ERA Reduces Power Tariffs In Nearly A decade

The Electricity Regulatory Authority (ERA) yesterday announced a downward change in electricity tariffs for the first time since 2005.

With effect from 16th January 2014, the end user tariff will be 520.4 shillings for domestic consumers instead of 524.5, 474.4 shillings for commercial consumers instead of 487.6, 452 shillings for medium industrial users instead of 458.9 and 310.4 shillings for large industrial consumers instead of 312.8.

The changes were announced by the ERA Board chairman Richard Apiire who attributed the changes to the favourable exchange rate regime that Uganda has enjoyed in the recent past, and a reduction in power distribution losses from 26 and 23 percent to 20 percent this year.

Apiire also said that the tariff has reduced because there will be a minimal dispatch of thermal generators for the first quarter of 2013 because of favourable hydrology and that government will continue meeting capacity payments to the thermal plants.

He added that government has also accepted to convert the debt obligations of Uganda Electricity Board (UEB)’s successor companies into zero return equity and that the debt will not be financed through the tariff.

When UEB was unbundled in 1999, the successor companies- Uganda Electricity Generation Company Limited, the Uganda Electricity Transmission Company Limited and the Uganda Electricity Distribution Company Limited inherited its debts which were being financed through the tariff.

Apiire revealed that the tariffs will be subjected to quarterly adjustments depending on the changes in the exchange rate and fuel prices. He said that the Authority shall approve a base tariff at the beginning of each calendar year through an open, transparent process taking into consideration the licensees’ revenue requirements.

The mechanism is similar to the one that was announced in January 2012-Automatic Tariff Adjustment, which was contested by manufactures in court who argued that that tariffs will be unbearable if they are left to vary depending on variables that the government has no control over like the exchange rate. The case is still in court.

State minister in charge of minerals Peter Lokeris said that although the sector is facing challenges of financial sustainability, vandalism and dependency on expensive Thermal generators, the government is committed to further reducing tariffs through increased generation.

ERA CEO Benon Mutambi said that the regulator is committed to continue working with government and the public to ensure that a level of tariffs that is affordable to facilitate economic growth is achieved.