Uganda faces the risk of reduced electricity consumption per customer this year in a development that is likely to hurt revenues for the national power distributor Umeme Ltd, according to researchers at the UK-based Exotix Partners LLP.

According to the research, electricity sales per customer in Uganda declined from a multiple of 3.7 Gigawatt-hours in 2013 to 3.1 GWh in 2015, and is expected to fall to about 2.75 GWh this year.

“There is a risk that electricity demand may fall below expectations and impact on revenues,” said the report dated July 19.

According to Uganda’s Energy Regulatory Authority (ERA), the projected drop in energy purchase is mainly as a result of constraints in the distribution infrastructure as well as lower than anticipated industrial/manufacturing activity during the year.

Other factors include reduced consumption in the domestic customer category as a result of rolling out the prepaid meters, which have made consumers more sensitive about their energy consumption levels.

According to the regulator, a slowdown in economic activity may also cause a decline in energy consumption as Uganda’s GDP has stagnated at 5.3 per cent since 2013.

Energy purchased by the Uganda Electricity Transmission Company Ltd is adjusted for transmission losses and sold to different distribution companies in Uganda. Part of the energy is also exported to Kenya, Rwanda, Tanzania and the Democratic Republic of Congo, according to the regulator.

Uganda plans to convert all government agencies to prepaid metering by December this year as the country moves to reduce distribution costs to Umeme, with hopes that the move would translate to a lower power tariff to consumers.

According to the country’s new electricity tariff schedule for the third quarter (July-September) this year, domestic consumers will pay Ush626 ($0.18) per unit from Ush640.2 ($0.19), while commercial consumers will pay Ush566.9($0.16) from Ush578 ($0.17). Medium industrial consumers will pay Ush524.7 from  Ush536.2 ($0.15), large industrial consumers will pay Ush349.5($0.1) from Ush361.1($0.11) and street lights will be charged Ush608($0.17) from Ush619.5($0.18).

The Ugandan shilling has depreciated by 0.22 per cent against the dollar, from Ush 3,357.1 ($0.98) in November 2015 to Ush3,364.5 ($0.98) as at May 31 this year.

Government agencies account for eight per cent of Umeme’s revenue.

“We expect that by financial year 2017/2018, 64 per cent to 70 per cent of total customers will be on pre-paid meters,” Exotix said. 

Umeme’s share price has fallen 20.6 per cent in 12 months compared with an average of 18.9 per cent decline for the other East African utility companies, reflecting the general weakness in the region’s equities market.

According to the report, Umeme’s share price has been impacted largely by currency volatility leading to foreign exchange losses that threatened to push Umeme into loss-making territory in 2015 and uncertainties over Uganda’s presidential elections in February this year.