ERA plans to raise power tariffs by 36%

Regulator seeks to raise power tariffs

Kampala

Tariffs for domestic power consumers are set to increase by 36 per cent if new rates being mooted by the Electricity Regulatory Authority are implemented. A leaked schedule of the proposed rates obtained by Daily Monitor indicates that consumers will pay Shs524.5 for every unit compared to the current Sh385.6.

The new rates are informed by the government’s decision to do away with the Sh396 billion subsidy it has been paying to the power generators and distributors, ironically, to cushion power consumers from higher tariffs.

Energy Minister Irene Muloni was set to announce the new tariffs that are to take effect on February 1, but the press conference was called off by the government Media Centre at the last hour. Officials later said she was yet to get Cabinet approval to announce the new tariffs.

But according to a schedule, commercial consumers shall pay Shs487.6 up from Shs358.6 per unit, medium industries Shs458.9 instead of Shs333.2 per unit and large industries Shs312.8 instead of Shs184.8 for each unit consumed.

The regulatory authority’s spokesperson, Mr John Julius Wandera, told the Daily Monitor: “It was because the Cabinet had not come up with a position paper on the proposals by the regulator to increase tariffs.”
Umeme (U) Ltd, the electricity distributor, will reap Shs236 million monthly for each single unit of electricity consumed by the 450, 000 domestic consumers. Due to a small industrial base, most of consumers are domestic.

The tariffs come at a time when consumers are enduring 12-hour load-shedding because less power is generated, and, thus, complaints that they pay the same bills they used to, although they now use less power.
Of the five East African countries, Uganda has the second highest tariff, second to Kenya.

The Private Sector Foundation Uganda (PSFU), an outfit of 157 Uganda business associations, corporate bodies and major public sector agencies, has protested that this will worsen business conditions in the short term.

PSFU Executive Director Gideon Badagawa said yesterday the new tariffs would ‘add to the cost of doing business’ since business entities would be ‘paying more for less power’.

Hindering businesses
“The new tariff will eat into the profitability of businesses and as a result, impact on the number of people firms could have employed,” he said. He urged the government to channel the money from the subsidies on thermal generation plants to the Energy Fund and then use it to put up cheaper sources of power.

Last October, ERA sought to increase the tariffs to factor-in the depreciation of the Uganda Shilling and the high international oil prices. The regulator first raised electricity tariffs in April 2005 from 171.4 per unit to 212.5 per unit for domestic consumers whereas for industrial consumers, it rose from 60.4 to 71.9 per unit.

In the past, however, the government had come out strongly against the increases, something it is unlikely to do now because it spends at least Shs607 billion annually, according to an official from the energy ministry, to subsidise thermal power, money it has often been at pains to release.

Since then, however, the Shilling has strengthened against the US dollar, inflation has reduced from 31 per cent (October) to 27 per cent (December), though the price for oil, now $101 (Shs247, 450) a barrel (158.987 litres) is projected to raise owing to the stand-off between the West and Iran, a major oil exporter, over the Strait of Hormuz.

The factors considered in arriving at the tariffs include power acquisition costs, operation and maintenance costs, investment related costs, return on investment as well as adjustment factors for system losses, inflation and foreign exchange.

Removal of the subsidy means the Uganda Electricity Transmission Company Ltd now has to ensure the timely remittances of costs to the thermal generators Aggreko, Electromaxx and Jacobsen and, therefore, ensure stability of power supply.