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World Bank lauds Uganda on energy sector improvements

Monday, 24th April 2017
President Museveni commissioning power supply in Nakitoma

The 2017 study, which surveyed39 sub-Saharan countries, compared cash collected from bills sent out with thetotal costs of supply—broken down into operational and capital expenditures—perkilowatt hour (kWh) billed. “The findings show that only Seychelles andUganda fully covered both operational and capital expenditures,” said thereport, noting that it did not take into account system expansion. Poorperformance of utility firms has an impact on the power output, which couldmean the country could be receiving less power than the installed capacity inplace, ultimately leading to rationing.

Inefficientutilities are said to suffer from transmission and distribution losses, billcollection losses, and over staffing. These prevent power distributors fromdelivering reliable electricity to existing customers, let alone expand supplyto new consumers.Power distributor Umeme says it has reduced technical anddistribution losses to 19 per cent from the highs of 35 per cent around 2008.It targets to reach 14 per cent by the end of 2018.

Thestudy titled Making Power Affordable for Africa and Viable for Its Utilities,will be presented at the utilities CEO forum at the coming African Utility Weekin Cape Town from May 16 to 18.“Less than half of utilities cover operatingexpenditures while several countries lose in excess of $0.25 per kWh sold. Inthis context, it will be difficult for utilities to maintain existing assets,let alone facilitate the expansion needed to reach universal access goals,” saidWorld Bank’s director of energy and extractive global practice Lucio Monari ina statement.

The report also found thatUganda was one of those that did not suffer from under pricing. “They have thefiscal space to charge better-off, large-consumption customers more andcross-subsidize needy households.”Researchers found that in most countries,unmetered consumption is concentrated in large consumers such as factories andothers who are able to pay cost-reflective tariffs.

By Uganda targeting better-off,large-volume consumers, significant loss reduction is possible with little lossof welfare. Also, pre-paid metering has been key in ensuring that Umeme is ableto reduce on the number of defaulters.“Households on prepaid plans do not riskdisconnection for failure to pay and avoid re-connection fees, which can beconsiderable in some countries,” the report noted, warning, however, that“prepaid meters should not be made mandatory if grid electricity is unreliable,lest customers pay cash in advance for electricity they cannot get when theyneed it.”

At least 15 per cent of thepopulation in Uganda is connected to the grid and five per cent on off gridsources, according to the 2014 census. The World Bank also lauded Uganda’s initiativeto attract smaller independent power projects (IPPs) investments, “includingthe innovative competitive bids for small hydro power, biomass, and solarprojects solicited under the global energy transfer feed-in tariff (GETFiT)program”.This was developed jointly by the Electricity Regulatory Authority(ERA) and the Kreditanstalt für Wiederaufbau (KfW, German Development Bank).

“After South Africa, Uganda hasthe largest number of IPPs in sub-Saharan Africa and the only othercompetitively bid grid-connected solar photovoltaic (PV) program,” the reportsaid.The biggest challenge for Uganda remains the high power tariff, which manypoor households are unable to pay. With an estimated annual increase in demandof 10 to 12 per cent through 2020, and higher beyond, Uganda needs to embark onproactive planning for additional generation capacity, the World Bank advised.

Karuma and Isimba dams’ comingonline by 2020 will curtail the shortage crisis that might have come due toincreased demand.