As Umeme steps aside, returns Government Utility Service

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OPINION

By Peter Kaujju

This week, Uganda’s Energy Sector will register a historic event, the retransfer of the electricity distribution assets to the Government of Uganda as the second phase of sector reforms begin to set in.

The assets comprise the electricity network of over one million poles, 17,000 transformer zones, 76 substations, and 51 service centers by Umeme to Uganda Electricity Distribution Company Limited (UEDCL).

Umeme, which has been Uganda’s largest electricity distribution company, accounting for 97% 20 years ago, came into being in 2005 after a rigorous exercise when the Government implemented the Structural Adjustment Programmes across the board, setting new priorities to serve the country’s needs at the time.

Prior, the country had a handful of citizens connected to the national electricity grid, which the Government-owned Uganda Electricity Board (UEB) operated, energy losses were at 40%, bloated uncollected bills, many safety related incidences, loadshedding and poor service, amongst others. 

The years leading to 1999 saw the electricity sector experience radical reforms, including breaking the monopoly of UEB to create room for entry of independent power producers and distributors.

The Electricity Act, 1999 and the Public Enterprise Reform and Divesture (PERD) Statute, 2003 were the key vehicles through which major Power Sector Reforms were conducted with the intention of increasing investments Energy Sector, causing financial and operational efficiency and drive access to electricity amongst others.

Available documents indicate that the bidding for the Distribution Concession commenced on June 24, 2001. On September 7, 2001, the Divesture and Reform Implementation Committee (DRIC) approved five bidders: CDC Capital Partners (UK); Cinergy Global Power (US); Electricity Supply Board of International Investment (Ireland); Union Fenesa International (Spain) and Eskom Enterprises (South Africa).

However, during the bid process, CDC Capital Partners, which was now CDC Globeleq and Eskom Enterprises, formed a consortium.

In the process, other bidders withdrew their bids. After a period of nearly three years of protracted negotiations on issues of tariffs, investment amounts and protection of the investment, the consortium formed a local company, Umeme Limited on May 6, 2004.

On May 17, 2004, the Concession was signed between the Government through UEDCL and Umeme Ltd, granting the latter a distribution licence and a supply licence was issued by the ERA.

Dr Fred Kabagambe, former Permanent Secretary, Ministry of Energy and Mineral Development, recalls that the beginning was rough and rocky, but eventually it paid off through the gains registered.

“In the short term, the Umeme Concession was faced with a shrinking and unpredictable business environment as a result of limited power, but we overcame. While the Company was supposed to invest $5m in the first 18 months, the Company invested $10m. In the long term the Concession attracted good investments outside Uganda,” remarks Kabagambe.

As the curtains are drawn for Umeme’s distribution journey in Uganda, Uganda’s former Minister of Natural Resources, Gerald Sendaula, who has held several senior ministerial positions, says the last 20 years have seen remarkable progress for Uganda’s electricity sub-sector.

“Having served as a junior Minister for a long time in the Government of Uganda, I was appointed Senior Minister for Natural Resources in 1996 when load-shedding was at its peak. There was little electricity to transmit and distribute from Owen Falls Dam. When one part of the city or country had power for two days, the other was off. There were so many hurdles that we needed to overcome and deliver solutions as the line Ministry at the time to the people of Uganda,” recalls Sendaula.

Sendaula says they had a critical task to dismantle an old entity called the Uganda Electricity Board which was riddled with inefficiencies, but also unreliable supply.

“The task was daunting and we had many engagements, including in Parliament of Uganda through the 1999 Electricity Act, which paved for the creation of Uganda Electricity Generation Company Limited, Uganda Electricity Company Limited and Distribution paving way for private sector inflow through Umeme,” says Sendaula adding that “Looking back at this journey, I am very proud of the strides that we have made as the energy sector of Uganda.”

At that time, as Minister of Natural Resources, Sendaula says he inherited a complicated portfolio because demand for more electricity was increasing due to a return to peace and people were investing more.

“So, there was huge demand for power both for domestic use and for industries. Before the merger of the ministries, there had been a project to get a bypass within the water of the River Nile in Jinja to create a [hydropower] generation [plant]. This had been worked on, but had not realised any energy. So, I was under pressure because out of the original 18 turbines at the Owen Falls Dam, only 11 were functioning. With my general manager of the Uganda Electricity Board, Simon D’Ujang, we would move up and down to find out what was going on in Jinja, to ensure that we get lines repaired,” recalls Sendaula.

Additionally, he notes that after a World Bank team visited, they commissioned a team of experts to establish how viable a second hydropower generation plant in Jinja would be – and they produced a report that said there was little that could be achieved because this would draw water at almost the same place.

This, he says, caused a big challenge and would later call for numerous trips between Kampala and Washington in the United States of America for support to the sector.

“We got a recommendation that UEB should be split into three: generation, transmission and distribution. To implement this, the study went further to recommend that generation can have government participation – if Government can get the resources and if the government does not have the resources to participate in generation, then transmission should be wholly run by the government because it is Government that has a political challenge to distribute power. Distribution should be totally out of Government hands, and this happened,” he recalls.

As Umeme bows out of distribution, electricity coverage stands at 62% (off grid 38% and 21.4% on grid) compared to 4% in 2005. Adieu

The writer is the Head of Communications Umeme Limited