Bundling of agencies will undo gains  

Jude Kamuganga

What you need to know:

  • Uganda is one of the pioneer countries in sub-Saharan Africa to champion electricity sector reforms and has been lauded for the initiative. 

The recent news on mergers was received with mixed reaction; trepidation and ululation. Whereas it is brainy to merge certain agencies, there is need to take caution on certain mergers.  

Uganda is one of the pioneer countries in sub-Saharan Africa to champion electricity sector reforms and has been lauded for the initiative. 

The foundation of the electricity sector reforms in Uganda was the Electricity Act, 1999, which unbundled the sector to form Uganda Electricity Distribution Company Ltd (UEDCL), Uganda Electricity Generation Company Limited (UEGL) and Uganda Electricity Transmission Limited (UETCL), under one Regulator in Electricity Regulatory Authority (ERA)

To the uninitiated, generation, distribution and transmission are distinct segments in the electricity sector. 

It may seem as though transmission and distribution are one and the same.  However, transmission is for high voltage from generation point and distribution is for low voltage to the end user of electricity.

These reforms have worked in many countries like USA, Norway, South Africa as champions of the reforms and later in other countries. Prior to the unbundling of the sector, we had Uganda Electricity Board (UEB) which was a failed entity on many fronts.

Unbundling was therefore a positive structural reform within our electricity sector. 

The vertical unbundling to separate; generation, transmission and distribution segments allowed private actors under concessions, hence competition. There has been efficiency, transparency and good governance in the sector, to a large extent.

 These gains have come with some challenges but by far there are more positives and no one would want to go back to UEB days.   

The sector still faces many problems/challenges, however, bundling (rebundling) the sector is not an antidote to the problems. 

There is need to concretise the regulatory framework by ERA and also break any interference in the sector, political or otherwise. 

ERA can use stronger regulatory mechanisms like yardstick competition, incetivisation and also break monopoly of certain actors in the sector. 

We can go for ‘sticks and carrots’ in regulation but in a more stronger way.
The major problem in the sector is the high cost of power. 

Mergers will not provide a solution to the problem. We must deal with the cost of power by boosting consumption through industrialization and putting up robust transmission and distribution infrastructure. 

One of the drivers of high cost of power is investing more in generation yet no enough consumers, thereby creating non-performing assets which have to be paid for through the electricity tariff.

We pay highly for unused electricity. We always wake up to news of big generation projects but don’t hear about big transmission and distribution projects.  

How will the generated power reach the end user?
Another driver of high power tariff could be inflated cost of operation (OPEX) and capital expenditure (CAPEX) that ERA needs to look into.  

There is need for strict accountability by concessionaires.
 This is therefore a call to the President of Uganda, Cabinet, Ministry of Energy and Mineral Development, Minister Ruth Nankabirwa, Development Partners like World Bank, GIZ et al, to rethink the bundling of the electricity sector.  

This move will undo gains made in the electricity sector.
 High government expenditure on agencies in the sector has been posited as a reason for the intended merger.  

The government can cut budgetary allocations and wasteful expenditure by electricity agencies without going for a merger. Otherwise, we cannot afford to, unbundle, rebundle and unbundle.  

Mr Kamuganga, is a lawyer/advocate and policy associate at Envirosure Consulting. 
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