Uganda did not have the skills to negotiate these deals and the risks of rent seeking were very high, Prof. Samuel Sejjaaka writes.
In the State of the Nation address of June 04, President Museveni said, “The cost of electricity is distorted by mistakes committed by some of our actors especially the mistakes of Bujagaali and Umeme, (which) add 55.3 per cent to the cost of electricity per unit. Otherwise, the cost of power from Kiira is US cents 1.19per unit, Nalubaale – US cents 1.119per unit, Isimba-US cents 4.16per unit, Karuma-US cents 4.97 per unit; but Bujagaali US cents 8.30 per unit. Bujagaali, at one time, was US cents13.8 per unit.”
The President’s concern is loaded with implications for the economy because without access to cheap energy, our industrial and agricultural production remains uncompetitive, and our households continue using kerosene which is a health hazard. But what has gone wrong?
First, let us have a historical context to this problem. The Nalubaale hydroelectric power station (formerly Owen Falls) was commissioned in 1954 and has a capacity of 180MW. It was not until 1993 that work started on the Kiira hydroelectric power station. The latter was commissioned in 2003 and completed in 2007 with a capacity of 200MW. The Kiira power Station (also known as the Third Power Project) was financed by Government of Uganda (GOU), with assistance from the World Bank and International Development Association which provides concessional financing for poor countries. These facilities are also largely debt free.
In 2002, the GOU, undertook a restructuring of the then Uganda Electricity Board (UEB). As a result of this ‘unbundling’ which created three companies Uganda Electricity Generation Company Limited (UEGCL), Uganda Electricity Transmission Company Limited (UETCL) and Uganda Electricity Distribution Company Limited, UEGCL, a 100 percent parastatal, awarded a 20-year operational, management, and maintenance concession to Eskom Uganda Limited, a subsidiary of Eskom, the South African energy company, to cover both Kiira Power Station and nearby Nalubaale Power Station. Eskom sells the electricity it generates to the Uganda Electricity Transmission Company Limited (UETCL), the authorised single buyer. UETCL resells the power to Umeme, the energy distributor.
A comparison of the unit cost per KiloWatt hour between the various power plants, therefore, in the absence of contextualising the reliability, tariff and funding structure, age and other technical dimensions of the power plants does not on its own provide an accurate basis from […]