Regulator allows Umeme to increase operational costs
Power losses. Umeme will the last leg of its concession be required to cut down power loses to at least 12.78 per cent by 2025. FILE PHOTO
What you need to know:
- Despite the increase in distribution, operation and maintenance costs, ERA has also increased the power losses targets.
- Umeme will be expected to reduce power losses to at least 12.78 per cent by 2025.
Electricity Regulatory Authority (ERA) has increased the amount of money that Umeme can spend on operational costs eligible for recovery through the tariff during the company’s last-leg of the concession.
After a month of deliberation, the electricity regulator has loosened the grip on Umeme, allowing it more money to utilise on its operations.
“They now provided sufficient information that justifies the costs. The regulator works with the information it has. Initially they had hoarded information. ERA kept asking for information and they turn in this and the other until they eventually stepped up,” Mr Julius Wandera, the ERA principle communications manager, told Daily Monitor.
ERA has approved $52m (Shs192b) up from $41.8m (Shs154b) to be used by Umeme in 2019 on its distribution, operation and maintenance costs.
Umeme has also been allowed to utilise $54.7m (Shs202b) for 2020 and $57.4m (Shs212.7b) and $60.5m (Shs224b) in 2021 and 2022, respectively.
Recoveries
For 2023, 2024 and 2025, Umeme will recover $63m (Shs233b), $66m (Shs244b) and $70.4m (Shs260b) spent on distribution, operation and maintenance through the end user tariff.
Worth noting is that the approved monies are an increment from the previous figures where the regulator had allowed Umeme $40.8m (Shs152b) for distribution, operation and maintenance in 2020, $41.9m (Shs156b) in 2021, $43.7m (Shs163b), 2022, $47.9m (Shs178b) for 2023, $47.9m (Shs178b) in 2024 and $49.7m (Shs185b) in 2025.
However, Mr Selestino Babungi, the Umeme managing director, applied for a revision on grounds that the company needed additional income since it was to increase the number of customer connections from 80,000 to 300,000 annually as required by government’s free electricity connections policy.
In its defense, Umeme explained that there was also need for additional staff and equipment such as vehicles to maintain the lines if power reliability was to be achieved.
Cutting power losses
Despite the increase in distribution, operation and maintenance costs, ERA has also increased the power losses targets.
For instance, power loss target has increased from 13.79 per cent that was earlier approved to 15 per cent for 2019.
Umeme will also have a target of 14.40 per cent for 2020 from 13.01 per cent before, and 14 per cent and 13.47 per cent for 2021 and 2022, respectively.
Umeme will be expected to reduce power losses to at least 12.78 per cent by 2025.
In turn, the power distributor will also be expected to connect at least 245,000 new customers in 2019.
In its half year results, Umeme indicated it had registered 93,580 connections as at June 2019 meaning the company will need to greatly increase its connection figures if it is to meet the target.
267,050 new connections are expected in 2020 and 291,085 in 2021.
In 2022, Umeme will need to connect 317,282 new customers and subsequently connect 345,837, 376,963 and 410,890 for 2023, 2024 and 2025, respectively.
