ERA to hike power tariffs

 

UGANDA Electricity Regulatory Authority (ERA) is considering hiking power prices next year in a direction that will ensure the energy sector meets its financial needs to enable reliable supply.

 

The regulator proposes that the subsidies government has been injecting to shield domestic consumers from the high electricity prices be removed instead use the huge sums of money to start new generation, transmission and distribution projects.

 

“We need to adjust the tariffs upwards to cost reflective levels, reduce the pressure on the government budget,” Benon Mutambi, the ERA acting chief executive officer, explained.

 

“(This) will lead to improvement in investor confidence, increased investment by independent power producers and thus leading to increased availability and supply of electrical energy.”

 

The suggestion comes at a time when government is facing difficulties in meeting the subsidy requirement not only because they are too high but are difficult to budget for without creating unnecessary domestic arrears.

 

It is estimated that subsidies for this year alone amounted to sh600b which is equal to 6.2% of the total budget allocation and 26% of the combined budget for health, agriculture and education. But only 12% of the Uganda population access electricity.

 

Government’s failure to clear the arrears has sent wrong signals to investors regarding its creditworthiness and commitment to meet the obligation yet there is still need to attract more private sectors to supplement public investment.

 

Now the regulator is reviewing the tariff to ensure to incorporate additional costs arising from fluctuations in the exchange rate, inflation and fuel prices are automatically passed over the consumer every month to enhance the long term financial sustainability of the sector.

 

One of the options is to increase domestic consumer prices to the average of sh587 per unit from the current sh386. But this is not the true cost as government pays additional sh460. The actual cost without subsidy would be sh846 per unit.

 

The new proposal also wants commercial consumers to pay sh519.5 from the current sh358.6. If the proposal is endorsed, medium industries will pay sh493 per unit from the current sh333.2.      

 

Large industries will have to pay sh389.5 per unit up from the current sh185. Then street lighting will cost sh528 per unit from the current 364.3.