New electricity law: A game changer for energy sector

A new electricity law was recently enacted with MPs arguing that it will improve the regulation and governance of the electricity sector.

Over the past years, Uganda has faced severe energy constraints in terms of generation, transmission, distribution, innovation and financing, among others. John Odyek examines how the Electricity (Amendment) Act, 2022 will unlock the power and energy ‘gridlock’ across the country.

To address electricity bottlenecks, in 1997, the Government formulated a strategic plan to reform the power industry.

The plan was revised in 1999 and the Electricity Act was subsequently enacted to buttress gaps within the power distribution, generation, transmission and regulatory processes.

Yet many years, the cost of electricity for average citizens remains a nightmare.

Electricity, itself, MPs said, is not reliable. In some regions such as West Nile, MPs added, even those who can afford power, just can’t get electricity.

So, will the Electricity (Amendment) Act, 2022 solve the emerging power challenges?

WHAT THE ACT SAYS

President Yoweri Museveni, last year, assented to the law, which provides for tough penalties against theft of electricity and vandalism of electrical facilities.

For both offences, the law set a 15-year jail sentence or a shillings one billion fine upon conviction for vandalism of electricity infrastructure and power theft

The Act also permits generation and transmission licensed companies to supply electricity in bulk directly to industries among others, a move MPs said, will cut the cost of power and spur industrial growth.

The minister for energy, according to the Act, has also been clothed with powers to prescribe the procedure for the transfer of generation assets to the Government.

It also prescribes the circumstances under which a holder of a generation licence or transmission licence may supply electricity to persons other than a bulk supplier.

The Act removes inconsistencies in the law and introduces flexibility in its implementation and streamlines operations of the electricity sector by, among others, removing the monopoly of the bulk supplier of electricity.

Commenting on the Act, Speaker of Parliament Anita Among, who is also the Bukedea District Woman MP (NRM), lauded the legislators for passing the law, saying it is not only critical to the energy sector, but it will decisively deal with vandalism of electricity infrastructure.

Uganda’s access to the national electricity grid stands at 19% and off-grid connections mainly solar power connections stand at 38%.

The low level of electricity connectivity, MPs said, is a major barrier to economic development and poverty reduction across the country.

According to the Uganda Bureau of Statistics (UBOS) National Household Survey Report of 2019/20, connections to national grid electricity have dropped to 19% from 22% in 2017.

“Although power is available in Uganda, many communities, homes and businesses do not have access to electricity due to expensive grid connection fees including high house wiring fees. The national electricity connection policy seeks to reduce the high connection and inspection fees,” the UBOS report noted.

On the other hand, connection to solar power, the UBOS report added, has increased to 38% from 18% in 2017.

“The public says that the continued use of manual labour to connect people to the national grid, much as it is good because it provides employment to the youths, is very costly to the economy. Millions of Ugandans are waiting for the electricity connectivity to start businesses,” MPs said.

ENTER MINISTER

Yet, according to energy minister Ruth Nankabirwa, the goal of government, which directly rhymes with the new law, is to achieve 60% electricity access to grid electricity in Uganda by 2027.

Currently, the minister added, there is a suppressed power demand of over 500MW.

However, with the new law, Nankabirwa said, manufacturers will be able to purchase electricity directly from the power generators at a tariff of five US cents.

Nakabirwa added that the Electricity Regulatory Authority (ERA) will produce the net-metering regulations to support the rooftops and other industrial commercial power installations to exchange power with the main grid to contribute to improving the reliability and security of power supply.

“Under the hybrid customer connection financing framework to boost electricity connectivity, the Government has reduced the cost of a no-pole new customer connection from shillings 720,838 to shillings 470,000 through a subsidy of shillings 250,883 for each no-pole connection. The Government, through the Uganda Development Bank (UDB) has provided a credit line of shillings 270,000 for those who are unable to pay a lump sum of shillings 470,000,” she said.

With the new law, a customer near an electricity pole can pay a down payment of shillings 200,000 to get connected to the electricity grid and clear the balance of shillings 270,000 through a 15% charge on the energy purchased over a period of eight years.

POWER VANDALS

The Act came at a time when the country had suffered a trend of vandalism of power lines and pylons, transformers, poles, and other related power infrastructure.

In the last three years it is estimated, the Government has lost over $3b (about shillings 11.3 trillion) to the vandalism of electricity infrastructure.

Vandalism of electrical installations, ministry of energy officials say, increases operation and maintenance costs, causes power blackouts and loss of revenue from customers who opt for alternatives to the unreliable main grid electricity.

The Act also provides for the membership and funding of the Electricity Disputes Tribunal, additional functions of the authority, to increase funds allocated to the Electricity Regulatory Authority from 0.3% to 0.7% of the revenue received from generated electrical energy.

The Energy Development Fund is the other innovation that the new law has created to develop the sector.

The Act also prescribes circumstances under which a holder of a generation or transmission licence may supply electricity to persons other than a bulk supplier to industrial parks at a tariff determined by the government.

“The penalty for interference with meters and electrical lines, vandalism and illegal connections has been made stronger for receiving vandalised electrical facilities, repeat vandalism, and interference with electrical works,” the deputy chairperson of the committee environment and natural resources, Emely Kugonza, who is also the Buyanja East MP (NRM), said in her presentation on the law during the committee stage.

Attorney General Kiryowa Kiwanuka also defended the need for hefty penalties, noting that the purpose of the law is to deter criminals from committing crime.

“The people taking down the power lines and other infrastructure are not the common people down there. These vandals are very sophisticated people. So, we need to make the law very deterrent,” Kiwanuka said

Arguing that when a single tower is cut down, it affects power generation in other areas, the natural resource committee chairperson, Emmanuel Otaala Otiam, who is also the West Budama County South MP, said: “The cost should be met by the vandals”.

On the removal of the monopoly of distribution of electricity, Otaala’s committee noted that since Government owns the largest dams, transmission and distribution assets, it should be by policy for government to use the leverage to sell power to industries at a low cost as currently planned in industrial parks.

“Uganda Electricity Distribution Company Limited (UEDCL) already has the in-house capacity and thus should also be given the responsibility of distributing power to industries in the industrial parks at a tariff determined by the Government,” MPs said in their committee report.

Given the fact that foreign investors in the power sector such as Umeme and Eskom expect profits, Otaala said, there is a need for the Government to regain direct controlling power of the electricity sector to avoid unnecessary power tariff increments.

“Therefore, the Government's decision to regain control of the power sector would mitigate the costs for consumers,” he said.

On March 27, 2023, the Government regained control of the 380MW Nalubaale and Kiira power stations based in Jinja.

This followed the conclusion of a 20-year concession deal, which has not been extended.

For Bujagali Energy Limited (BEL), Parliament, in March recommended a special forensic audit into the operations of the foreign company.

During the consideration of the Income Tax (Amendment) Bill 2022, at Parliament on May 18, 2022, the House stayed the extension of a five-year Corporate Income Tax (CIT) waiver.

Instead, it granted one year, pending a parliamentary probe into the tax waivers.

“In the case of the Bujagali power project, the Government was in a poor bargaining position, it did not have the resources to fund the project, and the country could not afford any further delays,” Dicksons Kateshumbwa, Sheema Municipality (NRM), who chaired the six-person committee that probed Bujagali tax waivers, said.

Otaala noted that the government's other decision to invest in nuclear energy will also close the power demand gaps and boost development.

According to the National Development Plan (NDP), Uganda’s power-generating capacity is targeted at 40,000 MW by 2040.

“The President directed that we should get these middlemen out of the business of providing electricity to citizens and also manufacturing. Middlemen are looking at return on investment but the Government is not looking at return on investment. It will be looking at providing a service that must be cheap and available,” the state minister for privatisation and investment, Evelyn Anite, said.

WHAT MPS SAY

Eddie Kwizera, Bukimbiri County (NRM)

All companies working in the electricity sector do not offer good services but are making money.

Emely Kugonza, Buyanja East (NRM)

I want to strongly believe that people who are vandalising electricity lines must be insiders — technical people who even connive with the Police.

Geoffrey Ekanya, Tororo North (FDC)

The Act will allow industries to purchase power directly from power generation companies by eliminating bureaucracy.

Medard Sseggona, Busiro East (NUP)

The Rural Electricity Agency (REA) should be re-organised and disbanded so that the Government directly supplies power to rural areas.

Milton Muwuma Kalulu, Kigulu South (NRM)

It is necessary to increase the penalties for vandalism to counter the mushrooming scrap dealers who always source their raw material from vandalism of state property.

Abdu Katuntu, Bugweri County (Independent)

Disrespect of public property calls for a strong punishment for people who perpetrate the act. We need very strong and deterrent measures to curb vandals.

This story was first published in Saturday Vision's The House on April 1, 2023