When the ministers of energy and finance return to Parliament this week to explain the problems in the electricity sector, they will find it extremely difficult to explain that the country is better off since the 2004 concession with Umeme.
“Ugandans are paying far more for the current crisis in electricity than they used to pay when Uganda Electricity Board (UEB) was in charge, and this is unacceptable,” Simon Mulongo (Bubulo East), said after yet another hearing, last week.
Energy permanent secretary, Kabagambe Kaliisa and Finance state minister, Aston Kajara, appeared before the parliamentary ad hoc committee on energy last Tuesday and Thursday respectively, and were forced to admit that the concession agreement with Umeme is unfair to Ugandans.
While Kaliisa admitted that he ignored a directive to cap Umeme’s losses at 33% per annum, Kajara went a step further to admit that if the concession was to be negotiated today, the scenario would be different.
“Mr Chairman, I agree that if the Umeme contract was being negotiated today, we would be wiser. As for now, the best safety exit we have in the deal is room for a review after seven years of Umeme’s operations,” Kajara said to the committee.
He had earlier admitted that the government had paid out Shs 1trillion to support thermal generation and Shs 2.413bn to Umeme as compensation for losses since 2005 — more than the amount spent to build Bujagali dam.
The money is also much more than the Shs 300m that UEB used to get from government each year before 2003. Kajara added that the subsidy for thermal power was a burden to the budget and was unsustainable, as it was preventing the government from supporting other critical development programmes.
However, he failed to explain whether the government had benefitted from the subsidy. “I think I can provide the detailed cost benefit analysis at a later date,” he said.
Kaliisa, who was facing a barrage of questions from MPs as they wondered whether it was not better to renationalise the electricity companies, since government was paying 60% of the electricity tariff, admitted that the country was in a crisis and there was need for a thorough review.
The current tariff is rated at Shs 680 for domestic users and Shs 800 per unit for industrialists, but the government pays to keep it at Shs 486 for domestic consumers and Shs 385 for industrialists.
Hindrance from finance
As the debate got hotter, Kajara found himself at odds to say whether his ministry was indeed a hindrance to the running of the electricity sector.
The ministry of Finance, Planning and Economic Development appoints the board members of the Electricity Regulatory Authority (ERA), Uganda Electricity Distribution Company (UEDCL) and Uganda Electricity Transmission Company (UETCL), although the ministry of Energy and Mineral Development is supposed to supervise them.
This matter had Andrew Baryayanga (Kabale municipality) wondering whether the ministry of Finance is justified to run these companies or is actually a hindrance to their proper running.
“Mr Chairman, the issues that you raise are justified in the Electricity Act. The ministry of Finance is supposed to run these organisations in liaison with the ministry of Energy,” Kajara responded.
But Eddie Kwizera (Bufumbira East) pressed the minister further that, as chairman of the Natural Resources committee, Kajara was responsible for creating the Electricity Act in 1999 and was aware that there was no consultation with the ministry of Energy at the time.
“The purpose of the law has been lost and you are now running these companies without the right expertise for them,” Kwizera charged.
But Kajara remained belligerent. “As a qualified senior lawyer, I can tell you that this is a good law and if implemented properly, there should be no problem,” he said, roundly dismissing their complaints that the ministry of Energy had been reduced to merely advising the Finance counterpart on how to run ERA, UETCL and UEDCL.
Eventually, Kajara admitted that the company directors report to the ministry of Finance, not Energy.
Lack of capacity in energy
But the situation is no better in Energy, as Kaliisa admitted earlier. Partly because only the Uganda Electricity Generation Company is under its mantle, the ministry of Energy and Mineral Development has no qualified electrical engineer at a position higher than assistant commissioner.
Ministry officials higher than assistant commissioner have training in mineral development or petroleum, an indirect indicator of the problems facing the electricity sector.
Kajara is expected to face the committee again this week, as well as Energy ministers, Irene Muloni and Simon D’Ujanga.
If time permits, the committee could also host energy PS Kabagambe Kaliisa for the second time to answer questions related to a World Bank loan and IDA grant extended to Umeme, and to provide explanations on technical and commercial losses by the electricity concessionaire.
The committee has also lined up more questions on whether the concession agreement with Umeme was favourable to Uganda. Kajara is also expected to provide a detailed schedule of all payments out of the ministry of Finance to power companies since August 2005.