Sector Analysis: Energy governance reforms in Uganda

A government proposal to amend the current Electricity Act Cap. 145 has been tabled before Uganda’s parliamentary committee on natural resources. It follows a report published by the Ministry of Energy and Mineral Resources which recommended that the three electricity agencies such as Uganda Electricity Generation Company Limited (UEGCL), Uganda Electricity Transmission Company Limited (UETCL) and Uganda Electricity Distribution Company Limited (UEDCL) be merged into one state owned company while the Rural Electrification Agency (REA) responsible for extending the grid to rural areas should be directly placed under the ministry. The government’s view is that this decision will aid in eliminating replication, irregularities, inefficiencies and redundancies of some programmes shared by these agencies in the same sector, set the stage for compliance of different actors and most importantly, redirect unnecessary government expenditures to other pertinent economic challenges.

In addition, the amendment bill seeks to enable a  transition from a single bulk supplier model to include Independent Power Providers as direct suppliers of electricity to consumers and increase funding for the Electricity Regulatory Authority from 0.3% to 0.7% of the revenue received from electricity sales as a means of supporting it in regulating electricity sector. It is projected that this will enable better monitoring, evaluation and address existing gaps and deficiencies in service delivery.

The proposed electricity amendments are ambitious in scope and I believe they are necessary but should go beyond the desire to see the reduction in electricity prices and rather focus more on ensuring universal access to clean energy.

Uganda’s electricity sector was unbundled two decades ago as part of the electricity sector reform and privatisation policy. The state-owned Uganda Electricity Board (UEB) was split into three electricity agencies which are; Uganda Electricity Generation Company Limited (UEGCL), responsible for generation of electricity, Uganda Electricity Transmission Company Limited (UETCL) responsible for the building of transmission lines and Uganda Electricity Distribution Company Limited (UEDCL) responsible retail end.

Before liberalisation, only 1%  of the population was connected to the grid. 22 years later, one can say that the liberalisation of the energy sector has to some extent bore fruit; 24% of the population has been connected to the grid and revenues of the different electricity agencies have increased. For example, UMEME- an electricity distributing company in Uganda continues to record revenue increases over the years. As of 2021, its gross profit rose to Shs642.2bn, up from Shs478.9bn in 2020 and other agencies like UETCL have also recoded profits and met targets. Over 30 independent power producers of different scales operate in the country.

Contrary to what one would view as successes, certain distortions and contradictions project Uganda’s electricity sector as an impediment to the country’s expected growth. Forexample, despite massive cash investments in the sector, effectful policies like the free electricity connections policy and an abundant electricity generation capacity, electricity prices are still high with a constrained supply. As a result,  88% of the population still relies on biomass such as wood and charcoal for their energy needs. Moreover, the dominance of biomass in the country’s’ energy mix has led to enormous loss of forest cover that has contributed to increased silting in water bodies due to high levels of soil erosion among other environment impacts.

These challenges have spurred the government into action with the proposed amendments as a tool to accelerate widespread energy access especially amongst rural communities, reducing electricity prices and achieving rapid industrialization.

While these proposed amendments if passed will certainly contribute to reduced electricity prices thus accelerating widespread energy access for all,  the most important question should be ; How long will it take for Uganda to achieve this ? Through REA, the government in partnership with multilateral partners such as the World Bank embarked on extending the gird to rural areas. However, the results have been dismal since access rates increased from 1 % in 2001 to only 10 % in 2021.

It is evident that extending the grid to remote communities is still a challenge thus, the government should instead use the proposed amendments to ramp up off-grid energy solutions such as solar micro and mini grids to these underserved communities and create an enabling environment to attract more private sector investments for increased clean energy access.  It should also continue to develop mini hydro power stations in instances where rural communities are in proximity with rivers that allow for it. Through this, an increase in energy access will be recorded while also advancing community development, alleviating pollution and therefore mitigating climate change.

Author : Daniel Ogwang

Researcher : African Centre for a Green Economy