Umeme Limited distribution license was issued on March 1, 2005, by the Electricity Regulatory Authority (ERA) based on an earlier signed concession agreement with Ministry of Energy.
While signing the concession agreement the Auditor General had calculated that Umeme’s losses both technical and commercial would stand at 28%.
The agreement was Umeme would invest in the distribution grid owned by Uganda electricity distribution company UEDCL
The power firm further would take over the already financed ADB and IDA loan financed worth $11 million and shs36 billion whose disbursement in terms of transformers and substations and feeders had by 2005 brought down the technical and commercial losses to 28% from 36% as highlighted by the auditor general audited accounts for the year 2005 of UEDCL signed off by Auditor general John Muwanga.
This compelled President Yoweri Kaguta Museveni to question how Umeme’s technical losses remain high at 17% yet the firm claims to have $500m in distribution infrastructure to address this hitch.
In the course of this investigation, TrumpetNews gathered that Umeme officials inflated the loss figure from what the Auditor General had calculated (28%) in 2005 to 35% only after 4 years of operation (2009).
It must be noted that Umeme breached the original concession agreement after a year of inception.
Conniving with officials from Ministry of Energy, Umeme amended the agreement to scrap some of the obligations.
Umeme has lately been in limelight for overcharging Ugandans and having the highest cost of power in the region, while Uganda even exports electricity to neighbouring countries like Rwanda and Kenya.
Losses
In June 2009 Umeme reported losses stood at 35%, our investigation reveals.
There exist two components of these losses namely; Commercial losses which are losses accrued from failed billing and collection by Umeme and as at 2009 they contributed 18% of the total 35% loss claim and Technical Losses which are loses accrued by Umeme from the distribution grid inefficiency and as at 2009 they contributed 17% of the total 35% loss claim.
We further established that in August 2009 Gen Salim Saleh instituted a commission whose findings indicated that Umeme reported loses dropped back to the 2005 level of 28% and this was responsible for the first ever tariff reduction in January 2010 since the beginning of the concession because up to 2009 losses contributed 24% of the electricity tariff.
Currently commercial losses contribute 1% of total loses while technical losses contribute 16%. The commercial losses have reduced because of increased efficiency by Umeme in billing customers and collecting dues aided majorly by the introduction of the pre paid meter billing system.
Technical Losses
These losses are the real challenge to reducing tariff in Uganda and are occasioned by the spread of transformers along the low voltage distribution grid from 33KV TO 240v that was concessioned to UMEME.
The PB POWER report by the south African consulting company PB power Consult, commissioned by ERA in 2012 states that the longer the distance on the low voltage line between transformers the higher the technical losses.
As part of its obligations in the Concession agreement for which UMEME receives compensation in the tariff are two cost centers namely;
Depreciation Operation and Maintenance costs (DOMC) which covers operation and maintenance costs like servicing transformers, replacing burnt-out transformers and broken distribution lines etc.
Return On Investment (ROI) which covers investments in loss reduction, expansion of the grid, and other new grid installations that were not present at the time of the beginning of the concession.
The PB power report states that for the concession to have been efficient UMEME should have invested in loss reduction up to USD$ 400 million country wide to take technical losses up to 4-6% which would take the tariff down.
No official from Umeme was available for a comment by the time of publishing this report.
The publicist Stephen Illungole couldn’t answer our calls.
But earlier Minister of Energy Irene Muloni, referred this website to Electricity Regulatory Authority (ERA).
“The regulatory body is the one that licensed Umeme and has all the information from the time the agreement was signed up to date,” she said before ending the call.
