ERA boss grilled at electricity tribunal
Dec 17, 2014
The chief executive officer of the Electricity Regulatory Authority (ERA) Benon Mugisha Mutambi has been grilled by the lawyer representing electricity distributor, Umeme Limited, over modifications made to its supply of electricity license.
By Andante Okanya
The chief executive officer of the Electricity Regulatory Authority (ERA) Benon Mugisha Mutambi has been grilled by the lawyer representing electricity distributor, Umeme Limited, over modifications made to its supply of electricity license.
On December 11, Andrew Kasirye grilled Mutambi during the electricity disputes tribunal hearing held at Amber House in Kampala.
The grilling that started at about 10:15am, lasted for close to two hours, rotated around key issues of tariffs and licence status.
The dispute arose in 2012 when Umeme petitioned, contending that it was not given ample opportunity to appeal before the changes, which ERA made between 2012 and 2013, were gazetted.
ERA gazetted the amended licence following a mandatory review in accordance with the provisions of its Act of 1999.
Umeme is also displeased with the tariff methodology which determines end user tariffs based on inflation, exchange rates and fuel costs without inviting public opinion through a forum.
Prior, Mutambi gave the tribunal chaired by Charles Okoth-Owor, a power-point presentation of the amendment impact analysis.
Asked whether key stakeholders like the World Bank (WB) and the International Finance Corporation (IFC), were consulted before amendments were made, Mutambi said he was not sure.
“Not to the best of my recollection,” Mutambi stated, prompting Kasirye to query whether ERA informed Umeme of WB and IFC’s responses.
Mutambi replied in the negative, stressing that they had no basis to do so.
“We did not provide any responses from those interested parties, partly because we did not receive any responses from these interested parties,” Mutambi stated.
The other members of the tribunal were Moses Musaazi, and Anaclet Turyakira. Lawyers Joseph Byamugisha and Kabiito Karamagi, represented ERA.
Mutambi emphasised that ERA derives its statutory powers from Section 75 of the Electricity Act, explaining that the amendment is intended to enable Umeme recover its revenue.
He stated that the tariff allows for recovery of operating costs, invested capital and the 20% return on investment.
He explained that Umeme was set performance targets on energy losses, operating and maintenance costs, working capital and non-collection rate for a seven year period (2012-2018).
Mutambi asserted that the essence of this was to ensure that Umeme reduces costs and operates efficiently.
Section 75 of the Electricity Act stipulates that: “The tariff structure and terms of supply shall be in accordance with principles of tariff calculation and terms of supply prescribed by the Authority taking into account the licensee’s total revenue from tariffs covering all reasonable costs and a reasonable rate of return”.
Subsequently, asked whether he agreed with Kasirye’s statement that it was unfair and unreasonable of ERA to embark on the tariff modification before concluding the seven year review, Mutambi said it was a misconception.
“It wasn’t unfair and unreasonable to embark on the modification of the license,” Mutambi said.
Section 3.1.1 of Umeme’s license for Supply of Electricity states that: “Licensee shall be entitled to recover its costs of conducting the licensed activity as such costs are reflected in the retail tariff.
It said the move contravened the Electricity Application for Permit, Licence and Tariff Review 2007. The public forum would have showed public interests in the amendments.
The Authority, however, contends that it fully complied with all the procedural requirements provided for under Section 44 of the Electricity Act in effecting the amendment to Umeme’s license.
The modifications meant that ERA clawed back $14.6m (about sh37.827b) on account of excess energy sales and income taxes which Umeme did not pay to Uganda Revenue Authority (URA), but which consumers had paid in the retail tariff.
The practice in the past has been that ERA would allow the taxes to be included in the end user tariffs from which Umeme was obliged to pay URA. The amount was based on the projections of volumes of electricity that would be sold.
For 2012, though ERA had projected Umeme would sell 1,735 giga watt-hours (GWh) of electricity; which is what Umeme sold in 2011, the company actually sold 1, 937 GWh - according to the utility’s 2012 Annual Report.
Mutambi was the last witness of ERA. Proceedings were adjourned to January 29, 2015.