Thursday April 18 2013

As 2013 wears on, are we entering a dark age?

By Karoli Ssemogerere

In 2012, Ugandans with gratitude settled two major debts. First was the retirement of a shareholder loan that Umeme took out to finance its operations in Uganda. This shareholder loan was paid off using the proceeds of the IPO. In the same year, the Ugandan taxpayer “received” the 250MW Bujagali project, prompting the turning off of thermal plants, some of which left the country with a trail of unpaid domestic debts. These thermal plants are supposed to enjoy direct backing of the taxpayer who, until last year, paid a direct subsidy to settle their bills. As Bujagali came closer to fruition, the government lost the urgency to settle their bills in a timely manner.

As a result, many former noise and air polluters are gone- but with a cost. No sooner had the thermal generators left town than the warning bells came in. First was the news that load-shedding would begin mid last year. The second warning has been directly related to the failure of Bujagali -- for various highly technical reasons -- to generate the full 250MW.

The reserve power is more expensive and the water flow rate insufficient to support higher generation. Hydro-engineering has been in the news in the past with highly inflammatory debates taking place in the media. The public still remembers the spat between Internal Affairs minister Hilary Obaloker Onek and Energy Permanent Secretary Kabagambe Kaliisa over the metrics and soundness of constructing a parallel dam at the site of the Source of the Nile.

Bujagali has claimed a number of high profile casualties. First is the taxpayer- delays in constructing Bujagali and its economics brought its final cost way above the conventional cost of a unit of hydro-electric power. Primary school pupils and those in lower secondary school spend a lot of time parroting how cheap hydroelectric power is; and how responsible it was for Uganda’s past industrial growth. In Museveni’s Uganda, this has unfortunately not been the case. Our domestic capacity, partly due to brain drain and partly due to the backwardness of our economy, has made it difficult for us to ‘procure’ that cheap hydroelectric power. Nyagak, a mini-hydro, almost failed to take off after a contractor abandoned equipment under water.

This week, Karuma is making headlines after Cabinet endorsed the recommendations of the Inspector General of Government, Ms Irene Mulyagonja, in which she asked that the procurement be set aside. Two Chinese companies have been battling each other to construct the dam. A vibrant debate on social media -- Facebook -- has highlighted the shortcomings of the IGG’s report.

Due to “lack of funds”, the IGG and her team were not able to conduct on-site due diligence to verify the claims of the complainants and accused. At least Judge Mulyagonja was honest in making this observation. Everyone remembers how a team of officials from the Ministry of Finance and Bank of Uganda visited ‘Westmont’ in Asia before handing over the nation’s largest commercial bank to them and the bleeding that followed, almost shutting down the nation’s financial sector.

Sound procurement requires some form of capacity building and sharing knowledge. Karuma, like Bujagali, are hell-bent on optimising nature or waterfalls to produce electricity. Uganda’s mass power model is still dominated by costly transmission over long distances of the final product. This model looks at power consumers as ‘markets’ who are able to buy a product at the market rate at will. So, as long as people in Kampala can still afford to pay for power at whatever price Umeme and the Electricity Regulatory Authority say, the role of the distributor -- Uganda Electricity Transmission Company Limited -- is to deliver power to them.

Unfortunately, the power consumer does not have options to dump expensive power in favour of cheaper alternatives. A distribution monopoly like the one Umeme enjoys also makes it easier for the government to collect ‘lazy’ taxes like VAT. By enforcing higher rates, Umeme is unlikely to lose revenue from load-shedding, it continues to sell less power at a higher price.

But there is another new class of electricity consumers served by the Rural Electrification Agency and independent power cooperatives. Their power is locally generated. The deal is that it does not run 24 hours but it is 100 per cent on for 18 hours. It costs more but these thermals are always running unless the generator breaks down or someone steals the money meant to purchase fuel. This model, if well managed can compete with the unreliable misbranded cheap hydroelectric power.

As it is, unreliable power will soon take its toll on the fragile economy. Already, the remaining virgin forest is now being ravaged for charcoal. Demand for the “black electricity” has never been higher. The commodity that once cost Shs3,000 a sack is edging closer to Shs100,000 retail. Very soon we will buy it in paper bags and all the attendant strain on the environment. If this is not a dark age, then what can it be?

Mr Ssemogerere, an attorney and social entrepreneur, practises law in New York.