Power tariffs to go down as govt takes over Umeme operations

Government announced yesterday that electricity costs in Uganda will decrease further after it officially took over the power distribution and sales operations that had been privatised nearly 20 years ago.

The Uganda Electricity Distribution Company Ltd (UEDCL) has received two licences, including those for distribution and sales, from the Electricity Regulatory Authority (ERA), marking the end of Umeme Ltd’s 20-year concession.

At a ceremony held at the state-owned Uganda Media Centre in Kampala, Energy Minister Ruth Nankabirwa assured the public that the cost of electricity would continue to decline.

“As it has been, we will continue to make sure that we distribute power that is affordable. The existing tariff packages as approved by ERA, such as live tariffs people have gotten used to, the declining block where the more you consume, the less you pay. We shall continue ensuring the power is affordable
to industrialists and enjoyed by other users as well,” she said.

Ms Nankabirwa added: “I am coming back here (Media Centre) on January 2, to announce the 2025 power tariffs, but what I can assure you is that the tariffs have gone down and will continue to go down because the essence of government takeover is to make sure Ugandans enjoy affordable and reliable power.” A comparison of power tariffs between the last quarters of 2023 and 2024, using different quarterly sched-
ules of end-user tariffs applicable for the supply of electricity by Umeme Ltd, shows a decline in the cost of power for domestic, commercial, medium, and large industrial consumers.

For example, between October and December 2023, the cost of a unit for domestic consumers was Shs805, which was reduced to Shs796 in the same period this year.

Similarly,the cost for commercial consumers decreased from Shs611 to Shs599, while the unit price for medium industrial users dropped from Shs461 to Shs448. Large industrial players saw their unit cost reduced from Shs384 to Shs378.

Ms Nankabirwa stated that these tariffs are expected to decrease even further as UEDCL takes over Umeme Ltd’s operations, which had high costs driven by several factors, including a significant 20 percent return on investment.

“The Ministry of Finance is still assessing and seeing how much we shall invest in, but our target is to ensure the return on investment is not high like that of Umeme, not even 15 percent, but we shall declare after everything,” she said.

After a thorough assessment, the Cabinet in 2022 decided not to renew Umeme Ltd’s concession, which is set to expire on March 30, and recommended that the state-owned UEDCL takes over from April 1.

The Auditor General is currently assessing Umeme Ltd’s investments to determine the buyout
amount. Initially, the cost was estimated at Shs921 billion, but this was later reduced to Shs849 billion by January last year.

Ms Nankabirwa further stated, “We are waiting for the Auditor General to carry out the assessment and inform us how much exactly we must pay. But I want to allay everyone’s fear that the money to buy out Umeme will be gotten because by the time the government commits not to renew the concession, it is ready to pay the buy-out amount.”

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As the transition from Umeme to UEDCL takes shape, Ms Nankabirwa acknowledged the inevitable challenges associated with such a change. She assured the public that the government would intervene to address these issues promptly.

“As we move towards the end of the Umeme concession, there are some challenges that are inevitable and consequential to the transition, and we expect them because UEDCL has not yet
gotten 100 percent authority. Power cuts, for example, may occur in some areas, but these are transitional challenges. Once the takeover is done, UEDCL has vowed to address them, and the Finance Ministry is looking for the money, which UEDCL will need to sustain the lights and ensure the affordability of power. So, I wanted the country to be aware of these inevitable challenges and pardon us,” she said.

In an exclusive interview with Monitor, UEDCL Managing Director Mr Paul Mwesigwa revealed the agency’s plans for substantial investment in the distribution sector.

UEDCL will invest an annual $70 million (approximately Shs256 billion) over the next 25 years.

“The investment will eliminate power cuts because currently, we are seeing the network over-strained and struggling because of overload and other loading requirements. So, that investment will manage these challenges through inserting sub-stations, buying transformers, upgrading conductors, and also extending transformer insertions to enhance the strength of the
backbone,”he explained.

Mr Mwesigwa added: “We have so far secured half of that money in our bank account. We are currently doing procurement of materials, and come April 1, our inventories will be full. We
have experience in distributing power because we are already distributing it in hard-to-reach areas like Karamoja, Moyo, Adjumani, the borders of Kisoro, and Bunagana. We have made them work perfectly well and at a reasonable cost, and because we have invested in technology, we can easily communicate with the population and provide quality services.”

He echoed Ms Nankabirwa’s pledge to reduce the return on investment and
also revealed plans to reduce the current 15 percent power loss rate.

“Currently, we have embarked on massive sensitisation campaigns and have also
taken action against those found vandalising our infrastructure. We shall ensure the power is cheap for all Ugandans and work to end power theft,” Mr Mwesigwa said.

About take over
Umeme Ltd is the third private firm UEDCL is taking over, after assuming the distribution responsibilities from Ferdsult Engineering Services Ltd, Pader-Abim Community Multi-Purpose Electric Cooperative Society Ltd, and Kyegegwa Rural Electricity Cooperative Society Ltd, whose licences expired last year.

The transition aligns with the government’s decision not to renew expiring electricity distribution concessions and licences, as explained by ERA Chief Executive Officer Ziria Tibalwa Waako.

The Uganda Electricity Board (UEB) was privatised in 2005 when the government partnered with Eskom and
Umeme as part of a World Bank/International Monetary Fund initiative aimed at saving money and improving service delivery.

However, in 2017, President Museveni reversed the government’s privatisation policy, stating that
further privatisation would not occur due to its negative impact on service delivery in key sectors.