Umeme should always remember that they are a monopoly providing a service critical to their customers. If I am angry with Airtel, I can shift to Africell or MTN. If DFCU Bank gives me a bad service, as they are doing now, I shift to Stanbic and Barclays.
Umeme has a guaranteed ROI of 20%. This is both good and bad. It is good in the sense that as long as they perform and meet or exceed their targets in loss reduction and operational costs, they earn the 20% or even more. It is bad in that should they fail to achieve the set target, their ROI would be lower. This is a win-win deal for everyone – consumers, taxpayers and government.
Finally, Museveni complains that it is Umeme’s ROI that has led to a high tariff. Previously he has said it is Bujagali. Yet Umeme’s ROI has very little influence on the tariff. Last year its total revenue was Shs1.6 trillion of which Shs 1.2 trillion was paid to Uganda Electricity Transmission Company Limited. This means Umeme contributes only 25% to the tariff. The real cost is with the policy government of Uganda has adopted on power.
Government can decide – like the one in Ethiopia did – to treat electricity as a public good for environmental or industrial reasons or both and make it free or heavily subsidise it. But this would require it to abandon its other priorities such as road building, free education/health and increases in salaries of government employees. However, this is a bigger debate to exhaust here so we reserve it for another day.