‘Investments in distribution will cut electricity tariffs’

Kampala, Uganda | JULIUS BUSINGE | Ziria Tibalwa Waako is the Chief Executive Officer of the Electricity Regulatory Authority (ERA). The Independent’s Julius Businge attended a media training workshop on March 6 where she responded to a number of questions.

How would you describe Uganda’s electricity sector at the moment?

Uganda’s generation capacity has increased from 60MW in 1987 to 929MW as at November 2017. Out of this total generation capacity, 874MW of the total capacity was supplied to the national grid in 2017 with hydro-power being (81%), thermo (11.4%), co-generation (5.3%). Our generation capacity is higher than the demand. But remember, access to energy in the country stands at 23% which means, the other population (77%) is waiting for this surplus. We are also a country yearning for industrialization and to attract industries, we need to have power supply security.

What will happen in case we generate more electricity and there happens to be no adequate demand?

There will be demand growth. At a bare minimum, every fresh graduate will need to buy a kettle, flat iron and electrical consuming appliances. Those who go through the rank will want to buy heaters, cookers. Therefore, demand naturally grows. But here, we are talking about accelerated demand growth and that is the reason government intervention and that of other stakeholders in all segments of the economy is very important to ensure that we consume this power, reduce our tariff, and create industries that will transform our society from peasantry to middle income status.

Why is it too expensive to join the national grid?

It is a concern to us as government, and this revolves around connection costs especially those that are outside the Umeme concession. Cabinet has approved the free connection policy meaning that the whole population that has proximity to the network will be connected free of charge. The consumer will be responsible for internal wiring and paying for the power consumed. We hope that this policy together with the lifeline tariff of Shs150 for the first 15 units would aid our rural population to access clean energy.

What is the role of the regulator as tariffs go up even when the determinants are going down?

Tariffs have always gone down. For instance, in 2017 it went down three times. But what the public needs to know is that the more we consume power, the lower the price because there are fixed costs within the tariff determination methodology which irrespective of our consumption, must be paid. I must add that the tariff that we charge is fairly cost recovery because government subsidizes the capacity payment of the thermo power plants and it also invests in the transmission assets using grants, loans and the treasury. The other important thing to note is that we have invested heavily in generation assets which are not subsidized. This generation cost contributes 61% of the electricity price that the consumer pays not to mention the ongoing renegotiations of Bujagali Hydropower project.

Some people still have concerns regarding the methodology for calculating the tariff?

We do not control the indicators that are used to calculate the tariff. For instance, fuel price is internationally determined, the exchange rate that we use, we get it from Bank of Uganda, inflation figures are also provided to us by Uganda Bureau of Statistics (UBOS). If there is an error in these indicators, it would come from the sources of these figures. But in general terms, our tariff methodology is a global benchmark.

There was a cold war between ERA and Umeme regarding amendments made to their concession which forced it (Umeme) to write-off Shs 115.3bn in the first half of 2017. Are there lessons that you learned from that conflict?

There has never been a cold war between the regulator and the licensees, Umeme included. We agree and disagree on principle and where they feel that our lack of approval disadvantages them, there is recourse which is the Electricity Dispute Tribunal. We sit on the opposite side of the table and are guided by the licensing terms and conditions. In terms of lessons learned, maybe on their side they could have learned some lessons because this matter was around for some time; it could have been mitigated gradually. But you know that each party in a case believes they have a good case. As usual, our desire is to balance interests of all stakeholders in this sector.

The licensing process appears to be tedious yet government is preaching the gospel of reducing the cost of doing business. What is your response?

What is at stake are millions and millions of dollars. Most of these projects average around US$20 million. We enter into power purchase agreements, licensing and other contracts for 20 years. We engage the project affected people; we do environmental assessments for these projects and many other things to ensure that no mistake is done while dealing with independent power producers.

What is the way forward for the sector?

Increasing and accelerating more investments in the transmission and distribution infrastructure is the way to go. This will increase electricity consumption leading to a decline in electricity prices.