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Umeme to appeal ERA’s tough performance parameters

FILE PHOTO: Umeme engineers install equipment as part of the network expansion project. Courtesy Photo

Kampala, Uganda | THE INDEPENDENT | Umeme says it will appeal tough performance parameters set by Electricity Regulatory Authority

Umeme Limited has said it will appeal the performance parameters set by the sector regulator, Electricity Regulatory Authority-ERA.

ERA set performance parameters for Umeme for the next seven years in the modification of its licence. The modified licence came into effect on April 12th, 2019.

The parameters cover Distribution Operation and Maintenance Costs (DOMC), energy loss Factor, Target Uncollected Debt Factor (TUCF).

ERA approved less funding for Umeme to meet the required targets. For instance, in some cases, ERA approved less than half of yearly budget that Umeme requested for.

“Relative to the company’s application, the approved targets differ by an annual average of 46%, 2.5% and 1% for DOMC, Energy Loss Factor and TUCF respectively,” Umeme said in a statement.

“The company is exercising its right under Concession Agreement and the Law to apply to ERA for the reconsideration of these tariffs. An update of the outcome of the application will be communicated.”

Umeme argues that Uganda’s agenda to increase electricity supply from current estimate of 26% to 60% by 2027 through implementation of free connection policy and utilization of new generation capacity from Isimba and Karuma dams require sufficient funding that ERA declined to approve.

Isimba and Karuma will be generating 783MWs. Isimba (183MWs) was commissioned by Museveni in March and Karuma (600MWs) is expected to be commissioned by end of this year.

ERA’s consumer and public affairs manager Julius Wandera says Umeme’s appeal will be received and “judged on its merits.” Asked if there is a possibility of changing parameters, he said, “yes. If they have a compelling case with supporting information. Why not?”

Umeme had requested for 116 billion Shillings as staff costs for 2019, but only 67 billion Shillings was approved by ERA. Umeme asked for 125 billion Shillings for 2020 and 124 billion Shillings for 2021 but ERA approved 72 billion for 2020 and 76 billion Shillings for 2021 respectively.

Umeme requested for other costs worth13 billion Shillings for 2019, 14 billion Shillings for 2020 and 14.5 billion Shillings for 2021. However, ERA approved 8 billion Shillings, 9 billion Shillings and 10 billion Shillings respectively.

Umeme asked for transport costs of 18 billion Shillings for 2019, 19 billion Shillings for 2020 and 20 billion Shillings for 2021. However, 15 billion Shillings, 16 billion Shillings and17 billion Shillings was approved by ERA.

ERA almost halved the operational costs that Umeme had requested for. Umeme requested for operational costs of 57 billion Shillings for 2019 but ERA approved 29.8 billion Shillings, 60 billion Shillings for 2020 but ERA approved 30 billion Shillings, and 63 billion Shillings for 2021 but ERA approved 31 billion Shillings.

Umeme is required to reduce energy loses to 13.79 percent at end of 2019, 13.01 per cent at end of 2020 and 12.46 per cent by end of 2021. The target for 2022 is 11.76 per cent, 11.47 per cent for 2023, 11.22 per cent for 2024 and 11.13 per cent for 2025 according to the ERA’s modification.

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