Uganda Government moves to cut power expenses

Friday July 15, 2011

UGANDA is switching off thermal power generators to reduce the cost of producing electricity, the Electricity Regulatory Authority boss has said.

Benon Mutambi said on Wednesday two diesel-powered plants, one at Kiira in Jinja and another at Mutundwe, would be turned off. The plants, which generate 100 megawatts (MW), will be replaced by cheap hydropower at the new Bujagali plant in Jinja. Each of the two plants produces 50MW.

The Bujagali project is expected to release its first 50MW onto the national grid in November.

“We are getting rid of the expensive thermal power generators. This will enable us save sh33b per quarter (every three month), which can be used to boost the economy,” Mutambi said.

“As we transit to the commissioning of Bujagali, we shall use our water to generate 40MW.”

He said the launch of Bujagali would reduce the energy sector costs to sh818.1b, from over sh1 trillion in the first quarter of next year.

The announcement comes at a time when Uganda is facing a 12-hour load-shedding schedule after Aggreko and Electromaxx turned off their generators in protest over a sh207.5b debt owed by the Government.

This has caused a power supply shortfall of 50MW during daytime and 120MW at night.

Mutambi explained that the total energy sector needs five years ago were sh420b, but this increased to sh618b last year and sh1,076b this year.

“The major drivers of the increase in revenue requirement are thermal generation costs, which increased from sh155b in 2006, to about sh670b in 2011. This is largely due to the depreciation of the shilling, increasing fuel prices and increased dispatch,” he said.

“In 2006, thermal power generation accounted for 23%. Today, it accounts for 46% of Uganda’s energy. Thermal power generation costs will be about 85% in 2011 compared to 73% in 2006.”

Mutambi noted that since November 2009, the shilling has depreciated by over sh600, from sh1,874 a dollar to over sh2,600 today. He added that the current revenue requirement is about $400m, of which 80% is foreign currency-based.

He said as a result of the depreciation of the shilling, the energy sector revenue requirement increased by about sh192b over the past 18 months.

“International crude oil prices have increased to reach highs of $120 per barrel against the earlier forecasts of $60-70 per barrel at the beginning of 2010,” he said, adding that the increase has had a huge impact on sector costs.

Mutambi said unchanged power tariffs, a depreciating shilling and the increasing fuel prices, and government subsidies have reached unsustainable levels. “We need to put in place measures to ensure that the energy sector is financially self-sustainable and efficient,” he pointed out.

By Ibrahim Kasita: The New Vision Newspaper