Power prices for the third quarter of this year have gone up slightly due to the shilling’s weakness against the US dollar, a tariff schedule released by the Electricity Regulatory Authority shows. The rise in tariffs will not affect extra-large industries, however, as they are to benefit from the debt refinancing of the Bujagali Dam.
Domestic consumers – households and small businesses – have seen the largest increase in the tariff they will pay to Umeme Limited, the country’s biggest energy distributor. They will pay Shs771.1 per unit, up from last quarter’s Shs718.5. However, the first 15 units purchased by this category each month is priced at Shs250 each, a subsidy intended to make power affordable to the poor.
Commercial consumers and medium industrial consumers had their increased by 6.1% and 4% relative to the second quarter to Shs687 and Shs615.3, respectively. The first category is comprised of small-scale industries, fuel and water pumps, restaurants, salons, among others.
Large industries, on the other hand, had their tariff raised to Shs383.8 from Shs374.4 in the second quarter.
The regulator relies on three factors to adjust power tariffs; changes in inflation, foreign exchange rates and fuel prices.
Core inflation and the United States Producer Price Index were higher in May compared to November 2017, the base period used in the determination. The result was an increase of Shs2.2 in the tariffs for domestic consumers, Shs1.6 for commercial consumers, Shs1 for medium industrial consumers, and Shs0.4 large industries. The inflationary effect on tariffs for extra-large industries was an upward adjustment of Shs0.3.
The Uganda shilling’s depreciation against the US dollar had the largest effect on power prices, however, after falling 3.5% between last November and the end of May, according to the schedule. As a result, the domestic consumer tariff increased by Shs62.3 while commercial consumers and medium industries had their tariffs rise by Shs44.5 and Shs29.2, respectively. That of large industries increased by Shs15.3.
Unlike all the other categories, the effect of exchange rate fluctuations on power tariffs for extra-large industries was negative. The regulatory authority said this was because “the benefits arising from the debt refinancing of the Bujagali Hydro Power Plant have been allocated to the Extra-large industrial consumers” through the exchange rate factor. In doing this, the government hopes that they will increase their demand for power – and therefore produce more.
The allocation led to a reduction of Shs50.4 in the tariff for extra-large industries which, together with a fall in the fuel adjustment factor – determined by international fuel prices and the dispatch of generation plants – offset the effects of inflation and the weak shilling. This led to a 15% reduction in power tariffs for the category to Shs314.1.
All the other consumer categories also registered a negative fuel adjustment factor, with an increase in the power produced by the country’s generation plants offsetting the rise in international fuel prices.
The adjusted charges will apply for the months of July, August, and September.