By the end of this month, December 2024, the Electricity Regulatory Authority (ERA) will have determined the applications by the Uganda Electricity Distribution Company Limited (UEDCL) for: a license for the distribution of electricity in Uganda, a license for the sale and supply of electricity in Uganda plus the applicable tariff performance parameters.
The applications by UEDCL were made ahead of the natural end of Umeme’s 20-year concession, come March 31, 2025. Government chose, UEDCL, a state company to take over from Umeme as it seeks to get back the control of crucial sectors.
As part of its mandate, ERA hosted a public hearing in respect to these applications on October 22, 2024. In this interview, ERA CEO Eng. Ziria Tibalwa Waako, shades more light on what the UEDCL applications mean for Uganda’s electricity industry:
Why was the public hearing important?
The public hearing gave an opportunity to the nation to listen to the content of UEDCL’s applications. Subsequently, the public was invited to make comments, raise questions and/or objections on what they think the authorities should take into consideration while determining these applications.
UEDCL submitted three applications. A license for the distribution of electricity in Uganda, a license for the sale and supply of electricity in Uganda plus an application for the tariffs that they are supposed to charge – the tariff structure that is informed by the performance parameters that enhance efficiency in the operations of the distribution utility.
The distribution license relates to the entire country, save for West Nile Rural Electrification Company (WENRECo) and Kalangala Infrastructure Services Limited (KIS), whose licenses are still valid.
Otherwise for the rest of the distribution business, including that of cooperatives (Bundibugyo Energy Cooperative Society Limited (BECS), Pader Abim Community Multipurpose Energy Cooperative Society (PACMECS), Kyegegwa Rural Energy Cooperative Society (KRECS) and Kilembe Investments Limited (KIL), and the distribution network that Umeme has been managing, will now be the responsibility of the UEDCL.
Waako speaking at the public hearing
What have been the major concerns from the public?
The public is largely concerned about reliability of power supply. They want a more consistent electricity supply – better than what Umeme is giving them. The public is also concerned with safety – they are wary of blown equipment and other accidents courtesy of power surges and the like.
And then finally the public is concerned about affordability of the electricity. These have been responded to. In its presentation, UEDCL also indicated how it intended to reduce the operational and maintenance costs.
When will the UEDCL application be determined?
The public hearing was part of the process, after we had received the application and done a preliminary review. We shared our feedback with UEDCL initially, especially in areas where we felt the information was inadequate or incomplete.
They responded and ensured their application was complete. We then issued them an invoice, which they paid to qualify for a substantive license application. We issued public notices for 30 days – in the print, digital and television media – and we received written comments.
The application was posted on our website and in our resource centre for the public to review and comment and question their areas of concern before we crowned our consultative process with the public hearing.
Following that, the review of all the comments and queries that we received, together with the content of the application is ongoing and the application will be determined before the end of December 2024; way ahead of the end of the Umeme concession on March 31, 2025.
This is to allow the companies time to transit since they cannot recruit or do anything without the license. So that is why the determination will be before the end of this year, so that the transition activities can be legally supported, enabling a smooth transition.
What is your take on UEDCL’s Shs 4 trillion budget?
The Shs 4 trillion is for three years – effective April 1, 2025 through to 2027.
A comprehensive comment on it cannot be made, however, before we review it in detail. Fortunately in their presentation at the public hearing, they broke down their budget.
They are looking at buyout amounts because Umeme has invested significantly over the years and their assets still have a lifetime that cannot be front-ended to hike the end-user tariff unnecessarily. It will have to be recovered gradually. That’s what we call the buyout amount.
They have also quantified the investment into the network because we are increasing the demand with new connections while we are adding value and increasing productivity. This means we have to keep upgrading the network so that it is robust enough to cope with the demand.
UEDCL also presented the distribution, operations and maintenance costs. Rotting poles and overloaded transformers need to be replaced.
The detailed breakdown has enabled us to review, benchmark costs, compare with best international practices so that we are able to determine the viability of their budget.
Our conclusion would be that the money requested is less or more than what is required. Perhaps they have left out a quality item here or there. This we will determine, by the end of December.
UEDCL’s budget
It was noted that 20 per cent of the network requires an upgrade – this will need some adequate investment quickly, not so?
Indeed the reality is that we need to appreciate that for the network to improve, it will require capital investments. This capital investment, however, is paid by you and me, the end user of the electricity.
Therefore, it has to be done gradually so that we don’t suffocate the economy. Because if the tariff is hiked rapidly because $200 million, say, is needed, our manufactured products will become unaffordable both locally and internationally.
So, the reality is upgrading the distribution network can only be a gradual process. That said, we still target achieving access for all by 2030.
Therefore for all those areas which have no access to clean energy, we are working with the Ministry of Energy and Mineral Development to ensure that we extend the grid, mini grids and solar so that the entire population has access to clean energy.
Where does this leave the proposed Uganda National Electricity Company (UNEC)?
The rationalization of the electricity supply industry is still ongoing. Actually this very activity that we are undertaking is part of the cabinet decision towards the rationalization of the electricity supply industry.
You may recall that it was decided that licenses of the private players within the distribution concession shouldn’t be renewed at their conclusion, including that of Umeme.
What happens after the three years UEDCL applied for?
Well, they will be required to reapply. Even if they are in UNEC, it will not change much as we will still have separate licenses for generation, transmission and distribution.
What is your reaction?
