Following president Yoweri Museveni’s concern over the high cost of electricity, which he says will not come down until the African Development Bank loan is fully paid, the Members of Parliament from the Committee on Natural Resources have today questioned the Electricity Regulatory Authority (ERA) over the increase in electricity tariffs.
The President was yesterday meeting the Bank’s President Akinwumi Adesina at the sidelines of the 28th Ordinary AU summit of Heads of States and Governments in Addis Ababa, Ethiopia where he expresed his his concerns about the high electricity tarrifs in Uganda.
The Presidents’ concern follows reports by Ugandan manufacturers and other big businesses that have complained of the high cost of electricity in the country, which they say makes their products uncompetitive in the region.
While meeting the ERA board of management, Hon. Alex Byarugaba (NRM, Isingiro South), the Chairperson of the Natural Resources Committee said that the Committee had received several complaints from the public about a 30% increase in electricity tariffs.
“We need to know why you as ERA would go ahead and increase the tariffs when you are aware that the President, H.E. Yoweri Museveni issued a directive not to do so,” Byarugaba said.
In response, the Chairperson of the ERA board of management, Richard Apire said that they had made consultations with the Ministry of Energy which sought the permission of the President.
“Our line ministry consulted the President over the increment and he accepted only if the electricity tariffs for manufacturers were protected from the decision,” Apire said.
Apire added that the fluctuating exchange rate had influenced the tariff trajectory. “We noted that in the last quarter of 2016, the Uganda Shilling had depreciated against the US Dollar by Ushs 300 and this affected the tariff prices,” he said.
The Acting CEO of ERA, Eng. Ziria Tibalwa Waako further explained that the increase in the US dollar rate meant an increase in the revenue requirement for the private players in the generation and distribution of electricity.
A revenue requirement is the total amount of money ERA allows a utility like UMEME to earn.
“Private companies involved in the generation and distribution incur loans and sometimes have to import equipment from abroad to run their machines. These costs are affected by inflation which affects the end user tariff,” Eng. Waako said.
Eng. Waako added that the private companies bear technical and commercial losses that also reflect in the tariff.
However the MPs rejected the explanations of the ERA board saying that the fluctuation in the US dollar has nothing to do with electricity tariffs.
Hon. Andrew Baryayanga (Indep, Kabale Municipality) said that the US dollar should not be used as a core determinant of a tariff when there are other core factors. “These companies operate locally and receive payments in Uganda shillings. Why should the unit be priced according to the dollar?” he asked, adding that, “Since we have more people connected to the grid to share a tariff, we would expect it to go down, other than increase.”
Hon. Ann Maria Nakabirwa (NRM, Kyankwanzi Woman MP) added that locally generated electricity meant that most expenses are incurred in local currency. She added that this has nothing to do with the dollar.
“Uganda is one of the countries in the world with the highest cost of generation at 11 American cents, yet world over the average is 3 cents,” she said.
Hon. Herbert Edmund Ariko (FDC, Soroti Municipality) further said that the US Dollar had to the contrary depreciated towards the end of the year.
“According to the Uganda National Bureau of Statistics, at the turn of 2016 the inflation rate was at 8.7% yet between October and December it was in negatives. It is illogical that the tariffs have increased” Ariko said.
Ariko also said that Ugandans should not be the ones to bear the weight of technical and commercial losses of the private companies.
“How do you as ERA break down and explain to Ugandans the Ushs 317 difference per unit between generation and distribution or the astronomical increase Ushs 73.3 in a year?” Ariko asked.
The Chairperson of the Committee, Hon. Byarugaba asked the Electricity Regulatory Authority to write a detailed response to the queries raised by the Committee Members and return to the Committee in two days
He also asked for a report showing figures of how much is generated in terms of percentages by Heavy Fuel Plant; how much is produced by hydro dams; return of investments for the past five years; commercial and technical losses and how they affect the consumer.