Electricity to be traded like airtime starting next year

A deregulated electricity market allows for the entrance of competitors to buy and sell electricity by permitting market participants to invest in power plants and transmission lines

Kampala, Uganda | THE INDEPENDENT | Electricity consumers will have the right to choose their electricity provider, regardless of who controls the physical infrastructure when the just enacted electricity law takes effect.

Electricity Regulatory Authority Chief Executive Officer, Engineer Ziria Tibalwa Waako reveals that the changes are expected to take effect next year once the operationalization guidelines are completed.

With the new law, consumers will not be limited to one distributor as has been the case over the last twenty-two years. She says this arrangement is similar to the way one chooses an internet service provider.

She says the 2022 electricity Act ended the single-buyer model or monopoly in the purchases of electricity from different generation companies.

“That is the mode that we have been on for the last twenty years since the 1999 electricity Act. Now with this amendment, we are moving ahead with a modified single buyer. We are going to have a deregulated market,” said Eng. Tibalwa.

She explained that technically a deregulated electricity market allows for the entrance of competitors to buy and sell electricity by permitting market participants to invest in power plants and transmission lines. Generation owners then sell this wholesale electricity to retail suppliers.

According to Eng. Tibalwa, generators and transmitters will sell power directly to industries. “Meaning that we are moving towards modernisation of our electricity supply industry. Indirectly we are going to detach the business of the transmission and distribution grid management from the business of power trading,” she added.

The new changes are part of the ongoing global reforms in the electricity industry sector. Regulated electricity markets existed across the United States until the 1970’s when the idea of deregulation was suggested.  The Public Utilities Regulatory Policies Act was enacted to enforced deregulation.

The 1992 Energy Policy Act opened the market further to increase the use of clean energy and energy efficiency.  A similar law Under the Electricity (Amendment) Bill 2022 was being debated in India in May when the Parliament of Uganda passed the amendments to the 1999 Electricity Act.

Uganda’s Electricity sub-Sector is run under a liberalized set up following its Liberalization in 1997 and the enactment of the Electricity Act, 1999.

The Liberalization and enactment of the Electricity Act, 1999, mandated the unbundling of Uganda Electricity Board (UEB) which was a monopoly managing generation, transmission, distribution, sale, import, and export of Uganda’s Electricity. The Electricity Regulatory Authority and the Ministry of Energy have according to Eng. Tibalwa started on the process of deregularisation.

“You will now be able to determine the willing cost over the transmission, and distribution network as well as determine the cost of ancillary. So that UEGCL can now sell directly to industry and receive the willing and ancillaryservices cost,” she added.

ERA has already drafted the guidelines that will be subjected to wider consultation including utility companies, consumer groups, ministries, and manufacturers. The changes also come as the Ministry of Energy reviews the energy policy of 2002. The new law now recognizes the Ministry of Energy as the majority shareholder of government companies in the electricity sector. These include Uganda Electricity Generation Company, Uganda Electricity Transmission Company and Uganda Electricity Transmission Company Limited.

The shareholding in those has been under the Ministry of Finance while their monitoring was under the Ministry of Energy. With the amendment, the Ministry of Energy is expected to establish a department in charge of planning across the electricity sector in the areas of hydroelectricity and renewable energy.

“So the issue of uncoordinated implementation and delivery of services where you have generation plants commissioned without evacuation lines, where you have transmission facility commissioned without outgoing feeders at distribution to reach the last mile will be the issue of the history,” said Eng. Tibalwa. The amendment of the sector also opened up electricity transmission from a single-buyer model to a bulk-buyer model.

It is expected that more players are to be attracted into electricity transmission. This is fear that Uganda Electricity Transmission Company Limited will face stiff competition.

Michael Taremwa, the Chief Executive Officer of Uganda Electricity Transmission Company Limited (UECTL) said the model should be allowed because of its likely positive contribution to the transmission sector.

He hopes that it will usher in financially viable projects that will stimulate demand. “ And as transmission, we are ready because we have a number of projects that are lined up” he said  “ we are hopeful that this model will allow the government to have funding that is off its consolidated fund allocation. So this will be funded through the tariff, and it will be managed by ERA to make sure that the tariff is smooth,” said Taremwa

Other changes in the Act

According to Engineer Abdon Atwiine, Assistant Commissioner in Charge of Electrical Supply at the minister of energy the new law has provided for the holder of a renewable energy generation licence shall pay to the district local government in which the renewable energy generating station is situated, a royalty agreed upon by the licensee and the district local government.

“Our target is that by 2030, we should have universal access to electricity with 10.4 million households The approach is that we can’t reach everybody on the grid. We must employ two solutions. One is on grid connection. And then the other option is to have you off-grid,” he added.

The just concluded national electrification study by the Uganda Bureau of Statistics (UBOS) found that 51% of the population in Uganda lives within 0-1.5 kilometers from the grid but doesn’t have access to electricity.

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