Government should insure power users - UMA
Posted Friday, October 25 2013 at 16:49
KAMPALA- Power consumers will not be subjected to higher tariffs if the government accepts a proposal by the Uganda Manufacturers Association (UMA), that it meets the extra cost arising from increase in fuel prices, inflation and exchange rates.
The proposal is contained in a September report about the proposed Automatic Tariff Adjustment (ATA) system. ATA is a mechanism through which the changes in the price of imported oil, exchange rate and inflation, which are crucial ingredients in the electricity sector, are factored into the consumer’s final tariff.
UMA recommends that the government insures electricity consumers against foreign exchange and imported fuel increases, should Uganda start implementing ATA.
Should the government accept the proposal, it would then liaise with selected commercial banks to forecast the prices of imported oil and the exchange rate of the shilling against the dollar.
‘Govt meets extra costs’
If the price of oil increases to levels above the projections, the government could then meet the extra cost or engage with specific banks, at a fee, thereby, shielding the customers from higher tariffs.
The same principle would apply for the foreign exchange rate. If, however, the prices of the two variables decrease, then the banks would keep the difference.
The Energy ministry officials, however, declined to comment on the matter referring us to Electricity Regulatory Authority whose officials were said to be out of office.
The September 2013 study, which was commissioned by UMA in March 2013, said this would meet the goals of ATA without compromising the affordability and stability of the tariffs.
The survey arose from a plan by the regulatory authority to change the electricity price setting mechanism to provide for monthly automatic adjustments to reflect movements of inflation rate, exchange rate and fuel prices.