Umeme’s new target

ERA wants the power distributor to connect more customers, cut losses

Kampala, Uganda | JULIUS BUSINGE | Selestino Babungi, the managing director of Uganda’s largest power distribution company, Umeme, wants the industry regulator, Uganda Electricity Regulatory Authority (ERA) to set for them fair targets amid high consumer expectations.

Babungi said fair targets benefits all players in the industry arguing that aggressive targets would require more resources to invest in the network hence causing unwanted increases in the power tariff.

He was speaking to The Independent on the sidelines of a half day public hearing in respect of its application for modification of License No.048 specifically relating to the performance parameters for the coming six years from March 2019 to March 2025, following the expiry of the current targets come February 28, 2019.

The company also wants amendments done in respect to computation of the total excess revenue earned as per modification number five of their contract.

The public hearing is one of the consultative meetings that ERA is conducting in accordance with section 44 of the Electricity Act, 1999 to set new targets for Umeme.

According to ERA’s Secretary and legal expert, Harold Obiga,focus group discussions amongst other stakeholders will continue and that the final decision of this matter will be made in January 2019 and effected on March 1, 2019.

Umeme’s application

According to its application dated March 28, 2018, the company was supposed to present performance for the review period 2012 –2018 and anticipated or trajectory performance for the coming six years to partly inform the decision on new targets – to be set by ERA.

The company’s proposed energy loss trajectory for the year 2019 is 15.24%, in 2020 (14.63%), 2021 (14.75%), 2022 (14.50%), 2023 (14.23%) and 2024 (14.36%).

According to ERA, the company has consistently reduced losses for the ending period but performed below the target; 27.3% against a target of 27.0% for 2011, 26.1% against a target of 25.5% in 2012, 24.5% against a target of 23.0% in 2013, 21.3% against a target of 20% for the year 2014, 19.5% against a target of 18.3% for 2015, 19.1% against a target of 16.9% in 2016, 17.2% against a target of 15.7% in 2017 and 16.5% against a target of 14.7% in 2018.

The other targets are in regards to Distribution Operation and Maintenance Costs (DOMC).

The company wants these set as follows for the new six years; Shs235.2bn (for 2019), Shs255.5 (2020), Shs274.2 (2021), Shs287.4 (2022), Shs299.0 (2023), Shs317 (2024) and Shs338.2 (2025).

In the ending period, according to ERA, the company incurred higher costs [DOMC]  compared to the target with the variances being Shs12.5bn in 2012, Shs27.6bn in 2013, Shs34.4bn in 2014, Shs32.1bn in 2015, Shs13.8bn in 2016 and Shs18.3bn in 2017.

The other area of targets will be on revenue collection though Umeme or ERA did not indicate what the former would prefer for this target.

Available figures, however, shows that the company performed above target for the ending period. For instance, the company hit the 99% collection target for 2011, 94% in 2012 and 100% against 97.3% at some point in the ending period.

In 2014, the company recorded a 99.1% collection point against a target of 97.50%, a 98.2% collection against a target of 97.7% in 2015, 98.4% against a target of 97.9% in 2016 and 98.9% against a target of 98.2% in 2017. ERA set the target for 2018 at 98.5%.

Participants, however, raised concerns on whether ERA had capacity to verify Umeme’s set targets and actual performance.

The other issues were the high electricity costs, existence of power outages and or unstable power amidst excess power generation capacity, and whether the distributor would provide bulky or aggregate meters for large consumers.

Poor quality of prepaid metres, opaqueness in computation of the tariff also took a center stage in the discussion.

ERA, Umeme responds

In her response, the ERA Chief OfficerEng. ZiriaTibalwaWaako, said they have more than enough capacity in terms of human resource and technology to verify Umeme’s performance targets.

“We have the experts that are being benchmarked even internationally….and we have the most qualified competent experts on the continent,” she said.

Commenting on the power distributor’s performance, she said the regulator would want Umeme to improve in all areas.

She, however, said the company has performed well as “we were coming from a vertical organisation (UEB) when all parameters were low.”

“What we need is to balance the investment we are putting in to bring down the losses and the tariff so that we arrive together,” she said adding, “our demand is improved efficiency, improved performance and that is why we are here to tap into the public’s input by way of comments.”

She added that part of ERA’s work is to represent the views of other Ugandans who are unable to interpret thenumbers to ensure they get value for the money they are paying.

In terms of outages, Tibalwa said it is being handled at two levels – at generation and distribution.

“The beauty is that when they (Umeme) do not achieve their target the consumer does not compensate them; they dig into their return and their profit and that incentivises them to run around to ensure that they achieve the target,” she said.

She said the company has the responsibility to ensure that power supply is reliable in line with the concession agreement with the government.

On his part, Babungi said they have performed well and they expect fair targets in the coming six years.