Just before the dust settles on Parliament's demand for government to cancel the contracts of Umeme and Eskom, the Uganda electricity transmission company Limited (UETCL) has announced that power tariffs will be increased this month.
Kenneth Otim, the public relations officer of UETCL, says the increment will be in line with the Electricity Regulatory Authority (ERA)'s proposal to implement the Automatic Tariff Adjustment (ATA) in April, 2014. ATA is a system that factors in movements in the exchange rate, fluctuations in oil prices on the international market as well as local inflation levels.
By increasing the tariffs, Otim said, the transmission company would get revenue to pay thermal generation firms Jacobsen and Electromax, to avoid load shedding.
"The cost of load shedding is more than that of thermal generation," says Otim.
The cost of production and consumption for thermal power is more expensive than that of hydro electricity but cheaper than the cost of load shedding. When the demand for power supersedes the total generation, the distributor has no choice other than to load-shed. This was the case faced by Uganda in 2005 as a result of a long drought with little power generation.
Uganda' hydro power generation dropped by more than half, from 300MW (megawatts) to 120MW as of October 2006, yet the country needed 340MW. The impact was so immense that it affected the country's economy as it slowed down industrialisation and affected people's business operations. With an installed generation capacity of 801MW, the current total power generation stands at 535MW against a peak demand of 520MW.
From the load forecast, the power demand is increasing at a rate of 5MW per annum, implying that in a period of three years, the demand will have surpassed generation.
UETCL expects the completion of the Isimba dam (183MW) in 2017 and Karuma (600MW) in 2019 to ease pressure. In the meantime, thermal power generation will be necessary to add on the national grid.
In January, 2014, the Electricity Regulatory Authority allowed the Uganda Electricity Transmission Company Limited (UETCL) to purchase power from thermal generators at a minimal dispatch to avoid machine depreciation as a result of redundancy of the thermal generators.
Prior to an order from ERA to UETCL to stop thermal purchases in 2012, the thermal companies had stocked heavy fuel oil (HFO) to run the plants, and stood to make losses as well as the Kenya Ports Authority (KPA) threatening to auction their HFO containers at Mombasa.
Government had budget for Shs 25bn this year to meet the costs for the two thermal power dealers, Jacobsen and Electromax. ERA will also pay another Shs 59.5bn as capacity payment to the thermal dealers.
The Jacobsen plant (50MW) at Namanve is owned by government, licensed under the Build, Operate and Transfer (BOT) agreement, while the Electromax (50MW) plant is a private business licensed under the Build Own and Operate (BOO) model.