ERA says increased electricity generation will bring both domestic and industrial tariffs down
By Julius Wandera
The Installed Capacity of Uganda’s electricity generation increased to 1,177 MW in March 2019, following the commissioning of the Isimba Hydro Power Plant (HPP), which added 183 MW to the National Grid. The Isimba Hydro Power Project was developed by the Government of Uganda; with 85% of the project costs financed with a loan from the EXIM Bank of China, and 15% financed by the Government of Uganda.
The Isimba Hydropower Plant’s addition to the National Grid is timely for support of Government Policy on accelerated access to clean energy and industrialization for the country’s socio-economic transformation. However, some stakeholders have used different media platforms to cast doubt on the possible reduction in Electricity End-User Tariffs following the commissioning of the Isimba HPP in March 2019, and the 600 MW Karuma HPP expected later in December 2019.
In light of the several assertions and discussions about the expected Tariff trajectory due to these projects, the Electricity Regulatory Authority clarifies as follows:
The Isimba and Karuma Hydropower Plants have been developed by Government of Uganda, with Government being the borrower of the project debt. Compared to privately-developed power plants, Isimba and Karuma will generate electricity at relatively lower tariffs over the term of the Licence.
The Electricity Tariff for the two plants will reduce over time, in a phased manner, from US Cents 4.16/kWh (year one to year 15) to US Cents 1.01/kWh (after year 15) for Isimba Hydropower Plant. For the Karuma Hydropower Plant, the Electricity Tariff will reduce from US Cents 4.97/kWh (year one to year 10) to US Cents 2.7/kWh (year 11 to year 15), and US Cents 1.17/kWh (after year 15). The changes in the generation Tariffs for the respective plants is on account of fluctuation in the debt service obligations. Basing on these generation Tariffs and the utilization of the power plants, the Weighted Average Generation Tariff is projected to reduce.
Following the commissioning of the Isimba and Karuma Hydropower Plants, a critical factor for the reduction of Electricity End-User Tariffs will be growth in Demand for/Consumption of electricity. The generation Tariff for Isimba Hydropower Plant is lower than the Weighted Average Generation Tariff. Increase in electricity consumption (for both Domestic and Industrial customers) will lead to increase in dispatch/utilization of Isimba Hydropower Plant. This will result into reduction in the Weighted Average Generation Tariff and therefore reduction in the End-User Electricity Tariffs.
In support of the Demand Growth agenda, the Government of Uganda working with several stakeholders has initiated several measures aimed at growing demand and increasing the consumption of electricity. These include:
With these initiatives aimed at massive electricity consumption in both homes and industries, the revenue base of the Electricity Supply Industry will grow, subsequently leading to reduction in the End-User Tariffs. Ugandans are therefore encouraged to use electricity productively and in large quantities so that the End-User Tariffs can reduce across all categories.
(table of tariff as of April 2019)
Mr Wandera is Manager Communication, Electricity Regulatory Authority