For close to a year, Uganda’s only bulk electricity purchaser, Uganda Electricity Transmission Company Limited (UETCL), paid thermal power producer, Electromaxx Shs3.6b for unsupplied power meant for Arua, an audit report has revealed.
The audit document seen by Daily Monitor, indicates that Electromaxx, which operates a 50 megawatt (MW) thermal power plant in Tororo has a six year power purchase agreement (PPA) with government through UETCL to supply electricity.
Government in 2019 amended the PPA to allow for relocation of 8MW to Arua in a bid to resolve the power deficit suffered in West Nile.
“A review of the amended Power Purchase Agreement (PPA) between UETCL and Electro-Maxx (U) Limited dated September 4, 2019 relating to Thermal Power Generation Complex at Tororo, the Electricity Regulatory Authority communicated the desire to modify Electromaxx license for purposes of relocating 8MW of the 50MW contracted capacity at Tororo to Arua and had asked the parties to negotiate an amendment to the PPA aligned to the terms agreed between ERA and the company, which was agreed,” the report reads in part, noting that to facilitate the action, Electromaxx was allowed relocation and civil works at a cost of $3.4m recoverable in equal monthly installments of $114,951 over a period of 30 months.
The agreement also required UETCL to pay capacity charges and finance costs to Electromaxx for the plant in Arua.
Capacity charges can be explained as booking fees, ensuring that Electromaxx guarantees that UETCL can acquire electricity from the plant as and when it is needed.
However, capacity test reports of the structure uncovered that Electromaxx had installed just 3.8MW instead of the agreed 8MW but was being paid by UETCL for 8MW.
“UETCL has been paying for both capacity charge and financing cost of the thermal plant at 8MW instead of the installed capacity of 3.8MW resulting to an overpayment of uninstalled capacity of 4.2MW,” the audit report notes detailing the amount of money that has been paid to the thermal electricity generator for over a year.
The total payments of Shs6.9b, the report noted, had been executed for capacity charges and financing cost with repayments detailed as Shs3b for capacity charge and Shs3.9b for financing cost, respectively.
The payments, according to the report, were effected for the period between November 2019 and June 2020.
“These payments were in respect of capacity charges and financing cost of 8MW instead of 3.8MW that had been installed by Electromaxx,” the report reads in part.
UETCL, however, disputed the overpayment period saying it was not one year but rather eight months from July 2019 to February 2020 as the inconsistency had been brought to light in March 2020.
The non-installed capacity of 4.2MW led to the payment of Shs3.6b (capacity charge Shs1.6b and financing cost Shs2b) to Electromaxx for the period July 2019 to February 2020.
“As for alleged overpayment for the period July 2019 to February 2020 [$458,000], the PPA provides for a mechanism for recovery of such amounts and scenarios. This mechanism is already being agreed with [Electromaxx] through a recovery plan,” UETCL wrote in a reaction to the audit.
However, according to the auditors, there is a risk of taxpayers losing Shs3.6b if recovery measures are not instituted.