An aerial view of Bujagali dam. The 250MW Bujagali Hydropower Plant operated by Bujagali Electricity Ltd (BEL) is operating at an average plant factor of 68 percent. COURTESY PHOTO
The Finance minister used Thursday’s Budget Speech to explain the government’s stall insofar as shading off Uganda’s reputation of having the most expensive electricity cost across the sub-Saharan region. Minister Matia Kasaija revealed that in a bid “to mitigate a rise in electricity tariffs […the] government has granted an income tax exemption to Bujagali Energy Limited for one year up to 30th June 2026.” Basking in the glory of the Uganda Electricity Distribution Company Limited (UEDCL) takeover of distribution of electricity saving the taxpayer Shs250 billion annually, the Finance minister said the national grid could not be in a better place. Despite ongoing efforts to scale down its unit cost, electricity has remained a largely expensive commodity to be accessed by an average Ugandan. This is especially so for those in the private sector with the price elasticity of electricity, as of March 2021, pegged at $0.157 per kWh for businesses.
Households, per the 2021 prices, pay $0.189 per kWh. Six years ago, the country’s electricity regulator, the Electricity Regulatory Authority (ERA) approved new electricity end-user tariffs to be charged by the electricity distributor for the supply of electricity from January 2022. ERA, accordingly, provided for a new qualification criteria for the lifeline tariff. This was only for domestic customers whose consumption does not exceed 100 units per month. Based on a six-month running average, domestic customers qualify to purchase the first 15 units charged at a lifeline tariff of Shs250 per kWh. Although tariffs have marginally reduced, access and demand for electricity in Uganda remains low.
This is despite the country’s huge hydroelectricity generation capacity, with the tariff structure for the rest of the consumer categories, including commercial, medium industrial, large industrial, and extra-large industrial consumers, remaining unchanged from the previous quarter. Notwithstanding, nationwide access to electricity increased from 11 percent in 2010 to 24 percent in 2019. Subsequently, the cost of electricity reduced marginally from nine US cents and 16 US cents in 2013 to eight US cents and 9.8 US cents for extra-large and large industries by 2018 respectively per a 2022 Energy ministry sector report. Experts say whereas it has reduced, the cost of electricity remains higher than the targeted five US cents per unit.
Researchers at Makerere University’s Economic Policy Research Centre (EPRC), for one, explain that the cost for medium industrial consumers is 15.6 US cents per unit while for commercial consumers (cottage industries) is 17.5 US cents per unit. “This increases the cost of production and reduces industrial productivity, which renders most industries uncompetitive in comparison to their peers in the region yet industries, especially small-scale cottage industries are the engines of growth and job creation,” the researchers stated in a 2023 report, adding that the high costs inhibit access to cheap electric power, render industrial and agricultural production less competitive, and also expose the majority of less fortunate Ugandan households to health hazards as a result of continuous use of kerosene.
Expensive generation
Saturday Monitor assessed the prices of electricity at major and minor electricity generation facilities across the country. We intended to examine what it costs the electricity transmission company to wheel electricity from them before it is distributed to the end-user. Our findings indicate that Uganda Electricity Transmission Co Ltd (UETCL) incurs worryingly high costs in undertakings to transmit power from these facilities. For example, the 250MW Bujagali hydropower plant operated by Bujagali Energy Ltd (BEL), which we established, is operating at an average plant factor of 68 percent. This renders the plant underutilised despite the contractual average availability of 99 percent.
Mr Alaister McDougall, the BEL general manager, explained that electricity from the facility continues to attract a higher fee than any other generation plant due to its model of financing. “You cannot compare Bujagali against Isimba, Nalubale, Karuma, or Kiira because they have not been financed the same way that we have,” Mr McDougall noted. “The debt for those power stations was consolidated into the sovereign debt, meaning that they do not have their debt repayments applied against their operating costs. We are the only facility in the entire grid that is getting its debt repayment factored into the tariff,” he added. Mr McDougall also disclosed that the underutilisation of the plant’s generation capacity has continued to influence its tariff.
“Even if we are to generate at full capacity, it will get us to about 6.2 US cents/kWh, because we still have the loan to pay,” he reasoned, adding, “If you look at Isimba, Nalubale, and Kiira, all their loans are paid off, and the only cost they now meet is the operating cost, so they are down about 1.1, 1.2 US cents/kWh. But probably in seven years, when our loans are paid off, we will be down about 3 or 4 cents a unit.” A further disaggregation of the plant’s electricity transaction with UETCL indicates a constantly high tariff charge, higher than the government’s longtime dream of five US cents/kWh. In April 2025, BEL’s last point tariff stood at 8.11 US cents/kWh, slightly higher than March’s 7.29 US cents/kWh.
We understand that both April and March would have seen a tariff of 6.3 US cents/kWh and 5.8 US cents/kWh if UETCL was off taking the plant’s total energy generation at 100 percent. For the past 10 years, records accessed by this publication, from both UETCL and BEL, have indicated that the plant has been dispatching at an average plant factor of 68 percent. We also established that, for the past four months, the plant has been dispatching at an average of 70 percent. In 2024, it dispatched 64.2 percent; 2023 at 68.2 percent, and 2022 at 68.5 percent.
Progressive reduction
Mr Julius Wandera, the ERA director of corporate and consumer affairs, admitted to Bujagali hydropower dam’s high tariffs. He, however, hastened to add that it had progressively reduced though still far from the campaigned five US cents/kWh. “The (Bujagali) tariff came from 13 US cents to eight US cents right now because the government kept waiving off income tax for them because when you get taxes out of their money, then their tariff does not come down but their tariff will significantly come as low as US 4 cents once their loan payment is complete,” Mr Wandera said, adding that, while it has successfully reduced tariffs for industrial consumers to ¢5, the electricity sector hopes to systematically reduce tariffs of other classes of consumers such as public small scale industries, institutions and utilities, schools, including domestic consumers.
Currently, institutional consumers like public hospitals, army, police and prison barracks, hospitals, schools, etc., are slapped a tariff of Shs360 per unit. Elsewhere, hospitals and schools, who use electricity for institutional cooking, are charged Shs450 per unit. This is slightly higher than that of domestic consumers at Shs412 per unit (approximately ¢11/KWh). Two Thursdays ago, Mr Geoffrey Feta, the Ayivu Division East lawmaker who doubles as the vice chairman of the parliamentary Committee for Environment and Natural Resources, told us that, whereas it stood on a higher end, the tariff is progressively reducing. According to Mr Feta, the takeover of all electricity distribution concessions by the government (Uganda Electricity Distribution Co Ltd or UEDCL) and the recent exit of Umeme Ltd represent a major strategy to reduce the tariff since the private players are profit-driven.
“The (high) cost per unit of electricity is one of the reasons why the country took a direction not to renew the concession agreement of middlemen like Umeme Ltd because electricity is a service you cannot give to a businessman to offer since they are looking for profits and in the process of doing investments on our electricity, he must get returns,” he said. Since the exit of Umeme Ltd, the Electricity Regulatory Authority (ERA) has issued fresh tariffs said to be lower than what was previously charged. “That means the direction the country is taking is to offer services of electricity to the citizens at a much affordable cost. It is an ongoing discussion, we have not reached the tail end where we want to be, but it is a move in the correct direction,” Mr Feta said.
Once the burden of Umeme is offset totally and the capacity of UEDCL is built to be able to offer services in a very stable manner, the cost will further come down since it is a government company that will operate purely as a service entity to offer services to citizens, not as a profit entity, Mr Feta stated. “Now that we have government entities offering electric services, the cost will continue to come down and become affordable for every citizen. The trickle-down effect will be that they will be able to have jobs created, self-employment for youth because now electricity is affordable,” Mr Feta opined.
Finance minister Matia Kasaija in Budget Speech
“Government has granted an income tax exemption to Bujagali Energy Limited for one year up to 30th June 2026 in accordance with our contractual obligations. This is intended to mitigate a rise in electricity tariffs. […] several milestones have been registered in the development of our energy infrastructure. These include: one, installed electricity generation capacity has now reached 2,051.6 megawatts; two, the electricity transmission line network expanded by 874.8 kilometres, to 5,140 kilometres; three, access to electricity has increased to 60 percent from 57 percent in FY 2023/24, after connecting over 197,000 new customers; four, following the Uganda Electricity Distribution Company Limited (UEDCL) takeover of distribution of electricity, the cost of power has reduced by 14 percent, saving consumers Shs 250 billion annually.
A tariff of USD 5 cents per kilowatt hour has been achieved for all extra-large consumers of electricity (those consuming above 1.5 megawatt) at off-peak.” “I have provided Shs1.04 trillion next financial year 2025/26 to undertake the following priority interventions: one, additional investment in UEDCL to ensure affordable, efficient, and reliable distribution of electricity to consumers; two, enhance access to electricity through implementation of the $638 million Electricity Access Scale-up Project covering grid expansion, connectivity and clean energy options for 1 million new electricity connections.
Further, [the] government will continue investing in priority transmission lines and substations […]; three, commence development of new power generation plants to meet the growing demand. These include new hydro-power plants at Ayago and Oriang in Nwoya District, and Kiba in Oyam District, the development of nuclear power in Buyende District, and rehabilitation of Kiira-Nalubaale Power Plant.”
