Increase in power production alone will not bring down electricity tariffs

By Diana Taremwa

On January 19, 2015, New Vision ran a story on Uganda Electricity Generation Company Ltd (UEGCL) vows to bring down electricity tariffs with a 50% increase in the quantity of electricity produced over the next three years.

The story indicated that Government has adopted a new energy policy direction, which gives UEGCL the mandate of implementing agency for the construction of Government flagship projects of Karuma (600MW) that will be 85% complete by 2017, Isimba (183) MW that will be completed by the end of 2017 and construction of Ayago(600mw) slated to start by the end of 2016.

UEGCL’S commitment to bring down power tariffs that have haunted the electricity sector for a long time is commendable.

The reality is that power remains generally pricey for many in Uganda considering that more than half of the populations live below the poverty line. Yet, increasing power tariffs has become a common trend year after year. Even recently, power tariffs were increased where domestic consumers now have to pay shs.531 for each unit of power from the previous Shs.518.7.

However, UEGCL should also be mindful that increase in the power production alone will not bring down the tariffs. Remember this was the same promise made during the building of the construction of the 250mw Bujagali  hydropower dam but on completion the tariffs increased even after decommissioning of the thermal power that used to use millions of litres of expensive fuel. Government must first tackle the issue of corruption, mismanagement and lack of transparency in the power sector that remains the biggest reason for high power tariffs.

The sector has been marred with lack of transparency in deal making, profiteering and shady contracts. Construction of dams in Uganda has had a history of inflated costs, lack of commitment and unnecessary delays. For instance, the unit cost of the Bujagali hydro-power dam is still the most expensive in the whole world of power projects.

To date, the Karuma dam is still struggling to take off and already the price is also the highest in the world.  Secrecy continues to surround the terms in the Karuma contract moreover endless promises have been made on when this project will finally take off.

Electricity Regulatory Authority(ERA) has also proved an incompetent regulator. While S.16 of the Electricity Act guarantees the independence of ERA, the same law subjects it to government policing. These existing weaknesses in regulation are the reason why under its watch, power tariffs have more than doubled in the past few years. In 2006, for instance, the tariffs increased by 35% in June and 41% in November and in 2012, the power tariffs increased by 69% for domestic consumers and 56% for industrial users.

ERA has failed to find long term solutions to the high tariffs and the darkness that is engulfing the country.

The problem of high power tariffs in the power sector is deep rooted and attempts to solve it and deliver affordable power to Ugandans without tackling some of the above mentioned issues will only be futile.

The writer is a programme assistant with Africa Institute for Energy Governance