Is ERA ripping off power consumers?

By Faridah Kulabako & Racheal Nabisubi

Electricity regulator, the Electricity Regulatory Authority (ERA), has been accused of misusing official statistics to rip off electricity consumers by setting high electricity tariffs.

Chris Mukiza, the Uganda Bureau of Statistics (UBOS) director for macroeconomic statistics, said this as he released the July Consumer Price Index in Kampala.

He said ERA does this by adjusting core inflation, the exchange rate and fuel independently, then adding them to get a final electricity tariff which increases the cost of electricity threefold.

Mukisa explained that ordinarily, fuel and the exchange rate are captured by UBOS under “core inflation”.

“You cannot adjust core inflation, the exchange rate and fuel independently, yet all are captured under core inflation. The tariff is being calculated from a wrong assumption and its triple jeopardy to consumers and must be addressed immediately,” he said.

Mukiza explained that the July headline inflation went up to 5.4% from 4.9% the previous month.

This was partly due to a steep rise in the Energy, Fuel and Utilities (EFU) inflation from 1.9% to 6% while core inflation rose to 5.4%, from 4.9% during the period.

He explained that the overall contribution of EFU to the basket of goods and services that measure inflation is 4.9% while electricity’s weight to EFU is 37.07%.

“Adjusting core inflation and exchange rate, and fuel independently, then adding them together is deadly and must be addressed,” Mukiza said.

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ERA speaks out

However, Benon Mutambi, the ERA chief executive officer, dismissed Mukiza’s assertions.

“We use the core inflation component to adjust for costs incurred locally only and the foreign exchange component where companies incur importation costs, so there is no double counting,” he said.

 “Companies import some of the equipment used in their day-to-day operations and if you do not factor in the exchange rate component, they might not be able to operate in future.”

However, Mukiza maintained that ERA is misusing UBOS statistics and said they (ERA) need to consult the statistics body to ensure proper usage.

“The exchange rate and fuel influence core inflation. There is no point in you adjusting core inflation, exchange rate and fuel independently. Do those companies import cables every month? Do you import fuel in shillings or in dollars?”

Mukisa said public officers should be careful while making policies because some of the policies made are counterproductive to other policy measures.

“In this case, the ERA tariff policy is counter-productive to Bank of Uganda’s tightening of the monetary policy stance by increasing the Central Bank Rate to curb inflation,” he said.

ERA is charged with regulating and setting the electricity tariff in Uganda. In the schedule of electricity retail tariffs for the third quarter 2015 published on July 14.

ERA considered the inflation adjustment factor of sh2.9 per unit for domestic and commercial consumers. The publication shows sh2.1 for medium industrial consumers, sh1.3 for large industrial consumers and sh3.1 for street lighting.

It also considered a sh37.3 for exchange rate adjustment factor for domestic consumers, sh31.8 for commercial consumers, sh31.1 for medium industrial consumers, sh22.4 for large industrial consumers and sh33 for street lighting.

For the fuel adjustment factor, sh13.3 was considered for exchange rate adjustment factor for domestic consumers and sh10.7 for commercial consumers.

There is also sh11.6 for medium industrial consumers, sh10.6 for large industrial consumers and sh10.9 for street lighting.

This saw end user electricity tariffs for domestic users increase by sh39.7 per unit to sh150 per unit for the first 15 units and sh558.4 for additional units.

 The tariff for large industrial users increased by sh20.2 per unit to sh328.7.