7 January 2013

Uganda: Power Prices Remain Unchanged

The Electricity Regulatory Authority (ERA) has stayed the decision to increase electricity prices and provide for automatic monthly adjustments to reflect movements of inflation rate, exchange rate and fuel prices.

This is after power consumers rejected the plan, which they argued will increase the cost of doing business and make life expensive.

"End-user retail tariff rates remain unchanged pending conclusion of consultations with the Government in respect of the tariff review for 2013," ERA said in a statement.

"The outcome will be made public upon conclusion." It is not clear when the consultations will be completed. Julius Wandera, the ERA principal communications officer, said the decision to retain the current tariffs was made to allow further consultations with various power consumers.

"The plan has been misunderstood. The authority feels that there is need for mass sensitisation and education about the tariff plan before it is implemented," he explained.

"Our mission is to regulate the electricity industry for efficient and reliable supply at equitable prices."

Paul Mubiru, the director of energy resources in the energy ministry, agreed that there is need for wider consultations before the new tariff plan is implemented. ERA had planned to change the electricity price setting mechanism to provide for monthly adjustments to reflect movements of inflation rate, exchange rate and fuel prices, moving away from quarterly adjustments.

Dr. Benon Mutambi, the ERA chief, explained that the problem of quarterly adjustments is that there are large increases due to large movements of the variables which cause a shock in the tariffs.

"Any shock is undesirable. You would rather have smooth and gradual movement of the tariffs which the automatic tariff adjustments address," he said.

"But we have been adjusting tariffs reflecting the movement of the variables and that explains the tariff shocks." Mutambi said the automatic tariff adjustment is a cost recovery mechanism, where consumers benefit from reductions and allows companies recover increase in costs as a result of fluctuation in macroeconomic factors of inflation, exchange rate and fuel prices.

"Consumers will benefit when costs reduce. Companies will be allowed to recover additional costs incurred. This will ensure financial sustainability of the utilities," he argued.

However, power consumers asked the regulator to suspend the whole process to allow for "further and meaningful engagement and consultations with stakeholders."

The decision means that electricity consumers will continue paying the same rates ERA approved in January 15, 2012.

Domestic consumers will continue paying for the first units sh100. Above the 15 units, they will pay sh524.5 per unit and a fixed monthly service charge of sh3,360. Commercial consumers will continue paying the average tariff rates per month of sh487.6 per unit and a fixed monthly service charge of sh3,360.

Small and medium industries consumers will continue paying sh458.9 per unit and sh16,644 as a fixed monthly service charge. Large industries will continue paying sh312.8 per unit and a fixed monthly service fees of sh70,000.

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