ERA increases power tariffs for first three months of 2018

Power consumers will pay slightly more in the first three months of 2018 compared to the previous quarter following an increase in end-user tariffs by the Electricity Regulatory Authority.

Domestic consumers will pay Shs718.9 per unit, a 4.9% increase from the tariff in the fourth quarter of 2017, according to ERA’s schedule of 2018 base tariffs. Commercial consumers, who include small scale industries, fuel and water pumps, etc., will be charged Shs648.3, an increase of 4.7%. The tariff for streetlights rose 4.8% to Shs701.9.

The tariff for medium industrial consumers rose 4.3% to Shs592.5, while that of large industries and extra-large industries rose by 2.0% and 1.8% to Shs375.5 and Shs371.1, respectively.

The tariffs apply only to customers supplied by Umeme Limited. The Uganda Electricity Transmission Company Limited, which buys bulk power from generators, transmits it and then sells to distributors, is projected to sell 92.9% percent of the energy to Umeme Limited in 2018. The rest will be exported (5%) and sold to smaller distribution companies operating in the country.

The regulatory authority said the rise in the energy tariffs was due to an “increase in investment related costs relative to the fourth quarter of 2017, the provision for transaction costs in respect to the debt refinancing of Bujagali Hydro Power Plant, and the depreciation of the Uganda Shilling against the United States Dollar, from Shs 3,600.38/$1 used in the determination of the tariffs for the fourth quarter of 2017 to Shs 3,634.92/$1 as of 30th November 2017.”

The annual base tariff is adjusted at the beginning of each calendar year to reflect changes in other tariff parameters such as energy losses by the distributor, collection rates, operations and maintenance costs, and investment costs by the generation, transmission, and distribution players in the electricity sub-sector.

According to the tariff review report for 2018, the power purchase costs for Bujagali Energy Limited, the company that owns and operates the 250MW Bujagali hydropower dam, are expected to increase to Shs603.7bn in 2018 from Shs583.1bn in 2017.

The increase is attributed to provisioning for “debt refinancing transaction costs of $5.9 million and step up of subordinate loans in the year 2018.”

“In a bid to manage the tariff at more affordable levels, the government of Uganda is negotiating refinancing of the debt component of the BEL project,” the report adds. “When achieved, the debt refinancing will help smoothen the tariff trajectory of the Bujagali Hydro Power Plant in the short to medium term.”

The high cost of energy purchased from Bujagali has been blamed for the high cost of power in the country. The dam was built on under a public-private partnership, with the government’s stake in BEL at 4.63%. Other shareholders are the Aga Khan Fund for Economic Development and Sithe Global Power LLC.

Bujagali Energy Limited contributes more than 65% of the overall energy purchase cost, according to the tariff review report.

Once complete, hydropower dams at Karuma (600megawatts) and at Isimba (183MW) are expected to double the country’s installed capacity to 1,678.5MW and hopefully reduce the end-user tariff.

The government also hopes that a refinancing of the 250MW Bujagali hydropower dam and increased demand from industry will reduce end-user tariffs and the cost of doing business in the country.