As Uganda teeters on the brink of another power crisis, the return of the scheduled power blackouts has pushed government in a tight corner, with the ministry of Finance pondering whether to renew its subsidy package to power firms or raise electricity tariffs.
Either way, both options come with a huge price. A big subsidy package – which was never mentioned in the recent budget – will require government to source for funds at a time when money is hard to come by, while raising consumer electricity tariffs when Ugandans are experiencing the highest cost of living in more than a decade could spark off another public backlash.
The Observer has learnt that closed door meetings to find an amicable solution to what is turning out to be a nagging problem for government ended in a stalemate, culminating into Umeme, the electricity distributor, sending messages to consumers about the trouble at hand. Umeme says there will be power interruptions, otherwise known as loadshedding, because the country faces a shortage of 50MW during the day and 120MW in the evening.
Sam Zimbe, Umeme’s general manager (Corporate and Regulatory Affairs), says the company received information from the Uganda Electricity Transmission Company Ltd (UETCL) indicating that two thermal power generators in Tororo had stopped providing power. A third generator in Jinja also stopped on Monday night.
“The operator of the two thermal power generators in Tororo, Electromaxx and the Aggreko plant in Jinja stopped generating power resulting in a shortage of 50MW during the day and 120MW in the evenings. We are also concerned that the Mutundwe plant may shut down in the next three days (Friday),” Zimbe said.
The last time Uganda experienced a power crisis – sometime in 2006 – many companies found it difficult to operate and instead closed shop. Others went embarked on deep cost cutting measures, laying off dozens of workers.
Charles Muhumuza, the executive director of Electromaxx, confirmed that they had shut down the power plant in Tororo. But while some industry sources say that firms like Electromaxx are facing financial hardships, Muhumuza says the current electricity shortage is mainly due to government’s delay to renew its subsidy package to power firms.
Government has been offering a subsidy of $300 per tonne of heavy fuel oil. But Muhumuza says that without the subsidy, with the price of heavy fuel oil doubling, the cost of operating the plant no longer makes business sense. The issue is so serious that President Yoweri Museveni has weighed in. According to our sources, Museveni is reluctant to okay the power tariff increment for fear of providing the opposition another reason to call for mass protests.
Only three months ago, the opposition staged protests against the rising price of food and other commodities, which claimed 10 lives and plunged Uganda into international media scrutiny over its violent handling of the demos. Instead, Museveni is said to have pushed Umeme into dealing with power leakages, which remain above 30%.
Umeme on the other hand believes raising power tariffs could ease part of the burden it faces. This would be the third time that power operators are requesting for a tariff rise. Over the last two years, Umeme has sought to increase the cost of a unit of electricity from Shs 385.60 per unit for domestic users to Shs457.
However, on both occasions, the Electricity Regulatory Authority turned down Umeme’s requests, insisting that the power distributor reduces losses in transmission from 38% to 34%, while increasing on its collections rating to 92%.
Observers say that a hike in power tariffs could trigger an increment in the percentage loss of power because many people who can’t afford paying the fees would more likely resort to stealing it. It is for that reason that the government withdrew its targets to Umeme to curb the power loss in 2006.