Rural communities turn to cooperative societies to subsidize high cost of power connections
Rural communities have adopted a creative solution to the high costs of getting access to electricity. They have formed cooperative societies which are providing subsidies to low income households so that they can afford to pay the initial costs of connecting to the electricity grid.
At least 38,350 new connections have been made, with the number expected to rise to 12,000 off grid connections, according to the Rural Electrification Agency (REA), the agency that is mandated to help rural communities get access to electricity. Access to electricity is seen as a key to the fight against household poverty and the attainment of the Millennium Development Goals for health and education, but the cost of getting a new connection is a key impediment particularly for low income earners. It costs more than Shs 460,000 for a new domestic customer to get connected to Umeme’s national grid while a commercial connection costs more than Shs 670,000 – way beyond the reach of the majority of the poor peasants. This cost includes Shs 100,000 as a security deposit and Shs 323,000 is the “capital contribution’ - a contribution to the capital growth of the overall network. But the cost is heavily subsidized by the government. Henry Rugamba, the Umeme Communications manager, said the actual cost of one pole, without including labour, materials, administrative and overhead costs of installation, is more than Shs 1.6 million. In effect, the government contributes Shs1,183,000 to every customer who connects to a pole, the customer would have to pay the full amount if he requires beyond one pole. On top of these costs are additional costs of getting the premises wired up.
Electricity SACCOs therefore, are the new solution to help communities get access by offering loans and subsidizing the costs. Some of the electricity co-operatives that have been formed include Bundibugyo Electric Co-operative Society (BEC) for Bundibugyo and Ntoroko districts, Abim Community Multipurpose Electric Co-operative Society (PACMECS) for Pader, Abim and Agago districts. Plans are underway for some of them to generate and distribute power through new power lines.
The subsidies are disbursed through financial institutions and Photo Voltaic (PV) companies to provide financing for acquiring solar electricity. Six financial institutions are participating with over 100 SACCOs offering the service to consumers. According to REA, districts that have been connected include Sembabule, Kaberamaido, Kanungu, Oyam and Kibaale. Other areas in western Uganda that now have electricity include Kayonza, Buhweju, Rugyeyo, Mazizi, some parts of Mbarara District, some parts of Ntungamo District and some parts of Kabale District.
So far, 15 district headquarters have also been connected to the grid and 11 more district headquarters are set for connection by 2013.
Just 3-5% of the population has access to electricity and many towns, especially in the North of the country are not connected to the national grid. In the rural areas only about 2 per cent had access to electricity, of which less than half was provided through the national grid, the remainder coming from household generators, car batteries or solar photovoltaic (PV) units.
Diesel generators have been installed in the districts of Moyo, Adjumani, Moroto and Kalangala. A total of 426 grid extension projects countrywide have been implemented to support social and economic projects in communities and institutions for rural transformation.
The government launched the Rural Electrification Strategy and Plan in 2001 with the aim of increasing rural access to electricity. However, electricity for most Ugandans is still a far off wish. The programme was at 6% coverage in 2009, and not much has changed since.
Rugamba said Umeme’s interest as distributor is also to increase the number of connections, “and we invest heavily in doing so.”
High demand
Uganda will require 2,000 Megawatts (MW) electricity by the year 2025 to run its industries and homes. To achieve this, more than $3.5 billion (about Shs 623 billion) will have to be sourced and spent in the energy sector. Within 20 years from now the country must generate an additional 1,700 MW to meet its demand capacity. Uganda is currently facing a huge electricity supply deficit, as over 90 percent of the country’s population is not connected to the national grid
However, a number of projects have been initiated to improve Uganda’s power supply and increase access to electricity and government gave priority to fully commission the completion of 250MW Bujagali Hydro Power Project and start the construction of 600MW Karuma Hydro Power Project.
Eng. Simon D’Ujanga, the energy state minister, recently told an energy stakeholders’ workshop in Kampala that the failure to hit the rural electrification target was partly due to the low interest from the private sector towards the programme.
He said while developing the rural electrification strategy and plan in 2001, it was assumed that market-led reforms would attract the private sector to invest in rural electrification.
The workshop was aimed at reviewing Uganda’s accelerated rural electrification project.
The minister also highlighted where the challenge would be and advised that there was a need to review the high connection fees charged by utility companies.
“Cost of house wiring has been a big barrier to power access since connection facilities cannot be provided unless the house has been wired,” said D’Ujanga.
Last month, the government and the World Bank signed a $5.5m ( Shs 13 billion) grant targeted at subsidising electricity connections for about102,200 low-income households countrywide.
Currently 4% of the country’s rural populace are accessing electricity but with this finding, development partners and government target to scale up accessibility to 22%.
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