It was wise to bring in Umeme — Dr Sebowa

KAMPALA - Dr Eng Frank Sebowa was the pioneer CEO of the Electricity Regulatory Authority (ERA) and oversaw the Umeme takeover. He spoke to New Vision’s John Ricks Kayizzi, and below are the excerpts.

Umeme became Uganda’s electricity distributor in 2005 under your watch. What were your aspirations?

The most fundamental was to ensure that private sector gets interested in our electricity sector. For the generation sector, we needed investors, but none were coming because the distribution sector was doing badly.

Then, in distribution, there wasn't much enthusiasm because the network losses were huge. Energy losses then were estimated at between 35% and 45%. Despite all that, we badly needed a private-sector player to bring in the money at a reasonable cost. Umeme came in.

Chief Executive Officer, Electricity Regulatory Authority (ERA), Eng. Dr. F.B. Sebbowa talks to the New Vision about power tariffs. (Credit: Ayiga Ondoga.)

What particular challenges did you encounter as a regulator?

First, the regulator itself was new. Besides, we didn't have all the right staff in place to deal with the regulation. Eventually, we built capacity. Secondly, the question of who should operate regulatory boards also hangs in the air. At that time, people were not used to paying cost-reflective tariffs.

There was resistance since they didn’t want to hear of self-adjusting tariffs depending on the performance of the economy. So, we had to figure out what the correct tariff acceptable to consumers. We also faced the challenge of getting the private sector in.

Was it wise to dismantle the Uganda Electricity Board (UEB)?

Yes, it was consuming more money and producing less electricity. By then, it had only mainly the Nalubaale dam. Since the opening up of the sector, we got many more other dams. That was not going to happen using only national resources. We needed some private sector money. The dismantling of UEB helped bring in initial managers of the electricity sector, who shared some experiences with our own people.

How has the energy sector changed in the last 20 years?

Previously, we lacked globally exposed managers who would efficiently run the system. We only had one school training people in electricity generation, and this was located in Jinja. Now, we have more skilled people. The huge energy losses also stood in the way of progress.

Now, through a tariff mechanism, where government penalises any player for inefficiencies leading to large losses, that has helped to reduce the losses. Before, no one was interested in refurbishing the network. After the private sector got in, they were keen to quantify the losses.

Then, ERA, as the regulator, imposed a particular clause where for each loss Umeme got rid of, they would get benefits. That has had a ripple effect for everybody. We were able to experience fewer losses, blackouts, and redundancies.

UEDCL truck loaded with electricity poles ahead of the company’s takeover of Kilembe Investments areas of operation in Kasese Municipality on Monday. (Credit: Benon Ojiambo)

When did you first learn about the coming of Umeme?

The energy ministry advertised and called upon any interested distributor to come in. Then, there were negotiations with Umeme. This outfit didn't come as Umeme. They came as some entity representing CDC from UK and Eskom from South Africa. It's later on that they adopted the name Umeme.

Was due diligence done on Umeme?

Due diligence was later on done by government. There was no bidding per se, but a response to a newspaper advert, after which government proceeded to conduct due diligence. To the best of my knowledge, you select an entity, then after you think you are making headway, you do due diligence discreetly. CDC had companies that had run electricity businesses in the Caribbean. Eskom, which was running South Africa’s power sector. These were enough.

Is it wise for the Government to place the distribution sector in the hands of UEDCL?

There are Ugandans who can do this business now that it has a reasonable amount of investment, especially on the generation side. Uganda currently has a surplus of electricity. It may remain a surplus for another 10 or so years. Additionally, the Yaka mechanism of paying for electricity, if well maintained, will help UEDCL get the money from consumers. Commercial losses are manageable now.

Workers offloading poles that were mobilised by UEDCL after taking over from PACMECS effective July 1 in Pader district. (Credit: Benon Ojiambo)

What do you think will be UEDCL's biggest challenge upon taking charge of the sector?

Investment finance, because operationally, Uganda needs to keep investing and expanding the electricity network with the intention of reaching every citizen. The government on many occasions lacks investment finance. And for the Government to get a loan, it needs a lot of documentation.

This is contrary to the private sector, where managers sit in a board meeting and the money needed for investment can be on the table within a week or two. The other big problem that UEDCL will face is staff. If their salaries are not that attractive, there will be a brain drain.

What do you say were your achievements at ERA?

First of all, to start as pioneers in regulation was critical. And we set a good foundation. For the first five or six years, we were the best regulators on the African continent. The verdict was reached through a study of African Development Bank.

Additionally, we licensed many power generation plants and brought down the energy loss levels by effectively regulating them. That in itself helped to stabilise the system. We also put up our own home where the bigger ERA is now sitting in the industrial area.

Lastly, to get our consumers to accept that electricity is not a charitable good.