Umeme sweats for renewal of concession deal

Saturday January 19 2019

umeme

An Umeme power substation. FILE PHOTO | NMG 

HALIMA ABDALLAH
By HALIMA ABDALLAH
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Kampala and Nairobi-listed electricity distributor Umeme Ltd is facing its last regulatory review as its concession reaches the last seven years.

Intense negotiations have been underway for its renewal, but no decision has been made yet.

In the review, done every seven years of the 20-year concession running since 2005, the power distributor faces tougher conditions largely linked to efficiency.

The new regulations by the Uganda Electricity Regulatory Authority, mean Umeme will be penalised for delayed connections and the power outage time has been reduced from the current 130 hours allowable in a year to 120 hours.

In 2005, ERA granted Umeme two licences — for the distribution of electrify and another one to supply electricity in the country.

The licence terms are reviewed every seven years by the regulator upon consultation with the public. New terms that fall within the concession agreements are then set.

In April 2018, Umeme applied for a modification of its supply licence, which is currently being considered. In the new terms ERA will monitor Umeme’s distribution system to ensure that the utility company meets minimum standards of reliability and quality of electricity supply.

The modification provides a new formula for reconciling consumption by category. Domestic consumers often pay the highest tariffs, followed by small scale industries and large manufacturers who pay the least.

Consumption projections are often made ahead of time and Umeme has been pocketing financial gains from revenues above projections in as much as it also bears the losses.

“Any gains in tariffs above our projections will be clawed back and reinvested in the sector,” said ERA spokesman Julius Wandera.

This, the regulator said, is achievable because it receives bills showing consumption volumes by every consumer connected to the grid.

The new target also sets outages for 120 hours per year, down from 130 hours in the ending licence terms. This means that in case of outages, Umeme must rectify the problem within 20 minutes if that target is to be achieved.

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