Umeme officials inflated losses, legislators told

POWER distribution company Umeme inflated losses it incurred during transmission when its concession was being reviewed by the Government. This resulted into the hiking of tariffs, MPs heard.

 

Senior officials from the Electricity Regulatory Authority (ERA) told an adhoc committee of Parliament investigating the energy sector that in 2008, Umeme approached the Government over review of its concession. They said Umeme, however, inflated the losses, making the Government to incur more costs in subsidising it.

 

“In their report, which they claimed was based on research, Umeme indicated to the Government that the annual percentage loss of electricity in the country was 41% in 2008 and that they needed more subsidies to compensate for the losses. But in the contract, the losses were 33%,” said Benon Mutambi, ERA acting chief executive officer.

 

The matter was started by Kabale Municipality MP Andrew Baryayanga, who submitted that in 2004, the approved electricity losses by the Auditor General countrywide were rated at 28%.

 

“ERA officials should explain how the percentage loss jumped to 41%.The Government has continuously been paying Umeme huge amounts of money in subsidies to cater for the losses,” he said.

 

“Between 2001 and 2004, World Bank gave the Uganda Electricity Distribution Company $38m to curb the losses, but the losses instead jumped to 41%. How can this happen when huge amounts of money had been sunk in the sector?” Baryayanga added.

 

Kasilo MP Elijah Okupa, quoting the 2009 Gen. Salim Saleh report on Umeme, said the concession agreements signed between the Government and the power distributor were unfair, leading to the inflated costs and losses that made the Government incur a lot of costs in subsidies.

 

Mutambi acknowledged that there were indeed clauses in the amendments that were not favourable to the Government.

This prompted Kyankwazi Woman MP Ann Maria Nankabirwa to question the rationale of Umeme in buying less electricity compared to six months ago, but selling the same amount as when power production was higher.

 

“The problem with Umeme is that right now, we are facing loadshedding but the power bills we are paying remain the same as before. One wonders, because Umeme claims there is low power generation which results into loadshedding,” she said.

 

This came as ERA director of finance and administration Patrick Mwesige disclosed that when Umeme was granted the distribution licence in 2005, it was expected to invest $5m in the first two years on transformers and poles to curb low power voltage.

 

Mwesige said at the same time, the Uganda Electricity Distribution Company got a $11m loan from the World Bank to purchase equipment which was handed to Umeme. This raised questions that Umeme did not fulfil its investment obligation, but went ahead to claim returns on investment that they never made.

 

Mutambi further disclosed that last year, Umeme imported 12,000 faulty electricity metres from Rosant, a South African company, but the metres were destroyed before being supplied to consumers.

 

“Thirty percent of the metres did not meet the performance requirement. Some were fast, while others were too slow,”  he said.

 

However, Okupa questioned how the faulty equipment found its way into the country and the role of Uganda National Bureau of Standards in the whole saga. 

 

Although Mutambi explained that the metres were never installed, MPs were not convinced since power consumers had continued complaining of increasing electricity bills despite low consumption.