Energy CS to Get Powers on Petroleum Products Pricing

The Cabinet Secretary in charge of the Ministry of Petroleum and Mining will now have powers to seek for a review of pricing of petroleum products in case of any emergency if the Petroleum (Pricing) Regulations 2022 tabled in the National Assembly are adopted.

Consequently, the ministry will also have powers to regulate the wholesale prices of petroleum products just like it does when setting the maximum retail prices. 

According to the ministry, the failure to cap wholesale prices has caused a bit of market distortion since the wholesalers would sometimes buy products at the depot at prices close to the retail prices yet the penalties for non-compliance were lenient.

The regulations seek to revoke the Energy Petroleum (Pricing) regulations 2010 to ensure that the petroleum pump price regulations meet the 10-year statutory limit set out by the statutory Instruments Act Number 23 of 213.

 “The primary objective of the proposed regulations is to regulate both the maximum wholesale price and maximum retail price as well as set up a framework for review of price determination under emergency situations as may be declared by the Cabinet Secretary in charge of Petroleum,” reads the regulations.

The regulations add: “Passing the proposed pricing regulations will align the existing regulations with the Petroleum Act 2019 and in turn provide transparent petroleum price setting methodology.”

Further the regulations will provide a stable business-operating environment thereby attracting and retaining investors.

“This is the preferred option since it addresses the requirements listed in the Petroleum Act 2019 as it addresses current and future goals of the petroleum sector,” the regulations state.

The new regulations that will be considered by the Departmental Committee on Delegated legislation will also provide for exigencies to ensure that price capping can continue even in extreme circumstances such as recently experienced Covid-19 related travel restrictions and the Russian –Ukraine Invasions and their related escalation of costs.

In addition, they will also provide for display of prices so as to ensure consumers had information on current prices and ensure security of supply through a cost reflective petroleum formula. The formula provides for prudently incurred costs that take care of consumers as well as unbundle the supply chain to reflect changes in the supply chain infrastructure and to achieve transparency  and clarity in cost identification.

 “The regulations will increase the level of transparency in computation of petroleum products, on the impact on the private sector, the private sector will have a clearer understanding of how the regulated petroleum prices are built up. This will help in planning and making of economic decisions, “ reads the regulations. 

In the regulations tabled in the National Assembly last week Thursday, the former Energy Cabinet Secretary Monica Juma said the guidelines will set the legal framework for the setting of the capped petroleum retail pump prices as approved by the Energy and Petroleum Regulatory Authority (EPRA) as it will enumerate all the parameters necessary for the determination of pump prices.

Following this, EPRA will now develop an approved petroleum-pricing model in Microsoft excel format that will capture all the costs as stipulated in the regulations and aid in converting all the costs and parameters to Kenya shillings per litre of the petroleum grade of interest.

  “The energy (Petroleum Price) Regulations 2010 have since been revoked by the Energy (Petroleum Pricing ) (Revocation) regulations 2022 vide LN 191/2020 gazzeted on October 14 2022. The repealed energy act did not provide for the capping of the wholesale prices,” reads the regulation in part.