if my kraken attempts to use its EMP, would it electrocute/superheat the water around it and therefore itself or will it be ok?
A classic Hollywood-style (in results, if not in appearance) EMP might be reasonably compared to a powerful radio broadcast. It doesn't need shooting lightning everywhere, and the effects of a modestly sized EMP aren't necessarily going to involve sparks and smoke. Those radiowaves induce voltages in conductive things like electronic devices, and that causes currents to flow in ways there weren't intended to and everything stops working.
Remember: radio waves or electric fields. Not lightning bolts!
First thing, then: it won't electrocute the water.
Next problem, though: radio waves, especially the shorter-wavelength microwaves that are good at frazzling small electronic systems, basically can't travel through water. If you operate a powerful EM source underwater, it'll probably warm up a bit as some of the radiation will be reflected back from the device/water interface, and the water will warm up a bit as some of the radiation is absorbed.
However, the heat capacity of water is extremely high, and the ability of convection to transport heat away from hot things in water is also extremely high, and the ocean is also kinda big. Making a system that could cook itself is obviously possible, but it would be hard.
Second thing: it won't cook itself.
You've probably already spotted the last problem. Short wavelength radiowaves can't pass though water, and long wavelength ones need huge amounts of power, very large transmitting antennae and large receiving objects in order for a useful portion of their energy to be absorbed, and even they don't propagate far through seawater (see ELF communication with submarines).
Third thing: EMP abilities are useless underwater.
However.
Classic EMP for frazzling every bit of electric equipment around you isn't the only option available. Have a little read of this Peter Watts blog post in which he discusses some fascinating research on the electric eel which shows that it is capable of remotely stimulating the motor neurons of prey from a short distance away (he also goes on to talk about fictional electric squid, which is even more directly related to your ideas).
Now, maybe that prey is in the form of your protagonists and their motor neurons, or maybe the things being interfered with are the bits of electronic and electrical equipment they're carrying. Maybe both! Nothing is gonna get fried at a distance, but you may find that sensitive equipment suddenly starts misbehaving in weird and confusing ways. Oh no, your targeting system has identified your buddy as an enemy! On no, your trigger-finger muscles have suddenly gone into spasm!
There's plenty of scope for fun with electrogenesis and electroception that doesn't involve trying to microwave things underwater.
