Uganda’s energy sector added to its energy generation surplus this year as new power stations went live.

Meanwhile user demand projections have increased but rising power tariffs have denied several people access to electricity, while transmission and distribution challenges mean power blackouts remain a key feature in many households.

The country’s installed generation capacity is estimated at 960 megawatts while active generation capacity stands at 700 megawatts according to energy industry sources.

This scenario points to idle generation capacity suffered by the large hydro power plants and small thermal generation facilities.

In comparison, the country’s peak power demand levels have grossed 640 megawatts this year, a figure that translates into a modest surplus of 60MW on the national grid.

Demand pressure

Industrial users account for nearly 70 per cent of Uganda’s electricity consumption basket, distribution statistics show while new factories and industrial plants that are in the pipeline are expected to wipe out the surplus in less than five years, sources hinted.

This offers investors motivation for more energy projects.

“The small electricity surplus on the national grid is not sustainable because of pending demand pressures from new factories and production plants already in the pipeline.

“These production facilities require around 14-20 megawatts per day and this is enough to wipe out this surplus,” Selestino Babungi, Umeme Ltd’s managing director said.

“Though Isimba and Karuma dams will be commissioned next year, they are likely to produce less than installed output capacity at the start, meaning that much of the of the electricity will be fully absorbed by new factories that will be going live in 2019. This leaves a sizeable future power demand gap that needs to be filled through additional investments in mini hydro stations,” Mr Babungi added.

“These plants help ease outage problems experienced across the national grid because they usually serve remote areas that are not catered for by the national grid. However, balancing the weight of power tariffs and efficiency demands in our operations is never easy,” he argued.

New firms

New factories commissioned this year include Mandela Millers Ltd with a daily power consumption rate of 14MW and Tiang Tang Ltd — a steel products manufacturer with daily power consumption of 20MW.

A new fertiliser, cement and glass production plant recently commissioned in Eastern Uganda requires 20MW daily while a new public water treatment plant under construction in Mukono District is to be commissioned in 2021 and will consume 20MW per day, according to Umeme records.

Global oil prices

Some seven power stations are still under construction and are scheduled for commissioning by close of 2020.

These are Siti III with a generation capacity of 16MW, Kyambura with 7.6MW, Sindila with 6.5MW, Ndugut with 5.9MW, Kikagati with 16MW and Waki with 4.8MW.

But relatively high electricity tariffs remain a headache for both households and businesses, particularly because of high capital expenditure incurred by investors and a direct peg that links power prices to changes in global oil prices, inflation rates and the exchange rate.

Umeme's concession

Persistent increases in electricity tariffs have piled significant pressure on government to terminate Umeme Ltd’s 20 year distribution concession agreement that expires in 2025, though it finally opted for renegotiation last week as opposed to an expensive, contract cancellation that would have cost the country roughly Ush500 billion ($134 million) in exit charges.

Retail consumer tariffs have steadily increased from Ush669 ($0.18) per unit in mid-2017 to Ush712 ($0.19) per unit in January 2018 and stood at Ush769 ($0.2) per unit at the beginning of October, according to ERA data.

“Government needs to fix the high electricity tariffs sooner in order to expand access to the electricity grid for poor, rural consumers.

“Most of them can hardly afford to spend Ush20,000($5) on prepaid electricity every month while middle income people also struggle with huge power bills,” Phillip Sendawula, chief finance officer at Exim Bank Uganda said.

“I spend around Ush60,000 ($16) per month on electricity for my domestic water heater, which is prohibitive for me. There is need to encourage rural people to embrace alternative sources of energy such as solar and biogas that are critical for tackling the problem of diminished firewood supplies around the country,” Mr Sendawula added.

Cyber hacking

Rising electricity tariffs have partly inspired cyber hacking schemes targeted at Umeme’s prepaid metering system.

A latest online advert posted in a local Facebook group revealed a strange, criminal offer; a hacker asking for $1 to tamper with one’s prepaid electricity meter and obtain more units for few shillings.

For instance, Ush3,000 ($0.8) would yield 15 units of power from a hacked meter compared with four units of electricity bought for the same amount at the current price after the first monthly purchase.

We were not able to authenticate these claims by the time of going to press.

“When the price reduces, more people are able to afford electricity. Lower electricity prices also mean cheaper manufactured products in the medium term.

“Since the refinancing of the Bujagali dam loan facilities, power demand levels among manufacturers have risen by an average of seven per cent due to the applied three per cent discount in the local industrial electricity tariff,” said Ziria Tibalwa Waako, ERA’s chief executive officer.

Under the refinancing deal arranged by the African Development Bank and its partners, the loan repayment period attached to $400 million worth of debt provided to Bujagali Energy Limited was extended from 2023 to 2032 in a move that eased debt repayment pressures faced by the project.

“As a result, industrial electricity tariffs charged against extra-large industries dropped to 5 US cents during the off peak period while smaller industrial producers are equally eligible for this incentive in the near future.

“Very large firms targeted in the first phase of the power tariff reduction exercise have seen their energy costs go down but spillover gains for consumers have not materialised because of the less regulated market that we operate in.

“The economy is still struggling, household spending is down and consumer demand is low. This has led to reduced production levels in local industries despite the tariff cut. As a result, my production capacity levels have dropped to about 49 per cent,” said Deo Kayemba, the CEO of East African Roofing Systems, a building materials manufacturer.