Electricity consumers are to start paying variable monthly tariffs adjusted for inflation, exchange rate changes and oil prices on January 15.

The adjustment mechanism implemented by the Electricity Regulatory Authority (ERA) will see end users paying bills reflecting the true cost of producing electricity. The decision is in response to the government's decision not to continue subsidising consumers directly.

The subsidy obligation stood at more than sh400b for 2011 alone, forcing electricity generators to switch off their machines because Uganda Electricity Transmission Company (UETCL) could not pay the investors.

"To avoid this, the ERA has come up with automatic tariff adjustment mechanism, whereby the end user tariff will vary on a month basis to take care of changes in inflation, exchange rate and oil prices," Mbaga Tuzinde, the ERA economist, said.

"The total effect of the variations in the three factors will be wholly passed on to the consumer. We shall have a base tariff, to which we shall then add the total effect of the three factors."