UMEME investment in rural electrification, new tariff issues

Umeme has implemented 100 rural electrification schemes worth over US$6.5million, and is working hand in hand with the Rural Electrification Agency to extend power in 46 rural areas, at a cost of a further US$4million, the statement says.

Umeme has also defended its proposed distribution tariff of 190.76 Uganda shillings per unit for 2011 which the ERA is yet to rule on. Chapman says Umeme plans to invest another US$32million into the network in 2011.  The distribution tariff, Umeme says will fund the 2011 priority investment projects like; prepaid metering, loss reduction projects, safety related projects including the Aerial Bundled Conductors, customer service improvement and debt-servicing.

Umeme cost of service study report by ERA
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“It is anticipated that Government subsidies will continue to be availed and applied against the power supply price in order to maintain the end user tariff for domestic consumers at Ushs385.6,” Chapman said.

The electricity tariff is driven mainly by the cost of power generation, including fuel, transport and transmission costs, non-Umeme technical losses and exchange rate variations. The company says only 28% of the price of electricity is related to Umeme.

“While power supply costs and price have increased significantly over the past five years due to the high cost of generation, Umeme’s contribution to the tariff has decreased by 50% over the past five years. In January 2010 retail electricity tariffs were reduced by an average of 6% for all customer categories and by 9.9% for domestic consumers. Before this, mind you, the end user tariff had not increased since November 2006,” Chapman said.

Many critics have been calling on the utility firm to desist from its proposed tariff and a flat payment system, with some imploring the company to instead reduce technical losses of power which currently stand at 14% of electricity that is generated.

Chapman agrees that that losses need to be controlled further to stop the price of electricity from rising.

“We have worked well with communities to reduce losses, and can report tremendous success. Losses have reduced from well over 38% when Umeme started operations in 2005, to an average of 30% for the current year – split between commercial losses at 17% and technical losses at 13%. Next year we should report a drop in losses to at least 28%,” he said.

Many Ugandans will be looking forward to UMEME beating that 28% target as reduced losses would help keep electricity tariffs paid by consumers down.

Related links

Umeme Should Rethink the Flat Rate Tariff The New Vision, June 16, 2010

UMEME wants to use new billing system to improve customer service

See UMEME ownership and the company’s Board of Directors in Uganda

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