President Museveni has said he will engage the Speaker of Parliament to fast-track the amendment of the Umeme Act and ensure that electricity goes directly from generation to the industrial consumer to spur economic growth through industrialization.
“Power should go directly from generation to the consumer, especially the industrial consumer,” said Museveni.
“We should amend the law. I will talk to the speaker,” the President said Wednesday during a meeting with Chinese investors from the Mbale Industrial Park who protested their omission from the direct power consumption despite having a bigger industrial park than MMP Industrial Park in Buwampa, Buikwe district.
The development comes after the government blocked new investments by power distributor, Umeme, as it searches for a new investor who will help in bringing down the cost of electricity and improve the quality of the distribution network as well as extend power to more homesteads.
While Umeme’s contract ends in 2025, President Museveni has advised against the contract renewal.
Museveni’s main grievance is that power distributed by Umeme remains expensive, undermining efforts to industrialize the economy.
Despite making large sums of money, the grid remains horrible, complicating efforts to evacuate more electricity to customers.
According to previous reports conducted by the Electricity Regulatory Authority (ERA), for every 1 percent reduction in tariffs, there is an automatic increase in electricity consumption of 2.7 percent in Uganda.
This means that for every 1 percent increase in GDP you need a 2.5 percent increase in electricity consumption in Uganda.
Law
MMP Industrial Park and Kapeeka Industrial Park are on a pilot trial for direct power consumption pending the amendment of the law to allow all industrial parks to access direct power affordably.
The meeting was attended by Ms. Zhang Zhichum CEO Tang Group, Wang Wentong General Manager Tian Tang Group Li Wenchao Deputy General Manager Mbale Industrial Park Ming Qian Sun and investor Yang Li.
During the meeting, a power investor Mr. Ming Qian Sun of Zhurong Hydropower Consumption Park also presented a proposal for a Power Purchase Agreement guaranteeing 300MW of power supply at a tariff of US$ 3.5cents and 15 acres of land close to Karuma Hydro Powerplant.
Zhurong Hydropower is interested in bulk power purchase, potentially being the largest power off-taker in Uganda.
“Once we reach full capacity, power bills paid by us alone will equate to 2% of the government spending. We connect directly to Karuma Substation at 142kV, no other off taker in Uganda at a voltage higher than 33kV. We will build our own substation which will be transferred to the ownership of UETCL, thus significantly reducing the upfront investment needed from the public sector to facilitate the project,” Ming Qian Sun Said.
Ming Qian Sun said they are also interested in investing in a Crypto- currency industrial park with an initial US$15million in the first year and subsequently grow it to US$20 million in the second year.
Illegal contract amendments
Parliament had recommended that Umeme’s power distribution concession be terminated on grounds that the Attorney General did not perform the Constitutional duty required of him under Article 119(2), specifically that of drawing and perusing all the agreements signed between GOU and Umeme Limited regarding the Power distribution concession.
The amendments in the concession agreements were crafted to strongly favor of Umeme at the expense of the people and government of Uganda in terms of return on investment, arbitration, buy-out conditions on termination of the contract, and risk allocation.
For example, in the dispute resolution provisions, the location of arbitration is London for amounts above US$7 million.
The government also waived its sovereign immunity on its assets other than those protected by diplomatic and consular privileges.
The original concession agreement of 2004 was legal and the burden of losses was on Umeme as an incentive to invest.
In November, 2006 the concession agreement was amended in Washington without the permission of the solicitor General and Electricity regulatory authority as is mandated by both our constitution and the Electricity act cap 145.
This amendment brought losses from being the responsibility of the investor Umeme and became part of the tariff and that’s when the problems started because technical losses stayed stagnant at 17.6% while commercial losses dropped only after the introduction of yaka meters which the consumers paid for and not umeme.
UMEME gets compensated on termination of the agreement irrespective of the cause, demotivating the power distributor to invest in the grid.
Where the government causes the termination, UMEME Ltd gets paid a higher percentage than it gets paid when it is the cause.
The State House meeting was attended by the Minister of State for Finance in charge of Privatization Hon. Evelyne Anite and that of State for Mineral Development Hon. Peter Lokeris and the Minister of State for Energy Hon. Sidronius Okaasai Opolot.
