HOW ERA-DRIVEN EFFICIENCIES IN ENERGY SECTOR ACCELERATED YK M7’S ECONOMIC GROWTH & TRANSFORMATION AGENDA IN THE LAST 20 YEARS (SINCE UEB’ UNBUNDLING)
By Samuel Kamugisha
Uganda has registered considerable achievements since energy sector reforms (manifested in the unbundling of Uganda Electricity Board or UEB) became effective just two decades ago. At the helm of this success story is the Electricity Regulatory Authority (ERA), the sector regulator and referee for all the stakeholders participating in the three critical areas of generation, transmission and distribution.
For starters, until the late 1990s (when the energy sector was liberalized to make the industry competitive, investor-attractive while increasing power generation and improving power reliability), the defunct UEB enjoyed monopoly as it handled power generation, transmission, distribution, sale, importation and exportation roles. At the time of UEB’s unbundling, it was clear the Energy Supply Industry (ESI) was fatally inefficient and did not have the adequate capacity to effectively handle the mandates of generation, transmission and distribution. Complaints of unreliable power supply and lack of access were rampant and commonplace.
But with UEB unbundled, segment-specific players came into place and these included Uganda Electricity Generation Company Limited (UEGCL) to manage electricity generation, Uganda Electricity Transmission Company Limited (UETCL) to deal with electricity transmission and Uganda Electricity Distribution Company Limited (UEDCL) to handle power distribution. For these three players to effectively deliver their mandate, they needed a referee to license and regulate their operations. Over the years, ERA (by virtue of its mandate and electricity’s key role in industrialization and transformation of our country) has been that regulator at the forefront of efforts aimed at realizing Uganda’s development plans and President Yoweri Museveni’s vision to improve infrastructure like roads while increasing access to affordable and reliable electricity to spur economic growth and development.
Regulation (which is ERA’s key role) has been at the heart of all the great transformation the ESI has witnessed right from the days of inefficient UEB’s monopoly to the era liberalization under which several players have come on board. According to ERA’s Principal Economist Patrick Tutembe, the regulator has prudently used regulation as a tool to create a conducive atmosphere capable of attracting more investors to inject significant money in generation, transmission and distribution of electricity to support industrialization and subsequently job creation and thereby accelerating our country’s progress or match towards middle income status.
Describing ERA as “the fulcrum of the Electricity Supply Industry,” Tutembe rightly observes that if any regulator sleeps, the sector stagnates. But over the past two decades, ERA’s dedicated staff and management motivated by a very supportive board have done their best to ensure that the electricity service sector is run as a business with much emphasis going into ensuring maximum efficiency, output maximization and cost-cutting while prioritizing the customer-centric approach.
By December 2019, a number of independent power generators and eight private distribution utilities were in operation. The independent power generators’ list comprised of Eskom (U) Limited (which took over UEB’s power plant assets at Owen Falls Dam under a 20-year concession), Bujagali Electricity Limited, Africa EMS Mpanga Kasese Cobalt Company Limited and Hydromaxx (U) Limited. Others are Eco-power (U) Limited, Jacobsen, Tibet Hima Limited (formerly Kilembe Mines Limited) and Tronder Power Limited.
This increase in the number of generation players has positively impacted on Uganda’s total Installed generation capacity from 1999’s 380MWs to 1254.2MWs as at December 2019. This simply means that the generation capacity has more than tripled in just two decades and is expected to grow even further in the coming months with Karuma Hydro Power Project getting commissioned and coming onboard. This generation capacity growth is phenomenal given the act that as of 1954 when Uganda’s governors then (the British) first established Owen Falls which at that time generated for entire country only 60MWs. Gratefully, the country has since grown it’s generation capacity by more than 20 times to reach the current 1254.2MWs.
This combined generation capacity is spread across a mix of energy sources which include Hydro-Electric Power (accounting for 1004.2MWs which is 80.1%); thermal (100MWs which is 8.1%); bagasse (aka cogeneration accounting for 96.2MWs which is 7.7%); solar (50.8MWs which is 4.1%) and other sources providing 1.1MWs which is a negligible 0.1%.
Tutembe explains that this energy mix is of critical importance because of the re4sultant diversity which offers the county the option of leveraging on alternative clean energy sources. And in case one source is affected (for instance drought reducing water levels and thereby negatively impacting on the hydro-electric power available or too much the diminishing the availability of solar energy). Patrick Tutembe observes that thermal electricity is vital for backup purposes as it is easier to shift materials that make up a plant from one place to another should such need arise. This explains why ERA has used its regulation mandate as a tool to incentivize and encourage private sector investment in various energy sources. For example, the issuance of Renewable Energy Feed-in Tariff (REFiT) Phase 4 Guidelines has been crucial in attracting private sector participation in power generation using renewable technologies.
THE DISTRIBUTION STORY:
When it comes to the distribution segment, the list of energy distributors (the excellent regulatory regime has attracted to the ESI since 2000) includes Umeme Limited, West Nile Rural Electrification Company (WENRECo), Uganda Electricity Distribution Company Limited (UEDCL), Bundibugyo Electricity Cooperative Society (BECS), Kyegegwa Rural Energy Cooperative Society (KRECS), Pader-Abim Community Multi-Purpose Electric Cooperative Society (PACMECS), Kilembe Investments Limited (KIL) and Kalangala Infrastructure Services Limited (KIS).
To make these competitive and improve the quality of services they offer, the regulator has had to set targets. Principal economist Tutembe explains that this has yielded fruit by increasing power sales and profitability-and thereby cutting costs while diminishing inefficiency because “a distributor, such as Umeme, knows that if they don’t make the money [or hit the target], they will make losses.” And to understand the effectiveness of the targets ERA sets for distributors, one has to compare the level of current defaults on power sold and what the used to be the case before UEB’s unbundling. While UEB would not collect about 40% for the power it sold/supplied to its customers, Umeme and other distributors now collect over 97% of all the power they sell.
And Tutembe says this excellent collection rate can only improve as by 2025, the collection figure by distribution companies is projected to grow to over 99.7% for all the electricity they sell. The regulator hopes that with advancement in metering technology (think of prepaid innovations like yaka) and the sector’s heavy investment in the same, there should not be any reason as to why Umeme (for example) won’t be collecting 100% of what it sells to its customers.
With all the 1.4m customers on either postpaid or prepaid billing systems, distribution companies have been able to meet most of their targets as set by ERA since tracking of power usage and billing is now transparent and easily verifiable which wasn’t the case during the UEB days. Prepaid meters are making work easier for Umeme and other distributors since consumers pay even before they start to consume the power and are instantly/electronically switched off once their subscription amount is depleted. As power sale defaulters reduce, ERA and electricity distributors will only have to worry about power thieves who like leveraging on illegal connections.
ALL NOT LOST
But the highly professional, results-oriented and committed ERA Chief Executive Officer (CEO) Ziria Tibalwa Waako and her team are not being indifferent about such illegal actors. They have already come up with innovations aimed at reducing power thefts always manifested through illegal connections. After conducting several studies on power thefts and illegal connections, ERA and distributors zeroed down on uncertified wiremen (locally referred to as kamyufu) as largely responsible for this vice. Although the Electricity Act of 1999 spells out penalties for people involved in facilitation of illegal connections and power thefts, ERA and other energy sector players agree that fining an offender 20 currency points (which basically is Shs400,000) or imprisoning them for a term not exceeding two years (or both) are not severe enough to sufficiently deter thousands of kamyufus from continuing with their illegal acts that are responsible for loss of lives and property due to electrocution, fires and loss of revenue (as those connected illegally do not pay for the power they use). As they wait for more appropriate laws to be enacted, ERA and other stakeholders have extended an olive branch to uncertified wiremen/the kamyufus incentivizing them to join training institutions, earn skills, become certified and thereby formalize their trade. This actually brings them to a position where the regulator can have them within reach (as opposed to being elusive).
FOCUSSING ON NDP WHILE
STREAMLINING THE KAMYUFUS
Through a campaign dubbed PawaKapo, CEO Waako and her team are seeking to hit two birds with one stone. And this is by considerably reducing the number of uncertified wiremen (and attendant problems like loss of lives and revenue) while at the same time increasing the number of certified electricians from 2,700 to 4,000. Through operationalizing the MoU signed with the training institutions (like Nakawa Vocational Training College, Uganda Technical College Lira, Rukungiri Technical Institute, Uganda Technical College Bushenyi, Arua Technical Institute, Uganda Technical College Elgon and Uganda Technical College Kyema in Masindi district) to train these Kamyufus, the regulator hopes to significantly diminish power losses once these newly certified wiremen start working. This will accelerate legal or lawful power installations while expanding on the already existing connections network.
ERA has leveraged on the generosity of the World Bank (one of the energy sector’s key partners) to finance the PawaKapo campaign as one of the many critical interventions provided for under the Electricity Connections Policy (ECP). This ECP is a key NRM government election Manifesto intervention aimed at increasing access to clean and safe energy. Through its brilliant innovations and regulatory activities, ERA is working hard to facilitate the realization of President Museveni’s target to increase the number of Ugandans connected to the national grid from the current 26% to 60% by 2027 (which is several from now) as was clearly stipulated under the National Development Plan. The PawaKapo initiative will make it possible for government to hit its target of increasing the number of annual connections from the current annual average of 70,000 to 300,000 connections per year for the next decade.
To bolster efforts towards achievement of the 300,000 connections annually, the Eng Waako-led ERA continues to welcome and oversee heavy investments into mini-grids (micro-grids/isolated grids). And under ERA’s supervision, five such grids have been put in place to accelerate extension of electricity to villages that are located far away from the national grid. The impact has been as follows: West Nile’s 3.5MWs Hydro-Thermal Hybrid Power System (run by the West Nile Rural Electrification Company/WENRECo via River Nyagak; 8MWs Thermal Generators (operated by Electro-Maxx Limited); 1.6MWs Kalangala Solar-Thermal Hybrid System (established by Kalangala Infrastructure Services Ltd in 2015 to connect people of Bugala Island) and 64kW Bwindi Community Hydropower System (put in place by Bwindi Community Hydropower Limited in 2014 on River Munyaga with funding from GIZ to supply electricity to Bwindi Community Hospital & the Hospital staff quarters and a nursing institution).
Others are the 300 kW Kisiizi Hospital Mini Hydropower System (established by Kisiizi Hospital Power Company Limited on River Rushoma to supply Kisiizi Hospital and the communities located within a 7km radius of the Plant) and the 230 kW Solar-Diesel Hybrid Power System (operated by Absolute Energy Africa Limited to supply Kitobo Island of Kyamuswa County in Kalangala District).
UTILIZING THE AVAILABLE POWER
With the completion of the 600MWs Karuma Hydropower Dam expected to increase Uganda’s installed generation capacity to over 1,800MW, Eng Waako and her team at ERA (as well as other ESI stakeholders) will have helped Uganda to register extraordinary progress. With the country being sufficiently supplied, the ERA boss has already started on efforts to evacuate the power to those who require it. This will be by increasing demand while ensuring that the power supply is both reliable and of high quality. This will require significantly investing in transmission infrastructure while putting in place incentives to encourage connections to available lines on top of prioritizing exportation to the region which is a good way to bring in additional forex for the country’s development processes.
Over the past four years (closely working with UETCL) ERA has supervised the establishment of power sub-stations and construction of transmission lines; most of them targeting industrial parks. This is acting prudently because industries and related activities are already consuming almost 70% of the power Uganda generates. These include Mukono Industrial Park’s 132/33kV & 3×40/63 MVA sub-station; Namanve South Industrial Park’s 132/33kV & 3×40/63 MVA sub-Station and Luzira Industrial Park’s 132/33kV & 3×32/40 MVA sub-Station.
ERA is also implementing a policy that allows consumers who want to undertake manufacturing and other business ventures to inject cash into grid extension works and get compensated over a period of 36 months (three years). The justification for this policy (technically called Rebate) is that businessmen or investors who might be ready to start their ventures shouldn’t be delayed by lack of access to electricity. So, ERA now allows such investors to meet extension costs and then receive a refund over a three-year period. The only condition is that such consumers must fall under the categories of Medium (Low Voltage 415V), Large (High Voltage 11,000V or 30,000V). Their maximum demand for power must exceed 500kVA. Those falling in the extra-large (High Voltage 11,000V or 30,000V) category must have their maximum demand exceeding 1,500kVA. They must also be strictly investors in the manufacturing sub sector (whose growth and expansion the rebates system seeks to facilitate).
ERA is also working with government to expedite interconnection projects within the region and through this arrangement, close to 700MWs will be exported to Burundi, Kenya, Rwanda, Tanzania, Democratic Republic of Congo and South Sudan. The resultant forex coming from this exportation will accelerate the GoU efforts to deepen service delivery for Ugandan citizens.
CONSUMERS BEEN CUSHIONED TOO
While striving to ensure that more investors are attracted to come and invest in the ESI, ERA has always remained mindful of the need to protect customers. And customer-centrism has been emphasized in all the three segments of the electricity supply chain namely generation, transmission and distribution. The ERA philosophy is that without customers, there would be no point producing power since there would be nobody to pay for it. All firms, that have been attracted to invest in the energy industry, would ultimately have to collapse as businesses.
Mindful of this, Eng Waako’s ERA team has several customer engagement initiatives through which they obtain as much feedback as possible.
Over the years, ERA has run the Consumer Affairs Unit through which complaints by customers are handled. In recent months, ERA has even taken a further step to encourage members of the public to call the regulator if they have any issues with power transactions, billing or even supply-related grievances. This means distributors must equally be sensitive to customer concerns. The Consumer Affairs Unit is mandated to present monthly, quarterly and annual reports regarding public complaints and how they have been resolved by concerned stakeholders to whom they are referred for redress.
ERA’s engagements with consumers even extend to issues some regulators would deem too sensitive. It’s also not uncommon to find ERA experts in meetings with members of Uganda Manufacturers Association (UMA) at Lugogo discussing concerns relating to tariff hikes and vice versa. Such mutual interactions between the regulator and consumers like UMA (whose members consume up to 70% of the total power generated in Uganda) have for years enhanced good relationship and boosted confidence in the electricity supply sector.
The agency has also severally involved consumers in its licensing processes, with members of the public being invited to attend hearings from which views are gathered on granting requests made by potential generators, transmitters and distributors. Some of the recent hearings included one where members of the public aired out their views on applications by Umeme Limited, UEDCL, UEGCL and Eskom Uganda Limited for their 2020 tariff reviews at the December 2019 event held in Kampala. Several other hearings were decentralized to upcountry towns/districts like Hoima, Bunyangabu, Bushenyi, Kabarole, Kasese, Mitooma and Bundibugyo. There October 2019 public hearings related to the license application by the Uganda Energy Credit Capitalization Company (UECCC) seeking to be authorized to construct, generate and sell electricity from nine plants proposed in the same districts.
PRIDE OF AFRICA
ERA’s efforts in streamlining and promoting financial sustainability and efficiency in Uganda’s electricity supply sector have resulted into commendable achievements for President Yoweri Museveni’s government whose shinning record when it comes to implementing energy sector reforms remains envied by many peers on the African continent and elsewhere in the developing world.
The regulatory has, through prudent decision-making and interventions, greatly contributed to Uganda’s economic transformation story registered over the past two decades. This is so because electricity has been and remains one of the key infrastructural drivers of the last 20 years’ economy growth and transformation. Consequently, ERA’s excellence and high standards have been recognized at home and elsewhere on the African continent where fellow regulatory authorities benchmark on the success story that Uganda’s EI has been for the last 20 years. Bilateral and multilateral funders and partners have equally been proud to be associated and closely working with ERA in accelerating the necessary interventions aimed at strengthening the performance of Uganda’s energy sector. In November 2019 (for a second time in a row), the African Development Bank (AfDB) ranked Uganda’s Electricity Regulatory Framework number one in the Electricity Regulatory Index for Africa 2019.
Weighed against international standards and best practices, the regulatory framework instituted by ERA scored 0.748 to emerge in the comfortable number one among the 34 countries that were ranked across the continent. The index (among others) measured ERA’s regulatory governance, implementation and regulatory outcomes. AfDB praised Eng Waako and her ERA team for formulating and efficiently implementing “Quality of Service and Supply Standards” which have enabled distribution companies to extend quality services to consumers. This basically is the reason why ERA has become a model on electricity regulation whose practices continue to be emulated by peers on the African continent (with some sister agencies elsewhere flying in their top executives for bench marking tours).
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