Umeme is winding down operations in the country with the firm that has a footing in South Africa expected to exit the market in March 2025.
The exit of Uganda's primary power distributor, Umeme, will result in lower electricity tariffs nationwide, Justine Lumumba Kasule, the minister in charge of general duties in the Office of the Prime Minister, has said.
Speaking at the 2024 Power Forum at Mestil Hotel in Kampala, Ms Lumumba said this change is crucial for enhancing industrial competitiveness and economic growth.
"To prepare for UMEME's exit, the government is strengthening the Uganda Electricity Distribution Company Limited (UEDCL) to take over power distribution," Minister Kasule stated.
"Once UEDCL assumes control, we expect electricity for industrial parks to be delivered directly from generation sites to factories, eliminating the need for a third-party distributor. This strategy is designed to reduce overall tariffs for industries."
Irene Bateebe, permanent secretary at the Ministry of Energy, echoed this sentiment, highlighting the government's plan to make UEDCL a more efficient operator with a targeted return on investment below 10%.
This figure is significantly lower than Umeme's agreed 20% return, which has historically increased operational costs for consumers.
President Museveni has previously criticised Umeme for failing to lower tariffs, hindering Uganda's industrialization and job creation efforts.
As Umeme's concession nears its end, the transition to UEDCL aims to address these longstanding issues.
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Despite the expected cost reductions, there are concerns regarding UEDCL's capacity to manage the transition effectively.
Eng Ziria Tibalwa Waako, executive director of the Electricity Regulatory Authority (ERA), reassured stakeholders, stating that UEDCL has expanded its board to include experts in various sectors to strengthen its leadership.
Umeme has significantly improved Uganda's power sector since its entry in 2005, increasing distribution efficiency from 50% to 83% by 2021 and reducing energy losses from 38% to 18%.
However, UEDCL will require substantial capital investment--approximately $158 million (about Shs580 billion)--for necessary infrastructure upgrades over the next three years.
"If UEDCL can effectively take control of the distribution network while maintaining service standards, Uganda's power sector could become a major driver of industrial growth and economic development," concluded Minister Kasule.
Umeme is winding down operations in the country with the firm that has a footing in South Africa expected to exit the market in March 2025.
