*

It has been argued that ‘the ongoing energy system transformation across the world, and especially in developed world, and the growth of renewable energies are changing the structure and value creation of the energy industry with adopted business model classes showing that traditional business models are affected by the decarbonisation, decentralisation and digitisation of the energy system in all segments and economic sectors. There is a need for the stakeholders in the energy sector to adopt business models that ensure that consumers get value, one that encourages consumers to pay for value, and one that converts those payments to profits. Liberalization and energy system transformation can arguably significantly increase the pace of change and have impact on the business model landscape substantially.

In many countries around the world, especially in the developed world, there has been a trend of liberalization, unbundling and deregulation of the energy sector in order to improve access to energy. The liberalization of the energy market is defined to mean the opening of the electricity and gas market to free competition where existing monopolies are broken and the market is opened to more participants. Liberalization in regard to the energy markets and specifically electricity and gas mainly refers to “the opening up of an industry to more competition, often involving the relaxing of government restrictions to break up existing monopolies and open the market to more participants.” Liberalization has been characterized as involving the introduction of competition (via structural changes such as the removal of subsidies, vertical unbundling of integrated utilities to facilitate non‐discriminatory access to monopoly networks and horizontal unbundling of incumbents to create viable competitors) and the establishment of independent energy sector regulators.

Expressed differently, in electricity and downstream gas supply, liberalization has often involved privatization (and/or the introduction of new private entrants) and structural reform of national industries to create competitive wholesale and retail markets with regulated non‐discriminatory third party access to monopoly transmission and distribution networks. Where liberalization has been achieved such as the European Union energy markets, it was done to benefit consumers through; raising employment levels, increasing business efficiency and increasing a country’s potential economic development and GDP growth. Thus, “opening up these markets to competition allows consumers to benefit from lower prices and new services…more efficient and consumer-friendly than before” and consumers benefit because a breaking up of a monopoly and introducing competition will help give consumers savings in price but also choice of what service they demand.

It has also been argued that ‘potential economic development and GDP growth is likely to occur as shown by the benefits to consumers, employment and efficiency because of increased employment which will cause more people to spend disposable income; an increase in companies also increases employment but also the reduction in market prices will result in consumers having more disposable income to be spent on other goods and services, and this will lead to economic development in other industries and businesses and is likely to increase GDP. It has also been observed that ‘the introduction of competition in downstream energy sectors, such as electricity and gas supply, facilitates competition in upstream gas and coal production sectors; while the general increase in energy trading facilitates the introduction of emissions markets’.

Notably, while Kenya may have attained some milestone as far as unbundling (encouraging private generators of power, and separating generation from distribution) is concerned, the same cannot be said about liberalization (which is visibly missing from the Vision 2030). The electricity sector is unbundled and generation by independent power producers is permitted by law and is regulated, where as at 2018, it was estimated that the private sector produces 28% of Kenya’s centralised electricity supply. This was enabled through Feed-in tariffs (FITs) Regulations which were introduced in 2008 and revised in 2010 and 2012 to enable independent power producers to sell electricity to KPLC at a fixed price for a fixed term of 20 years.

Despite the commendable considerable success of this development, there has been challenges in uptake of this generated power. For instance, it is estimated that Kenya’s Lake Turkana wind farm and its 365 turbines make for a generating capacity of more than 300MW, creating one of the most productive projects anywhere in the world. Wind power has become a key contributor to the national grid to the extent that where there is interruption in its production, consumers have ended paying more for electricity in the country. The Lake Turkana Wind Power (LTWP) has been allocated a maximum production quota of 210MW, against an installed capacity of 310MW.97 While independent power producers have made considerable efforts to produce enough power to run the country, there have been problems with uptake of the same by the Kenya Power and Lighting Company Plc (KPLC). For instance, in the recent times and partly due to the Corona Virus (Covid19) pandemic, there have been reports that measures to contain the pandemic have led to reduced demand for power especially among the commercial consumers who account for over 65% of the power use in the country.

Reports also indicate that KPLC has prioritized the uptake of geothermal at 39.5 per cent, hydro at 33.9 per cent, wind at 14 per cent, diesel at 9.7 per cent with other sources like solar, imports from Uganda and co-generation accounting for about three per cent. This has thus left some of the producers with excess power. This shows that Kenya’s main consumers of electricity are commercial businesses and when these run into difficulties, the independent power producers are left stranded.101 This happens while there are still reports that there are homes in Kenya still not connected to the grid despite the Government’s best efforts to do so.

Thus, even as the Government looks for ways to produce cleaner power, there is also a need to address the disconnect between production and distribution of the power possibly through liberalization of the energy sector. While this has been attributed to the Covid-19 pandemic that afflicted almost the whole world in 2020, it raises a concern as to whether the power producers’ major customers are only the commercial users. This is because, it has already been pointed out that there are households in Kenya that still mainly rely on kerosene and biomass (firewood and charcoal) as their main source of energy for their inability to afford electricity. Even as we vouch for increased transition to renewable energy by way of increased production, this scenario points out the fact that there is more than availability of the renewable energy: the same must not only be made available but must also be made affordable to the local ‘mwananchi’ (citizen).

Affordability of energy is key. While the Energy Ministry had expressed optimism of introducing net metering for customer-sites generation (dependent on the enactment of the energy bill), establish regulations for mini-grids, and had started exploring the idea of local-currency-denominated tariffs in a bid to encourage local commercial banks to participate in energy projects, this was however not achieved after the enactment of the Energy Act, 2019. Liberalization of the sector would make all of these easier to actualize, for the benefit of consumers. Arguably, the current unbundling structure has not achieved a lot for the Kenyan people as the high cost and unreliability of electricity supply in the country are still major issues, as these are greatly affected by state monopoly mainly through Kenya Power, a vertically integrated company.

Liberalization would ensure that for all forms of energy – gas, electricity, coal and oil – industrial and domestic consumers would be free to choose their supplier. Kenya needs to borrow a leaf from some of the most successful countries in this sector such as Sweden and Singapore, among others. In order to improve energy security and affordability, Singapore began to deregulate its electricity market since 2003, with the creation of the National Electricity Market of Singapore (NEMS) allowing for bid-ask offers to be made for the dispatch of electricity supply on the wholesale side and subsequently, the retail market liberalized in tranches, with 80% of electricity consumers currently already given an option to select their electricity retailers since late 2014.

As result, as at 2018, it was reported that ‘supply competition and the retail liberalization efforts had possibly led to a combinatorial decrease in wholesale electricity prices by up to 9.11%, accounting for the influence of oil prices and volatility components’. The country has also attracted investors in the sector making it more competitive for the retail consumer as far as choice of energy supplier is concerned. Notably, 14 electricity providers participated in the pilot phase, including units of infrastructure companies.  Kenya should follow in the footsteps of Singapore and other countries that have liberalized their energy markets in order to address the gap between generation, transmission and distribution of energy and particularly electricity and consequently ensure that all people in the country have access to cleaner, affordable energy.

*This article is an extract from published article Delivering Clean and Affordable Energy for All, by Dr. Kariuki Muigua, PhD, the African Arbitrator of the Year 2022, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), CIArb (Kenya) ADR Lifetime Achievement Award 2021 and ADR Publisher of the Year 2021. Dr. Kariuki Muigua is a Foremost Dispute Resolution Expert in Africa ranked among Top 6 Arbitrators in Kenya by Chambers and Partners, Leading Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized as one of the leading lawyers and dispute resolution experts by the Chambers Global Guide 2022. 

References

Muigua, K., “Delivering Clean and Affordable Energy for All,” Available at: http://kmco.co.ke/wp-content/uploads/2021/05/Delivering-Clean-and-Affordable-Energy-for-All-Kariuki-Muigua-Ph.D-24th-April-2021-1.pdf (accessed 25 June 2022).

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Former KCB Company Secretary Sues Over Unlawful Dismissal

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Former KCB Group Company Secretary Joseph Kamau Kania who has sued the Bank for Unlawful Dismissal

Former KCB Group Company Secretary Joseph Kamau Kania has sued the lender seeking reinstatement or be compensated for illegal sacking almost three years ago. Lawyer Kania was the KCB Group company secretary until restructuring of the lender in 2021 that saw some senior executives dropped.

Through the firm of Senior Counsel Wilfred Nderitu, Kamau wants the court to order KCB Group to unconditionally reinstate him to employment without altering any of the contractual terms until his retirement in December 2025.

In his court documents filed before Employment and Labour Relations Court, the career law banker seeks the court to declare the reorganization of the company structure a nullity and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution. He further wants the court to declare that the position of Group Company Secretary did not at any time cease to exist within the KCB Group structure.

He further urged the Employment Court to declare that the recruitment and appointment of Bonnie Okumu, his former assistant, as the Group Company Secretary, in relation to the contemporaneous termination of his employment, was unprocedural, insufficient and inappropriate to infer a lawful termination of his employment.

“A declaration that the factual and legal circumstances of the Petitioner’s termination of employment were insufficient and inappropriate to infer a redundancy against him, and that any redundancy declared by the KCB Group in relation to him was therefore null, void and of no legal effect and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution,” seeks lawyer Kamau.

Kamau says he was subjected to discriminatory practices by the KCB Bank Group in violation of his fundamental right to equality and freedom from discrimination as guaranteed in Article 27 of the Constitution and the termination of his employment was unfair, unjustified, illegal, null and void.

Lawyer Kamau further seeks the court to declare that the Non-Compete Clause in the 2016 Contract is unenforceable by the KCB Group as against him and is voidable by him as against the Bank ab initio, byreason of the termination of the Petitioner’s employment having been a violation of Articles 41(1) and 47(1) and (2) of the Constitution, and of the Employment Act.

He also wants the Employment Court to find that finding that KCB’s group legal representation by Messrs of Mohammed Muigai LLP Advocates law firm in respect of his claim for unlawful termination of employment resulted in a clear conflict of interest by reason of the fact that a Founding and Senior Partner at the said firm lawyer Mohammed Nyaoga is also the Chairman of the CBK’s Board of Directors.

“A Declaration that the circumstances of KCB’s legal representation by Messrs. Mohammed Muigai LLP Advocates resulted in a violation of the Petitioner’s fundamental right to have the employment dispute decided independently and impartially, as guaranteed in Article 50(1) of the Constitution,” seeks lawyer Kamau.

Kamau is seeking damages against both KCB Group and Central Bank of Kenya jointly and severally for the violation of his constitutional and fundamental right to fair labour practices.

He wants  further wants court to declare that CBK is liable to petitioner on account of its breach of statutory duty to effectively regulate KCB Group to ensure that KCB complied with the Central Bank of Kenya Prudential Guidelines and all other Laws, Rules, Codes and Standards, and that, as an issuer of securities, it complied with capital markets legislation.

Kamau through his lawyer Nderitu told the court that he was involved in Shareholder engagement in introducing the Group aide-mémoire that significantly improved the management of the Annual General Meetings, including obtaining approval without voting through the Memorandum and Articles of Association of Kenya Commercial Bank Limited among others.

He said that during his employment at KCB Bank Kenya and with the KCB Group, he initially worked well with former KCB CEO Joseph Oigara until 2016 when the CEO allegedly started sidelining him by removing the legal function from his reporting line.

He further claims he was transferred from the Group’s offices at Kencom House to its offices Upper Hill under the guise that the Petitioner was merely to support the KCB Group Board.

He adds that at that point his roles were given to Okumu for reasons that were not related to work demands.  He stated that Oigara at one time proposed that he should leave his role in the KCB Group and go and serve as the Company Secretary of the National Bank of Kenya Limited, a subsidiary of the Group, a suggestion which he disagreed with to Oigara’s utter annoyance.

Kamau stated that his work was thenceforth unfairly discredited, leading to his being taken through a disciplinary process whose intended outcome failed miserably, and the Petitioner was vindicated.

“More specifically, the Petitioner contends that the purported creation of a new organizational structure towards the end of 2020 was in fact Oigara’s orchestration targeted to remove certain individuals by requiring them to undergo interviews in the pretext that new roles were created, and amounted to a further violation of the Petitioner’s fundamental right to fair labour practices under Article 41(1) of the Constitution,” said in his court documents.

He further adds that this sham reorganization demonstrates how the role of the KCB Group Company Secretary purportedly ceased to be and was then very briefly replaced with a new role of the KCB Group General Counsel. The role of KCB Group Company Secretary then ‘resurfaced’ immediately thereafter, in total violation of legal and regulatory requirements.

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Court of Appeal Upholds Eviction of Radcliffes from Karen Land

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Adrian Radcliffe, the Expatriate Squatter, Evicted from Karen Property by Innocent Purchaser for Value

The Court of Appeal has stayed the decision of the Environment and Land Court purporting to reinstate Adrian Radcliffe into possession of the 5.7 Acre Karen Land by Kena Properties Ltd after eviction by the lawful owners in February 2022. Adrian Radcliffe who was evicted by Kena Properties Ltd, the innocent purchaser of the Land for value.

Before his eviction, Mr. Radcliffe had been living on the land as a squatter expatriate for 33 years without paying any rent. Since he moved into the property as a tenant, he only paid deposit for the land in August 1989 despite corresponding severally with the owner of the land. His attempt to acquire the land by adverse possession claim filed in 2005 was dismissed by Court in 2011 on the basis that he has engaged with the owner of the land July 1997 and agreed to buy the land which he failed to do. The High Court [Justice Kalpana Rawal as she then was] concluded that:

“His [Mr. Adrian Radcliffe] averments that he did not have any idea of the whereabouts of the Defendant and that he could possibly be not alive, were not only very sad but mala fide in view of the correspondence on record addressed by him to the Defendant’s wife. I would thus find that the averments made by him to the contrary are untrue looking to the facts of this case.”

On 10th March 2022, Mr. Adrian Radcliffe and Family purported to obtain court orders for reinstatement into the land. However, the Court of Appeal issued an interim stay of execution of the said orders. The Court of Appeal has now granted the application of Kena Properties Ltd and stayed the execution of the Environment and Land Court Order pending the hearing and determination of the Appeal.

The Court also stayed the proceedings at the Environment and Land Court on the matter during the pendency of the Appeal. In effect, the eviction orders issued by the Chief Magistrate Court for eviction of Mr. Adrian Radcliffe in favour of Kena Properties as the purchaser of the property for value were upheld and the company now enjoys unfettered ownership and possession of the suit property until the conclusion of the Appeal.

The Court of Appeal in granting the orders sought by Kena Properties Ltd concurred with Kena Properties Ltd that as the property owner it had an arguable appeal with a high probability of success which would be rendered nugatory if Adrian Radcliffe a trespasser was to resume his unlawful possession of the suit property, erect structures thereon, recklessly use or abuse the said suit property as he deems fit. In any case, that is bound to fundamentally alter the state of the suit property and render it unusable by Kena Properties Ltd as the property owner.

At the same time, the Appellate Court rubbished the argument of Adrian Radcliffe in opposition to the application for stay that he has been in occupation of the suit property for more than 30 years and that he and his family were unlawfully evicted from the suit property on 4th February, 2022. The Court also rejected Radcliffe’s claim that Kena Properties Ltd has no valid title to the suit property and held that as the purchaser, the company was entitled to enjoy ownership and possession of their property during the pendency of the appeal.

The Court dismissed claims of Mr. Adrian Radcliffe that Kena Properties Ltd as the property owner acquired title to the suit property illegally and unprocedurally finding to the contrary. Further, it rejected Adrian Radcliffe’s claim that Kena Properties as the purchaser cannot evict a legal occupier of a property putting paid to the claim that he was a legal occupier at the time of eviction.

As a matter of fact, Mr. Adrian Radcliffe cannot claim to be the legal occupier of the property having attempted to acquire it by adverse possession before the High Court thwarted his fraudulent scheme on 28th February 2011. Mr. Radcliffe did not appeal the 2011 High Court decision meaning it is still the law that he is not the owner of the land nor the legal occupier of the land having attempted to adversely acquire against the interests of the lawful owner who sold it to Kena Properties.

Mr. Adrian Radcliffe is a well-to-do Water, Sanitation and Hygiene (WaSH) UNICEF consultant and former UN employee (who has been earning hefty House Allowance). Many have wondered why he has been defaulting in paying rent for 33 years on the prime plot of land in Karen while living large and taking his kids to most expensive schools in Kenya. No question, a local Kenyan could never have gotten away with such selfish impunity.

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Review: Journal of Conflict Management and Sustainable Development, Vol. 9, No. 1

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The Journal of Conflict Management and Sustainable Development, Volume 9, Issue No. 1, which is edited by and published by Dr. Kariuki Muigua, PhD is out and stays true to the reputation of the journal in providing a platform for scholarly debate on thematic areas in the fields of Conflict Management and Sustainable Development. The current issue published in September 2022 covers diverse topics including Resolving Oil and Gas Disputes in Africa; National Environment Tribunal, Sustainable Development and Access to Justice in Kenya; Protection of Cultural Heritage During War; The Role of Water in the attainment of Sustainable Development in Kenya; Property Rights in Human Biological Materials in Kenya; Nurturing our Wetlands for Biodiversity Conservation; Investor-State Dispute Resolution in a Fast-Paced World; Status of Participation of Women in Mediation; Business of Climate Change and Critical Analysis of World Trade Organization’s Most-Favored Nation (MFN) Treatment.

Dr. Wilfred A. Mutubwa and Eunice Njeri Ng’ang’a in “Resolving Oil and Gas Disputes in an Integrating Africa: An Appraisal of the Role of Regional Arbitration Centres” explore the nature of disputes in the realm of oil and gas in Africa taking a look into the recent continental and sub-regional developments in a bid to establish regional integration. Additionally, it tests the limits of intra-African trade and dispute resolution and the imperatives for the African regional courts and arbitration centres. In “National Environment Tribunal, Sustainable Development and Access to Justice in Kenya,” Dr. Kariuki Muigua discusses the role played by the National Environment Tribunal (NET) in promoting access to justice and enhancing the principles of sustainable development in Kenya. The paper also highlights challenges facing the tribunal and proposes recommendations towards enhancing the effectiveness of the tribunal.

Dr. Kenneth Wyne Mutuma in “Protecting Cultural Heritage in Times of War: A Case for History,” argues that cultural heritage is at the heart of human existence and its preservation even in times of war is sacrosanct. It concludes that it is thus critical for states to take positive and tangible steps to ensure environmental conservation and protection during war within the ambit of the existing international legal framework. In “The Role of Water in the attainment of Sustainable Development in Kenya,” Jack Shivugu critically evaluates the role of water in the attainment of sustainable development in Kenya and argues water plays a critical role in the attainment of the sustainable development goals both in Kenya and at the global stage. The paper interrogates some of the water and Sustainable Development concerns in Kenya including water pollution, water scarcity and climate change and suggests practical ways to enhance the role of water in the Sustainable Development agenda.

Dr. Paul Ogendi in “Collective Property Rights in Human Biological Materials in Kenya,” reflects on property rights in relation to human biological materials obtained from research participants participating in genomic research. He argues that property rights are crucial in genomic research because they can help avoid exploitation or abuse of such precious material by researchers. In “Nurturing our Wetlands for Biodiversity Conservation,” Dr. Kariuki Muigua notes that Wetlands have a vital role in not just delivering ecological services to meet human needs, but also in biodiversity conservation. Wetlands are vital habitat sites for many species and a source of water, both of which contribute to biodiversity protection. The paper examines the role of wetlands in biodiversity conservation and how these wetland resources might be managed to improve biodiversity conservation.

Oseko Louis D. Obure in “Investor-State Dispute Resolution in a Fast-Paced World,” preponderance of disputes between States or States and Investors created need for a robust, effective, and efficient mechanisms not only for the resolution of these disputes but also their prevention. He notes that developing states lead in being parties to Investor-State Disputes (ISD) particularly as respondents. He proceeds to conceptualize and problematize investor-state disputes resolution in a fast-paced world. Lilian N.S. Kong’ani and Dr. Kariuki Muigua in “Status of Participation of Women in Mediation: A case Study of Development Project Conflict in Olkaria IV, Kenya” review the status of participation of women in mediation to resolve conflicts between KenGen and the community. The paper demonstrates a need for further democratization of the mediation processes to cater for more participation of women to enhance the mediation results and offer more sustainable resolutions.

Felix Otieno Odhiambo and Melinda Lorenda Mueni in “The Business of Climate Change: An Analysis of Carbon Trading in Kenya analyses the business of carbon trading in the context of Kenya’s legal framework. The article examines the legal framework that underpins climate change into the Kenyan legal system and provides an exposition of the concept of carbon trading and its various forms. Michael Okello, in “Critical Analysis of World Trade Organisation’s Most-Favored Nation (MFN) Treatment: Prospects, Challenges and Emerging Trends in the 21st Century,” highlights the rationale behind MFN treatment and also restates the vision of multilateral trade to achieve equitable and special interventions with respect to trade in goods, services and trade related intellectual property rights in the affected states.

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