Merging Uganda’s electricity sector agencies is a bad idea

Improvements after unbundling

An analysis of current data from Uganda’s electricity distribution company – against general reports from the previous era – reveals that Uganda’s power sector is in much better shape than before. There is a significant increase in generation capacity, the number of power producers, financial viability, consumer connections and relative reliability.

Structural and governance reforms provided space for market-oriented ownership, management, regulation and incentives. This helped to improve the adequacy, efficiency and financial sustainability of supply. A recent World Bank study identified Uganda’s electricity sector as one of only two in Africa – along with Seychelles – with financially viable distribution utilities. This is key in attracting investors.

Progress in electricity access, reliability and affordability is disappointing, though. This can be explained by the poor state of infrastructure of the 1980s and 1990s due to civil wars. Added to this are policy trade-offs made in the 2000s to attract investment in generation expansion and achieve financial viability.

Uganda has subsequently been able to attract the second highest number of independent power producers (38) in sub-Saharan Africa. It is also on a stable path to ensuring energy security, with current installed capacity of 1,237MW and peak demand of 724MW.

This is partly because of increased transparency, competition and financial viability – which encouraged independent power producers such as the 250MW Bujjagali and over 16 renewable power projects.

Gaps remain in electrification rates and supply reliability. But these are issues that require targeted policy solutions and incentives rather than structural rebuilding. Access to electricity is a social objective that requires a social policy. It can only be funded using a blend of public subsidies and innovative private funding.

The global power sector is experiencing a new wave of reforms. Innovations in disruptive technology and business models are making it possible to offer clean, low-cost energy. At such a time, merging or re-bundling energy agencies would be disastrous. It would dissuade private investment in the sector, the backbone of an economy aspiring to reach lower middle-income status

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