New dams won’t reduce tariffs

Recently, the media was awash with news of positive infrastructural development. It was expected that the commissioning of Isimba power dam would reduce the price of electricity in Uganda.
I am one of those who will disagree with this short-term euphoria given the skewed terms and conditions in the power generation agreements in favour of investors.
To begin with, it is envisaged that all the generated electricity will be consumed. Yet of the 965MW currently generated, only 627MW is consumed, leaving an excess supply of 13MW.
Who will utilise the additional power when even the few units we produce are lying dormant? The public should be reminded that the government promised Ugandans lower power tariffs when Bujagali Hydro electricity Dam was commissioned, but nothing of the sort happened.
The government also agreed to some of the unfavorable terms by accepting high return on investment by investors to build these dams.
Many concession agreements between Uganda and generation companies have constant costs like generation, transmission, debt service and staff costs that still have to be paid whether power is consumed or not. It is these costs that inform final price determination paid by the end users.
It is no wonder that, Uganda is the country that has the highest power tariffs paying 15 per cent higher than in the other East African countries such as Kenya and Tanzania.
The dams that are being constructed have not been financed by Uganda’s own money. It is being constructed using money borrowed from multinational companies. This impose a heavy debt burden on Uganda’s population.
With Uganda’s debt standing at at Shs41.3 trillion, the country will this financial year earmark 65 per cent of the total revenue collection towards debt repayment! Out of Shs5.6 trillion released by the Finance ministry this quarter, the biggest portion of Shs2 trillion, translating into 38 per cent, will go for debt repayment.
This cannot translate into lower power tariffs per se. Moreover, more Ugandans have slid into poverty according to Uganda Bureau of Statistics.
The government should, therefore, renegotiate Power Purchase Agreements (PPAs) if lower end user tariffs is to be realized both in the medium and long term frame work.