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MPs renew calls to terminate Umeme contract

By Mary Karugaba

Added 18th August 2016 07:45 PM

The company still has more 10 years to go on its 20 year contract

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The company still has more 10 years to go on its 20 year contract

Only halfway into its contract, Ugandan legislators now want government to terminate the services of Umeme.

Meeting officials from Uganda Electricity Distribution Company Ltd (UEDCL), MPs on the natural resources committee wondered whether government still needs Umeme’s services.

They asked UEDCL officials led by the managing director Joseph Katera to explain why the company’s contract was never terminated after Parliament’s recommendation in 2014.

In 2014, MPs demanded that government cancels the concession agreement made UMEME and take on the supply of electricity to solve the problems of high tariffs.

They complained that the agreements were crafted to favour Umeme at the expense of Uganda in terms of return on investment, arbitration, buy-out conditions on termination of the contract.

This followed outcry from the public, politicians and manufacturers of the high cost of electricity in Uganda.

“Parliament two years ago recommended that the Company’s contract be terminated and government pays them off and then operates the system. What happened?  Are you also waiting for Parliament to demonstrate so that you take action?” committee chairperson Alex Byarugaba asked, sending members into laughter.

MP Keefa Kiwanuka (Kiboga East) said from the analysis, government would be better off operating its system rather than relying on a company that seems to be “taking from government rather than bringing”.

MPs Andrew Baryayanga, Thomas Tayebwa and Wamakuyu Mudimi complained about high electricity tariffs and wrong billing.

“Ugandans are tired of Umeme. The tariffs are high and we don’t think it will come down very soon.  Parliament I think should review the Company’s contracts to establish how much they get in profits visa vie what they pay government,” Baryayanga said.

The committee agreed to summon officials from Umeme and ERA to explain their concerns.

Katera told the committee that power distribution was handed over to a private operator because government did not have funds to run the business.

According to Katera, if Umeme’s contract is terminated, government would require over $150m annually to invest in the business.

“This is a capital intensive venture and I don’t think financiers are willing to lend government money to invest in a business like venture. They think the private sector is better placed to handle that,” he said.

Early 2005, Umeme signed five agreements with government to distribute electricity around the country.

These were the Lease and Assignment, the Support, the Power Sales and the Escrow Agreements (2005) as well as the Power Supply Licence (in 2005) agreements.

Through the Lease and Assignment Agreement, UEDCL leased its assets to Umeme to operate the business and invest in rehabilitation, upgrading and expanding the electricity distribution network for 20 years.

This means, the company still has more 10 years to go.

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