January 21, 2019—Eskom Uganda Limited (EUL), one of two major national generators, is hinting of higher tariffs due to anticipated rising overhead costs during the next four years, but in contrast, new investment in plant is set to drop sharply.
The company has a 20 year concession to operate the 180MW Nalubaale and 200 MW Kiira hydro power dams at Jinja that runs out in 2023. Oversight of the concession is being done by the Uganda Generation Company Limited while the Uganda Electricity Transmission Company Limited (UETCL) is the biggest customer.
UETCL then sells the power to Umeme, the main distributor, meaning that any request for tariff changes by EUL will inevitably affect everybody along the supply chain and ultimately the final consumer. Umeme has also filed an application to modify its license.
In their application to the Electricity Regulatory Authority (ERA), Thozana Gangi, the EUL managing director/CEO wrote, ‘The current license No. 18 was issued for the period 2015-2018. The following year, will not have key tariff parameters thereby rendering the condition unduly onerous to execute the license obligation of generating and selling electricity. The tariff parameter needs to be set and approved prior to the expiry of the existing ones’.
ERA is accepting views on the application until Friday, January 25, 2019.
EUL is hoping approvals for the modifications come before April 1st 2019, the date the company first took up the concession in 2003.
This also comes against the backdrop of Uganda getting additional electricity supplies from the 183 MW Isimba dam (recently commissioned) and the 600 MW Karuma dam which is expected come into operation next year.
During August last year, EUL which is a subsidiary of South Africa’s Eskom Enterprises, applied to the ERA, regarding its Generation Operation and Maintenance Costs (GOMC) for the period 2019-2022.
According to the application, EUL overheads this year are projected to be UGX66 billion (about $18 million); UGX 57 billion ($17 million) in 2020; UGX 68 billion ($18 million) in 2021 and UGX81 billion ($21 million) in 2022.
EUL adopted the UGX3700 exchange rate with the US dollar in its proposals, but stipulates it will wait for the January Uganda Bureau of Statistics figures and Bank of Uganda average exchange rate to reach a final determination.
Meanwhile according to the application, for next four years estimated investment requirements, termed ‘restoration and reinforcement plan’ for the Nalubaale and Kiira dams are set to decline. During 2019, $13 million is the expected expenditure; $6 million in 2020; $5 million in 2021 and $1.4 million in 2022.
Although Eskom Uganda is the cheapest generator of electricity, Nalubaale dam was first commissioned 65 years ago while Kiira dam came online in 2007. The high maintenance bill is bound to come into play as EUL management surveys the imminent changes in Uganda’s power sector and its competitive advantage.
The other concern is a government proposal, mooted last year, to re-bundle Uganda’s electricity sector into one entity similar to the defunct Uganda Electricity Board, something that is causing unease in the private sector.
UETCL says Uganda has a short term surplus situation, but rapid demand at 10 pc annually means this situation cannot last very long if no new power generation is commissioned in the medium term. Hence the importance of Isimba and Karuma, but again the fear now is the slow uptake of the anticipated supplies. There is a persistent view among small and medium industries that Uganda’s electricity is overpriced.
According to UETCL, Uganda’s peak power system demand currently stands at 500 MW against an installed generation capacity of 851.53MW with a firm capacity of 496 MW that varies in accordance with the prevailing hydrological conditions.