Energy Minister Nankabiwra, ERA launch a UDB –Funded Subsidized New Electricity Connection Fees

With support from the Uganda Development Bank Limited (UDBL) and other partners, the Ugandan government through the Ministry of Energy and Mineral Development (MEMD) together with Electricity Regulatory Authority (ERA) have launched the effectual connectivity module dubbed ‘Hybrid Electricity Customer Connection Financing Framework’ through which new electricity connection fees has subsidized.

This program which will be rolled out for Umeme Limited and the Uganda Electricity Distribution Company Limited customers as a pilot is sustainable given that it combines resources from the consumers, the Government, and the private sector relieving the heavy burden on Government.

In her remarks at the launch, Uganda’s Minister of Energy and Mineral Development, Ruth Nankabirwa said the Government with support from development partners has packaged a number of programs to accelerate electricity access in the country such as the GET ACCESS project supported by KFW, and the World Bank Energy Access Scale-up Project (EASP).

The proposed EASP will support access to electricity for households, refugees and host communities under the ECP framework. This financing will achieve 1,360,000 connections.

‘’On of the main obstacles to households getting connected to the national grid is the high cost of initial connection/connection cost. Consequently, the Government launched the Electricity Connection Policy (ECP) commonly referred to as the Free Connection Policy, targeting to increase annual domestic customer connections from 160,000 to 300,000. Under this scheme, a customer is only required to meet the cost for the inspection of internal wiring and the initial units of electricity’’, Nankabirwa said.

This framework is based on the 2020 connection costs of a no-pole connection (UGX 720,883) approved by ERA, which will be implemented as follows: (i) The customer will make a down payment of UGX 200,000 as a contribution towards their connection. (ii) The second proportion of UGX 270,000 will be taken as a credit line that will be recovered as a 15% proportion of every bill payment by the customer. (iii)The last portion of UGX 250,883, the credit interest, and any bad debt is to be considered as a subsidy to the customers and, (IV) The Uganda Development Bank (UDB) will finance the UGX 270,000 and allow for the recovery of this money in a period not exceeding 8 years.

The framework is a reaction to frequent cries from consumers about the high connection fees that have kept many out of the electricity’s reach despite their immediacy to the grid network. Connection fees were as high as sh720, 883 for a no-pole connection.

Flanked by Ziria Tibalwa Waako the Chief Executive Officer of ERA and officials from UDB Nankabirwa said that whereas the EASP and GET ACCESS resource mobilization continues, some households cannot wait for this due to their immediate needs, and yet they cannot afford the entire 720,883 immediately.

‘’To bridge this gap, my Ministry in partnership with the Electricity Regulatory Authority and Uganda Development Bank is implementing a hybrid mechanism targeting No pole Customer connections. This hybrid electricity connection framework combines a customer contribution, a subsidy, and credit to the customer payable through the customer’s energy purchases over a period of eight years with no interest’’.

The Global Energy Alliance for People and Planet (GEAPP) with their anchor partner the Rockefeller Foundation has committed to providing a Payment Guarantee for the credit line. This will also go a long way in reducing the risk associated with the credit line to the customer.

In 2020 challenges arose in the implementation of the ECP occasioned by the COVID -19 Pandemic that required a diversion of resources and prioritization of the Health Sector.

As a result, over 280,000 applications for connection could not be effected. To address this shortfall, in August 2020, Cabinet approved a hybrid connections program to allow consumers who can afford the full electricity connection cost to get connected while Government mobilizes resources to fund free connections.

The cost of a no-pole connection approved by the sector regulator – the Electricity Regulatory Authority (ERA) is UGX 720,883. This cost includes taxes but excludes internal house wiring and inspection fees. In March 2021, the ECP program was resumed with a target connection of at least 87,000 free connections to address the backlog in the Umeme Limited Concession.

However, more than 200,000 of these applications still remain not connected on top of new applications being received by the electricity utility providers. This number does not reflect the component of consumers who have been discouraged from applying due to the backlog and the related high cost of connection.