Opinion: Bubu Will Pull Down The High Electricity Tariffs

Opinion: Bubu Will Pull Down The High Electricity Tariffs

By Ben Ssebuguzi

Buy Uganda Build Uganda(BUBU) is a government programe intended to increase the consumption of locally made goods and services. According to Buy Uganda Build Uganda (BUBU) government policy passed by cabinet in 2014, it aims at ensuring a vibrant diversified domestic trade in goods and services through promoting the consumption of locally produced goods. One of the factors that is affecting the effectiveness of BUBU is the high prices of products brought about by high cost of production like high electricity tariffs, multiple taxation etc.

According to Mr.Julius Wandera, the Public Relations Director at Electricity Regulatory Authority (ERA), 3rd quarter of July, August and September tariffs stands as follows: Domestic Ugx 771.1, commercial Ugx 687, medium industrial shs 615.3, large industrial Ugx383.8, while Extra large industrial is Ugx314.1 subject to changes on a quarterly basis.

However, before we cry foul about the high price of electricity, there are many underlying factors that we need to know so that we can get well informed about the subject matter. There is what is known as the Bulk supply tariff. This comes as a result of summation of the weighted average generation tariff by the generation companies, power transmission costs to the stations as a result of operational costs and among others divided by the amount of electricity generated. It is this Bulk electricity tariff that is sold to the distribution company, UMEME.

The distribution company UMEME also sells to the end user after factoring in the other fixed costs such as service fee, VAT among others. In Economics, there is a terminology known as Economies of scale which means that the more units of products produced, the less the cost of final output. In the same way the more bulk electricity the distribution company buys from the generation company, the lower the end user electricity tariff. However this is a different story as Uganda is grappling with surplus electricity despite the increase in average growth in domestic customer numbers at 16 percent between 2012-2017 plus about 5000 industrialists we have in Uganda who are the large consumers of power.

Uganda’s peak power system demand stands at only 500MW against an installed generation capacity of 851.53 MW not forgetting that by 2019 when Karuma and other small dams are commissioned, they will reach 3500MW.This means that we shall have more surplus power, and the more we cannot complete to consume the power we generate, the more the generation companies will transfer the burden to the end user.

The only antidote for the surplus power is advocating for industrial loads as one factory like the phosphates plant in Tororo is expected to consume about 500MW.However there are  disturbing reports where  industrialists demand about 50MW for a start from Electricity Transmission company but end up taking up only 5MW.This is partly brought about by high demand for imports by Ugandans against the locally made goods which makes manufacturers to produce below the production capacity hence leading to low power demand. Seldom we have heard the outcries from the Uganda Manufacturing Association (UMA) an umbrella body of manufacturers in Uganda claiming that their members are producing at 50 percent hence putting a financial burden to them.

Youth power research Uganda, an umbrella body of youths in Uganda urges all Ugandans to embrace Ugandan made products in order to increase power consumption by manufacturing plants which will at the end reduce the surplus electricity which impact on end user electricity tariffs. Higher power consumption will reduce power tariffs on top of creating jobs for youths and also increase revenue for government.

The power and strength of our economy will depend on the cost of electricity and we therefore urge ERA to double their effort to reduce the cost despite their incentives such as the 15 units monthly bonus to domestic consumers and the 6 cents for industrial users during off peak hours. We also appeal to government to continue to give incentives to investors as a measure to increase power consumption hence leading to reduction on surplus electricity in the country that is a financial burden in computing end user tariffs.

 

Ben Ssebuguzi

Team Leader Youth power research Uganda

Secretary General Uganda Poor Youth Movement

0751-811286

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