Pull the plug... and pay Umeme $65m fine

But Mr Onek has made his stand clear, saying he backs parliament on terminating Umeme’s contract, which has failed to control power losses currently standing at 32.6 per cent and has kept the tariff high. But he says the termination should be done “scientifically.”

Already a special committee headed by Gen Caleb Akandwanaho, aka Salim Saleh, has been set up to investigate power tariffs and recommend the method of termination.

Umeme is a joint venture between South Africa’s Eskom and Globeleq that manages the transmission and distribution of power in Uganda. It started operations in March 2005. Globeleq owns 56 per cent of Umeme and Eskom 44 per cent.

“We have submitted our proposal to the committee and we are preparing to go for a review,” said Umeme spokesperson Charlotte Kemigyisha. 

According to the agreement, the two parties are supposed to review the concession after seven years, in 2012.

By that time, the losses should be at 28 per cent, and it is envisaged that cheap electricity will be available from the Bujagali project, enabling tariffs to go down. 

“We are fulfilling our contractual obligations. By the time of the review, we should have cut the losses to 28 per cent,” said Ms Kemigyisha.

Umeme has performed well in some areas like collection of revenue, where it surpassed the revenue target to collect 95 per cent against the set 75 per cent.

The targets for collections were at $65 million as of July this year against the same amount set for March 2010 in the 20-year concession signed in 2004.

Ministry of Energy officials argue that though it is true that Uganda has the highest tariffs in the region, this has to be put in perspective of the energy mix.

The thermal to hydropower supply ratio is 30:70, accounting for 80:20, respectively, of the costs on the tariff.

The cost of thermal power generation is $0.20 to $0.35 per kWh, compared with $0.06 to $0.10 per kWh for hydropower generation.

Thermal, although highly subsidised, is thus responsible for the high tariff and Uganda being a landlocked country does not compare with either Kenya or Tanzania in generating thermal power.

Uganda’s tariff stands at Ush62 for the first 15 units and Ush426 for subsequent units and Kenya’s is Ush38 with a maximum of Ush348.

Umeme says it is not interested in a high tariff either because the more customers they have, the higher the revenue. Only 25 per cent of the tariff goes to Umeme, while 75 per cent is for generation.