British firm to decide Umeme tariff model

Umeme Limited says it hopes Ricardo Energy and Environment, a consultancy firm from the United Kingdom that the Electricity Regulatory Authority has contracted to come up with a new power tariff model, will take into account its concerns in order to protect its revenue streams for the next six years.

Ricardo Energy is updating the tariff model covering the period 2020–2025, putting into account the new performance parameters that the authority set for Umeme. Some of the performance parameters include the turnaround time for reconnections, among others.

The new model is a slight shift from the usual factors – inflation, forex exchange fluctuations, and the price of oil on the international market – that Umeme was accustomed to. The tariff remains a bone of contention between the regulator, ERA, and Umeme, as it is the magic number that defines whether the utility company makes money or not.

It is not clear when Ricardo Energy will release its report. For the year 2020, Umeme plans to spend $54.7 million in capital expenditure, with the target of bringing power losses down to 14.4% from the current 15.5%. The company recently received financing of $70 million from the World Bank’s investment arm, the International Finance Corporation.

For the next six years, Umeme plans to spend $920 million on its different electricity networks such as substations, power transformers and voltage lines, among others. Umeme plans to grow demand and also increase the number of customers connected on the grid.

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