Uganda on edge of major structural reforms to electricity sub-sector as power generation returns to government hands

April 1, 2025 in Business, Companies, Energy, Hydro, Policy by Editor

Energy and Minerals minister Ruth Nankabirwa says she will not be rushed to reconsolidate electricity generation, transmission and distribution to avoid risking the gains made since the policy was adopted just over two decades ago.

Speaking during the “Great Switch” the event where electricity distribution returned to the government, Nankabirwa lavished praise on Umeme for being the tip of the spear of reforms that launched Uganda’s electricity subsector on a trajectory of unprecedented growth. But the end private concessionaires, which first saw Eskom return the Nalubaale power station to Uganda Electricity Generation Company Limited two years ago, and now Umeme, would not set in a rapid reset of the industry she assuered.

Electricity distributor Umeme handed electricity distribution assets back to Uganda’s Ministry of Energy March 31, marking the end of a 20-year concession, and an era that revolutionised electricity distribution in the country.

Government run Uganda Electricity Distribution Company Limited UEDCL, the outfit from which Umeme inherited power distribution two decades ago, is back in the saddle, promising to better Umeme’s record. Responsibility for electricity distribution in the country reverted to UEDCL at the stroke of midnight on March 31, with managing director Paul Mwesigwa steep KPIs that include meeting the expectations of sceptical consumers regulator ERA’s target of 0.3 million new electricity connections in the nine months to December 31.

The symbolic handover, which preceded a technical handover that happened at 23:59 on March 31, was witnessed by hundreds of guests, with officials praising Umeme for expanding the distribution network and lifting electricity access from 5pc of the population in 2005, when it took over, to 25pc at handover. Umeme also enhanced service levels and achieved sharp reductions in commercial and technical losses. Unbilled energy was reduced from 38pc at the start of the concession to 16pc at the time of exit.

An ebullient Paul Mwesigwa, the managing director at UEDCL, said they hope to slash commercial losses to 14.92pc of energy received within the first year, with a focus on installed prepaid metering for public facilities such as government offices, military installations, prisons and public hospitals. These account for the bulk of the remaining 10pc of consumers on the network that pay for energy after consumption, resulting in huge arrears of unsettled bills.

Mwesigwa said UEDCL, which had been distributing power in areas outside the Umeme concession, was well positioned to meet the challenge because presently, 99.9pc of its customers were on prepaid metering. Equally, the company has previously taken over five concessions from private distributors in rural areas.

“Energy in the rural areas where we have been operating is not subsidised but the business has been self-sustaining under UEDCL. So, I am confident we have the technical competences to take over distribution from Umeme,” Mwesigewa said.

Despite pending resolution of the final concession buyout amount, Umeme agreed to handover the distribution network after receiving USD 118, 385,603, against its claim of USD 234 million.

“Today marks the conclusion of a 20-year journey that @UmemeLtd has walked with the people of Uganda in powering homes, businesses, and industries. It has been a period of growth, transformation, and innovation in the energy sector,” Managing Director Selestino Babungi said in remarks at the handover.

He cited USD 850 million that has been invested to revamp and expand the distribution network and improve reliability of power supply. Revenue is realised from 84pc of energy received. But with demand growing at 10.4 per annum Babungi warned that without investment in new generation capacity, Uganda was headed for an electric energy deficit in as little as the next three years.

“We hand over the baton to UEDCL with best wishes for continued progress and success,” Babungi concluded.

The non-renewal of Umeme’s concession marks a major policy shift as the Uganda government backtracks towards reconsolidate its electricity assets. Generation, Transmission and Distribution, which were spun into separate entities just before Umeme and Eskom were concessioned to takeover generation and distribution.

In October 2022, cabinet passed a decision to remerge the power sector. But speaking at transfer of distribution from Umeme to UEDCL, Ruth Nankabirwa, the minister for energy who praised Umeme for a job well-done and a proactive stance during the transition, said she would not be rushed to reconsolidate the industry and would bide her time to ensure every single step in that direction is taken after conclusive studies.

Allaying fears of power generation falling behind demand, Nankabirwa said plans to develop the 400Mw Kiba power station were at an advanced stage.