GAZETTE NOTICE NO. 1682

PURSUANT to section 110 (3) of the Energy Act, 2006, the Energy Regulatory Commission hereby invites members of the public to submit written comments within forty (40) days from the date of publication of this notice to the Director General, the Energy Regulatory Commission, on the proposed Regulations in respect of Minimum Operational Stocks and Capacity Sharing Regulations 2014 which are set out in Part II hereunder. 2. A comprehensive Regulatory Impact assessment is available on our website www.erc.go.ke 3. Comments may be hand-delivered, posted and facsimiled or e- mailed to the Energy Regulatory Commission. 4. Physical address: The Energy Regulatory Commission, First Floor, Eagle Africa Centre, Longonot Road, Upperhill, Nairobi 5. Postal address: P O Box 42681–00100, Nairobi 6. Facsimile Number: +254 20 2717603 E-mail address: info@erc.go.ke PART II THE ENERGY ACT (No. 12 of 2006) IN EXERCISE of the powers conferred by Sections 5 (a), 6 (o), 85, 96 and 110 of the Energy Act of 2006; the Cabinet Secretary makes the following Regulations: The Energy (Minimum Operational Stocks and Capacity Sharing) Regulations, 2014 1. These Regulations may be cited as ―The Energy (Minimum Operational Stocks and Capacity sharing) Regulations, 2014‖ 2. In these Regulations, unless the context otherwise requires— ―Commission‖ means the Energy Regulatory Commission established under section 4 of the Act; ―common user facility‖ means an open access petroleum storage facility under the control of Government; ―consignment stocks‖ means petroleum products stored on account of any oil marketing company in a consumer site; ―consumption‖ means the quantity of petroleum products consumed within Kenya; ―EPP‖ means emergency power production; ―hospitality‖ means storage of petroleum products on behalf of the owner for a fee; ―in tank sales‖ means volume of product exchanged between two oil marketing companies in a common user facility through a commercial transaction; ―KPC‖ means the Kenya Pipeline Company Limited; ―line fill‖ means the volume of petroleum products maintained in a pipeline as dead stock for purposes of displacement of other products during pumping; ―minimum operational stock‖ means the minimum operational stock to be maintained in accordance with regulation 3; ―oil marketing company‖ means a company licensed under the Act to import petroleum products; ―quarter‖ means a period of three successive calendar months; ―throughput‖ means the volume quantity of products passed through a pipeline system; 3. (1) All importers of petroleum products intended for use in Kenya shall maintain at all times physical operational stocks, to be known as the minimum operational stock, in quantities not less than the minimum amounts specified in Schedule 1. (2) The minimum operational stocks shall be maintained in order to ensure short term supply of petroleum products in the event of disruption of supply of such products. (3) Any licensee who contravenes this provision shall be liable to the fines provided for in schedule 2 or, upon conviction, to a fine not exceeding Two Million Kenya Shillings or imprisonment for a period not exceeding two years or both. THE KENYA GAZETTE 14th March, 2014 640 640 4. (1) In determining the minimum operational stocks maintained in accordance with regulation 3(1), the following shall be taken into account:— (a) Petroleum products at the storage tanks of the Kenya Petroleum Refineries Limited on account of an individual oil marketing company; (b) Petroleum products at the Kipevu Oil Storage Facility on account of an individual oil marketing company; (c) Petroleum products belonging to any oil marketing company stored at the storage tanks of the Kenya Pipeline Company Limited in any part of the country; (d) Petroleum products belonging to any oil marketing company, stored at the company‘s own licensed storage depot. (e) Petroleum products belonging to any oil marketing company, stored under hospitality arrangement in another oil marketing company‘s licensed depot. (f) Petroleum products stored as consignment stocks by oil marketing companies in consumer depots (2) The minimum operation stocks shall not include: (a) Petroleum products in KPC‘s pipeline; (b) Petroleum products in marine tankers; (c) Off-specification petroleum products; (d) Petroleum products stock in any oil marketing company‘s retail network, that is, service and filling stations; (d) Petroleum products in transit from one depot to another 5. (1) In determining consumption levels for purposes of regulation 3 and the schedule, the local sales figures for the latest two quarters shall be used to ensure compliance by every oil marketing company. (2) For purposes of regulation 5(1) above, every oil marketing company shall forward to the Commission their local monthly sales volumes per product by the 10 th day after end of every calendar month. 6. (1) Any authorized officer of the Commission or its agent may, at any time, and pursuant to section 24 of the Act, conduct scheduled or unscheduled checks at the premises or facility of any oil marketing company to ensure compliance with the provisions of these Regulations. (2) Any oil marketing company in charge of a facility storing bulk petroleum products shall grant such officer specified in regulation 6(1) access to such premises or facility in order to facilitate inspection of such premises or facility. (3) The Commission may issue directions from time to time for purposes of carrying out the provisions of these Regulations. 7. Sharing of capacity in common user facilities shall be done as follows: (1) The percentage of the total available capacity dedicated for local products storage shall be as provided in schedule 3. (2) Capacity required for EPP shall be deducted from the total available capacity before sharing is done. (3) National Oil Corporation of Kenya shall be allocated up to a maximum of 30% of the local capacity for Automotive Gasoil (Diesel) and Jet Fuel and in the event that the actual allocation is lower than the maximum, the released capacity shall be shared by oil marketing companies as per the formula provided in these regulations. (4) Newly licensed oil marketing companies shall be allocated the minimum capacity provided in schedule 3 for the first three months of operation after which capacity sharing to the new companies shall be based on throughput at KPC. (5) The local products storage space shall be shared amongst oil marketing companies prorata to each company‘s contribution to the total local volume throughput in the KPC‘s system. (6) The transit products storage space shall be shared amongst oil marketing companies prorata to each company‘s contribution to the total transit volume throughput in the KPC‘s system. (7) In determining petroleum product throughput at KPC for purposes of sub-regulation (5) and (6) above, the latest three months‘ throughput data shall be used. (8) In determining the total throughput under sub-regulation (5) and (6) above, in tank sales and any throughput volume to EPP shall not account. (9) Capacity sharing at common user facilities shall be determined as follows: (a) Local Capacity: Where: VOL : is the storage volume in litres allocated to an oil marketing company for petroleum products meant for sale in Kenya; VOLT : is the total throughput volume in litres at KPC on account of an individual oil marketing company for petroleum products pumped for the Kenyan market in the latest three month period; VTLT : is the total throughput volume in litres at KPC for petroleum products pumped for the Kenyan market in the latest three month period; x: is a percentage as defined by schedule 3; VTA : is the total available storage volume in litres; VEPL : is the storage volume in litres reserved for petroleum products meant for Emergency Power Production in Kenya; VNOC : is the storage volume in litres allocated to National Oil Corporation of Kenya for petroleum products meant for sale in Kenya; and VNOL: is the storage volume in litres allocated to newly licensed oil marketing companies for petroleum products meant for sale in Kenya. (b) Transit Capacity: Where: VOT : is the storage volume in litres allocated to an oil marketing company for petroleum products meant for export; VOTT : is the total throughput volume in litres at KPC on account of an individual oil marketing company for petroleum products pumped for the export market in the latest three month period; VTTT : is the total throughput volume in litres at KPC for petroleum products pumped for the export market in the latest three month period; x: is a percentage as defined by schedule 3; VTA : is the total available storage volume in litres; VEPT : is the storage volume in litres reserved for petroleum products meant for Emergency Power Production in the export market and which have been negotiated with the Government of Kenya; and VNOT: is the storage volume in litres allocated to newly licensed oil marketing companies for petroleum products meant for export. (10) The determination of capacity sharing described above shall be undertaken by KPC. (11) Capacity sharing shall be done by the 10 th Day of every month and shall apply from the 11 th day of the month immediately following the allocation to the 10 th day of the next month. 14th March, 2014 THE KENYA GAZETTE (12) (1) All importers of petroleum products transporting their products through the KPC system shall contribute to line fill volume. (2) Line fill volume contribution shall be as follows: (a) Each oil marketing company shall contribute the minimum line fill provided in schedule 3. (b) The remainder of line fill volume requirement shall be shared amongst the oil marketing companies prorata to each company‘s contribution to the total throughput at KPC in the latest calendar year period. (c) The sharing of line fill volume in sub-regulation 2 (b) above shall be undertaken by KPC by the 10th Day of the beginning of every calendar year. (13) (a) For purposes of capacity sharing described in Regulation 7, KPC shall send throughput data on petroleum products to the Commission, the Ministry of Energy and Petroleum, oil marketing companies and the Commission by the 5th day of every month. (b) Any delays by KPC in submitting the data in (a) will attract the penalties listed in schedule 2 . (14) (a) Any person aggrieved by a decision of the KPC may file a complaint in writing with the Commission. (b) Any person aggrieved by a decision of the Commission on any complaint or any matter under these regulations may file an appeal with the Energy Tribunal. Any person who contravenes these regulations shall, where no other penalty is provided for, be liable, upon conviction to imprisonment for a period of one year or to a fine of one million Kenya Shillings or to both. (15) The Energy (minimum operational stock) Regulations, 2008 are hereby repealed. SCHEDULE ONE (1) Petroleum Product Minimum Operation Stock (days’ Consumption) Liquefied Petroleum Gas (LPG) 15 Aviation Gasoline (Avgas) 15 Premium Motor Spirit (PMS) 15 Jet A 1 15 Illuminating Kerosene (IK) 15 Automotive Gas Oil (AGO) 15 Heavy Fuel Oil ( Boiler/Furnace Oil) 15 SCHEDULE TWO (2) Fines and Penalties Contravention Occurrence Penalty Failure to maintain minimum operational stocks 1st offense in licensing period KSh.100,000 for each day that the contravention continues. 2nd offense in licensing period KSh. 200,000 for each day that the contravention continues. 3rd offence in licensing period Suspension of import license for a period of three calendar months. Failure by KPC to submit throughput data on or before the 5th of every month KSh. 100,000 for each day that the data is not submitted. SCHEDULE THREE (3) Minimum capacity and line fill Item Minimum Volume Capacity allocation for a newly 550,000 Litres licensed oil marketing company Line fill contribution by a newly licensed oil marketing company. (linefill shall not exceed allocated capacity) 550,000 Litres x Factor 70% LINUS GITONGA, MR/4648161 for Director-General.