MPs end Umeme monopoly as electricity distributor

Parliament has passed the Electricity Amendment Bill, 2022, which among others, permits generation and transmission licensees to supply electricity in bulk directly to categories of customers specified by the minister

What you need to know:

The decision by Parliament, which now awaits assent by President Museveni, ends decades of Umeme’s monopoly as the sole bulk power supplier

Parliament yesterday passed the Electricity Amendment Bill, 2022, which among others, permits generation and transmission licensees to supply electricity in bulk directly to categories of customers specified by the minister. 

Clause 14(3) of the Act states: “The authority may, by regulations, prescribe the circumstances under which a holder of a generation licence may supply electricity in bulk to a holder of a distribution licence, transmission licence or directly to a specified class or category of customers.” 

The decision by Parliament, which now awaits assent by President Museveni, ends decades of Umeme’s monopoly as the sole bulk power supplier. 
“This action would of necessity eliminate Umeme in service territories where it is not licensed and in effect implement the presidential directive on selling power to industries at a tariff that eliminates the expensive distribution costs of Umeme,” the report by the Natural Resources Committee reads.

It adds: “The Committee observed that government owns the largest dams, the entire transmission and distribution assets in the country and, therefore, can by policy use this leverage to sell power to industries at a low cost as currently planned in industrial parks
President Museveni has been pushing for direct supply of electricity to industrial parks as a means to create a more convenient environment for the industrialisation agenda. 

Mr Emely Kugonza, the Committee deputy chairperson, said the elimination of a monopoly in power distribution will help in cutting down the cost to the final consumer. 
The Act has set five cents as the unit cost for industries. 
To reduce the power tariffs for domestic consumers, the proposed law has recommended a reduction in the Value Added Tax from 18 per cent to 10 percent. 
Cause 19 of the Act also introduces hefty penalties for vandalism of electricity infrastructure, as well as power theft. 
Parliament set a prison sentence for both offences at 15 years, or a fine of Shs1b or both for those convicted of the offences. 

An earlier recommendation by the Committee to increase the fine from Shs100,000 to Shs4m was amended by MPs, who say vandalism costs the taxpayers much more. 
Attorney General Kiryowa Kiwanuka said it is crucial to set a deterrent fine. 
“The people taking down the power lines and other infrastructure are not the common people walking on the streets. These vandals are very sophisticated people so we need to make the law very deterrent,” he said. 
Authorities in the energy sector have in the previous past decried the increasing  cases of vandalism that they say cost the taxpayers billions of shillings, as well as pushing the cost of power up.

Parliament also voted to increase funding to the Electricity Regulatory Authority from 0.3 per cent to 0.7 per cent of the electricity sold to improve its performance.
The authority currently has a funding gap amounting to Shs8b. 
The Bill also provides for the establishment of an Energy Development Fund.


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