WARNING: This is Version 1 of my old archive, so Photos will NOT work and many links will NOT work. But you can find articles by searching on the Titles. There is a lot of information in this archive. Use the SEARCH BAR at the top right. Prior to December 2012; I was a pro-Christian type of Conservative. I was unaware of the mass of Jewish lies in history, especially the lies regarding WW2 and Hitler. So in here you will find pro-Jewish and pro-Israel material. I was definitely WRONG about the Boeremag and Janusz Walus. They were for real.
Original Post Date: 2011-07-25 Time: 06:00:01 Posted By: News Poster
By Ibrahim Kasita
There is sh207.5b ($83m) debt government owes Aggreko and Electromaxx, the independent thermal power producers. This accrues from delayed payments for the period March to June 31.
The payments are direct subsidies to shield the consumers from tariff shocks as electricity consumer prices rose from sh215 per unit in 2005 to the current sh385.6 indicating a 76% rise.
Power crisis
The investors decided to switch-off their machines; an action that has plunged Uganda to 12-hour power load-shedding.
Daytime electricity supply shortfall is 50 megawatts (MW). At night there is a deficit of 120MW.
Current electricity supply averages 404 MW compared to demand standing at average 454MW. But analysts advise that there is a need to raise the tariff in order to “progressively” reflect the economic cost of power supply and also reduce the consumer subsidies but instead use the money for other economic and social needs.
Dr Benon Mutambi, the Electricity Regulatory Authority (ERA) head, says the subsidies benefit only 15% of Ugandans; about 33 million.
“Government subsidies are 8% of the tax revenues collected. The subsidies are actually bigger than budgets of other sectors,” he explains.
“It means the subsidies are denying other economic and social sectors funding yet only 15% of the population accesses electricity.”
Last years’ tax revenue collection was estimated at slightly over five trillion Ugandan shillings.
Interestingly, the subsidies do not benefit everyone. The upper-middle classes as well as enterprises receive almost all the direct benefit of the power subsidy, which is difficult to justify from a public policy perspective.
The energy sector costs have jumped to slightly over one trillion shillings this year compared to sh420b in the last five years, according to the regulator.
“The major drivers of the increase in revenue requirement are thermal generation costs, which increased from sh155b in 2006, to about sh670b in 2001,” says Dr Mutambi.
In 2006, thermal power generation accounted for 23% of Uganda’s energy. Today, it accounts for 46% of the energy. Thermal power generation costs will be about 85% in 2011 compared to 73% in 2006. Although government has been subsidising sh92b every year for domestic power users, this money has been consumed faster than expected as the shillings depreciated against the dollar.
Since November 2009, the shilling has depreciated by over sh600, from sh1,874 a dollar to over sh2,600 today. Yet the current revenue requirement is about $400m, of which 80% is foreign currency-based.
As a result of the depreciation of the shilling, the energy sector revenue requirement increased by about sh192b over the past 18 months from sh92b previously.
Power subsidies killing the economy
Power tariffs have not been adjusted upwards to absorb the effects of the exchange rate depreciation and high fuel costs. This is in contrary to Kenya where there is an automatic adjustment of the tariff for inflation, exchange rate and fuel prices, Mutambi disclosed. As a result, the tariffs in Uganda are much lower than those of Kenya and the extra burden of financing has been pushed to Government in form of increased subsidies, he says.
Currently Ugandan consumer pays sh385.6 compared to his/her Kenyan counterpart who pays sh450.8 per unit.
Commercial consumers in Uganda pay sh358.6, compared to sh476 per unit paid by the Kenyan commercial consumers.
Uganda medium industries pay sh333.2 per unit compared to sh385 in Kenya. Large industries in Uganda pay sh184.8 compared to their counterparts in Kenya who pay sh356.44 per unit.
Tanzania has the cheapest power tariff in the East African region followed by Uganda, Kenya and Rwanda.
Need to raise the tariffs
This means that the impact on government subsidies has reached unsustainable levels.
“Let the tariffs move upwards to reflect the true cost of producing electricity. It should capture prevailing charge adjusted for the fuel costs, inflation and foreign exchange rates every month,” Mutambi appealed.
Indeed given the current situation where government is grappling with challenges to meet the electricity subsidy requirements, an increase in the level of tariffs and other charges would be appropriate since this can happen without the Ugandan consumer losing competitive advantage.
Uganda is also turning-off thermal power generators to reduce the cost of producing electricity. Two diesel-powered plants, one at Kiira in Jinja and another at Mutundwe, would be turned off.
The plants, which generate 100
megawatts (MW), will be replaced by cheap hydropower at the new Bujagali plant in Jinja. Each of the two plants produces 50MW.
Consumers want expensive but reliable power
Charles Chapman, the managing director of Umeme says his clients prefer expensive but reliable power supply.
“We need increased generation capacity. Most of our clients say they must have high tariffs rather than less power at low price,” he explains.
Chapman says there is a possibility of investors relocating to Kenya if power supply situation is not improved.
Analysts have also called upon the regulator to set new performance targets on losses, collection rates, customer connection and investments if distribution costs are to reduce. Distribution losses have reduced from 35% in 2009 to 27% which was the target for 2011.
Umeme’s collection rates have improved from 92.5% in 2009 to 96.2% in 2011 while customer connections have increased from 37,000 in 2010 to the targeted 51,000 in 2011.
But the regulator is now in a better position to set Umeme more realistic performance targets compared to Kenya Power and Lighting Company.
Kenya connects about 280,000
customers every year and its distribution losses stand at about 15%, while its collection rate is over 100%.
Fred Kabagambe-Kaliisa, the permanent secretary ministry of energy called for a multi-pronged approach that includes balanced use of hydropower and thermal power generation and “a well-priced finance.”
Original Source: 
Original date published: 20 July 2011
Source: http://allafrica.com/stories/201107250046.html?viewall=1