WE DON’T WANT UEB BACK

I remember it like it was yesterday. Then energy minister Richard Kaijuka had just had his attempt at amending the UEB (Uganda Electricity Board) Act thrown out by parliament. Government needed to create a law that would allow for the unbundling of UEB.

This was necessary to attract investment into the sector and create specialities that would lead to a greater efficiency within the sector.

“The problem with this country is politics,” Kaijuka complained then. “It is a small economy, a small portfolio in a European investment bank. It can be turned around were it not for the politics.”

The economy is now three times as it was when Kaijuka said those words on the steps of parliament in 1998 but the politics continues to dog its every step.

The ministry returned to the drawing board and brought brand new laws that eventually split up UEB into its component parts, generation, transmission and distribution and in addition spawned the Rural Electrification Agency (REA) and the Electricity Regulatory Authority (ERA).

As a result of this action billions of dollars have been invested in the sector that is doubtful would have happened under the amorphous UEB.

And yet we want to reverse this inspired bit of policy today. Many times in this country you don’t know whether you want to cry or laugh.

Under the new plan to rationalise the government Uganda Electricity generation Ltd (UEGCL), Uganda Electricity Transmission Ltd (UETCL) and Uganda Electricity Distribution Ltd (UEDCL), essentially the former UEB operations, are to be merged as a way to create savings.

"With every strategy there is a trade-off. In this case government is signalling that it is trading off the created efficiencies in the industry for spurious savings, which would not stand up to serious scrutiny...

Of all the turnarounds in service delivery that came out of the privatisation and liberalisation drive of the 1990s the electricity sector in this country has to be up there with telecommunications and banking.

For one thing there has been increased investment to the sector to the point that at power generation has jumped fivefold from the 180MW of the Nalubale dam and power consumers have followed suit rising to the current 1.5million from a paltry 240,000 in 2005 when Umeme took over the distribution concession.

In both generation and distribution government still owns the assets under the respective holding companies UEGCL and UEDCL.

The natural progression is that these holding companies grow to invest, manage and attract investment in their respective sectors. With electricity enjoyed by barely one in five Ugandans there is great scope for expansion.

As it is UEGCL is getting ready to take over the Isimba and Karuma dams, whose completion is expected in the next year or so.

To return UEGCL into some amorphous structure will not help its mandate. As it is now they are already working with their hands tied behind their back.

In the computation of the end user tariff UEGCL accounts for under one percent of the tariff, but this is artificially low as they are not allowed to provide for return on equity and depreciation of assets as the private concessionaires – ESKOM and Bujagali are allowed to do.

What this means is that when UEGCL takes over Isimba and Nalubale it would have to still resort to government for funds, even if the dams have the potential to be commercially viable.

The last thing any self-respecting manager wants is to be reliant on government for hand-outs. With government priorities change, revenues do not come in as budgeted and any other number of things that would prevent one from getting their fair share of the budget.

For UEGCL imagine a turbine at the dam goes down but government cannot release money because government needs the money for something else or doesn’t have the money anyway.

ERA needs to allow UEGCL and even UEDCL – which accounts for 0.4 percent of the tariff, to charge depreciation and even return on investment is that when they take over they need not revert to government every time they need to replace plant and machinery.

"The logic of unbundling the old UEB still stands nothing has changed to suggest a rethink of the sector. Just because the sector has grown does not mean we reconstitute UEB. In fact the contrary is more true now than ever, the industry has developed a momentum of its own and we should allow this mature especially as the president has said that we need 17,000 MW in ten years to fuel our development ambitions...

It is conceivable that, like the electricity generating company Kengen in Kenya, UEGCL will one day take over the Nalubale and Kiira power plants and even Bujagali to add to Isimba, Karuma and any number of power generation plants they will have developed.  

We will be going against established logic and good practice to fold them back into some amorphous entity and in addition we cannot tie their hands behind their backs and hope for a miracle. In fact if we do that we will come back full circle to where we were in 1998 looking to unbundle the new UEB – again.