Electricity tariffs likely to be reduced

Ugandans are likely to pay less for every unit of electricity they consume for the last quarter of the year (between October and December).

Although the sector regulator, the Electricity Regulatory Authority (ERA) is yet to pronounce itself on the tariffs that shall be applicable for the last quarter of the year, all indicators seem to be pointing towards a reduction in the end-user tariffs for the period.

ERA considers different factors during the quarterly determination of the tariff and the performance of the Ugandan Shilling against the US dollar, changes in the electricity generation mix, international fuel prices, core consumer price index and US producer price index.

However, the exchange rate (performance of the Ugandan Shilling against the US Dollar) is the dominant factor considered during the tariff setting due to the fact that the majority of the inputs used in the subsector such as transformers, oil, cables are imported and hence paid for in dollars.

According to Dr Geofrey Okoboi, ERA's director economic regulation, the Uganda Shilling has appreciated by 0.82% against the US Dollar, from sh3630.22/$ in November last year to sh3600.38/$ as at August this year.

But the movement in August was a slight appreciation from sh3602.63/$ reported as at May 31 this year. 

On the other side, the international price for crude oil as at the end of September 2017 slightly increased to $49.6 per barrel compared to $49.2 per barrel registered in May this year.

However, this is still below $51.9 per barrel used in the determination of the 2017 base tariffs. 

This also represents a 4.64% reduction in international fuel prices from the base period despite a 0.81% increase from the third quarter. 

Should the tariffs be lowered, it shall be third successive time it will be happening since the year began, despite a hike in the first quarter of 2017 in relation to the last quarter of 2016.

In December last year, the regulator hiked the prices by 11% for the period January and March on the account of a depreciated shilling against the dollar from sh3,375.45 per US dollar in September to sh3,630.22 to get a dollar.

But in April, ERA reduced the tariffs for the second quarter of the year by a weighted average rate of 1.5% relative to the tariffs for the first quarter of the year.

The reduction was majorly informed by the appreciation of the Ugandan Shilling against the dollar by 1.2% from sh3630 per dollar in the base period to sh3586 per dollar at the end of February 2017.

Between July and September, the regulator lowered the end-user tariffs by a weighted average reduction of 1.7% still on the account of appreciation of the shilling against the dollar, reduction in international fuel prices and subsequent changes in the energy generation mix.

For that period, the Uganda Shilling appreciated by 0.76% against the US dollar from sh3630.22/$ in the base period to sh3,602.63/US$ as at end of May 2017.