Tuesday, May 6th, 2014

Increasing tariffs, faulty meters and resigned customers: What role for Uganda Electricity Regulatory Authority (ERA)

1. Introduction: A promise of expensive but constant electricity

The Uganda Electricity Transmission Company (UETCL) last month announced an increase in tariffs just weeks after ERA announced a 1% reduction. Ugandans have lost track of the enormous tariff hikes that the country has continuously experienced ever since Umeme took over the power sector in 2005. The cost of electricity has more than quadrupled and billing problems and general incompetence in the power sector have chronically hindered growth and development of the sector.

UETCL’s excuse for increasing tariffs was that there is need to utilise thermoelectricity generators that government had earlier abandoned because of the astronomical costs of running them. The government then decided to concentrate on hydroelectricity that it deemed cheaper. Now, UETCL says, it is more expensive to maintain load shedding and idle generators than to put these generators to use. In essence, UETCL is promising that with the generators, there will be a constant supply of high-priced electricity.

2. Irregular generator project

The thermoelectric generators were abandoned in favour of hydroelectricity and small power dams (built to increase supply to make up for what the generators would have produced). From the start, thermoelectricity generation was bound to be a failure. First, it was commenced without a clear policy on how to engage the thermo companies and how their assets would be managed after they are replaced with the dams. How did ERA plan to regulate such companies without a clear policy? Before tariffs rise further, ERA should answer this pertinent question.

3. Ugandans biggest losers in tariff wars

Increased tariffs can never be good news to Ugandans, many of whom live below the poverty line. Their battles with the players in the electricity sector are far from over- a battle Ugandans, led by AFIEGO, took to court in 2010 when they sued Umeme, ERA and UETCL for failing to provide quality, affordable and reliable electricity.

Technically, UETCL is the electricity generator, ERA the regulator and Umeme the distributor. Umeme is the most well known player in the electricity sector in Uganda, enjoying monopoly over distributorship and recording profits each year. However, Umeme has refused to take blame for the increasing tariffs, saying that as a mere distributor, it has no power over tariffs. Umeme insists that it is ERA which has powers to increase the tariffs.

4. Futile public hearings

Ironically, it is the same Umeme that last month defied ERA’s organized public hearing whose objective was to subject Umeme’s application for tariff increment to public scrutiny.   In the same breath, Umeme has expressed its determination to increase the electricity tariffs even further (Whether or not ERA agrees) to the chagrin of Ugandans and in defiance of parliament that recently passed a resolution to terminate the Umeme contract.

Even more controversial is the fact that even as Umeme insists that it has nothing to do with the increase in electricity tariffs, it has dragged ERA to the Electricity Disputes Tribunal over the amendments to Umeme license No.48 for the supply of electricity. The tribunal is established under section 93 of the Electricity Act 1999 as the line implementing agency.

Umeme insists the amendments in the license, as per the contracts, necessitate an automatic right to increase tariffs. As we wait for the tribunal decision, Ugandans are increasingly getting trouble in appreciating who exactly is behind the sky rocketing tariffs.

Indeed, the on-going “tariff wars” in Uganda are rather confusing for the general public that, no doubt, have greater interaction with Umeme. Prior to the public hearing, Umeme (the applicant) unequivocally wrote to ERA informing them that they (Umeme) had no interest and would not participate in the hearing. Still, ERA went ahead to hold the hearing on an application whose author was no longer interested. In this case, ERA wasted public resources because at the time of the hearing, the fate of the application was with the tribunal and not the public. Both ERA and the public failed to respect the subjudice rule whose essence is that issues before court should not be discussed.

5. Yaka causing more harm than good

While the roles of other players such as ERA are provided for by law, the people have for long seen Umeme manage the power distribution as if we do not have a regulator. Power consumers continue to suffer with faulty meters, late bills and irregular disconnections. Currently the pre-paid metering which Ugandans had hoped would address power electricity service issues in Uganda seem to be bigger money making machine for Umeme. As we speak, pre-paid customers do not know how much a unit is because Umeme has discretion in deciding the charges. Unfortunately there is no legal framework that can be relied on to hold Umeme accountable. Ugandans are at their mercy.

The prepaid metering was introduced to solve problems like estimated billing and to lower costs of running and distribution. The benefits of the prepaid metering seemed obvious as less staff would be needed as well as less trips to read the meters, prepare and print bills, take bills to the consumer, go to disconnect if a bill not paid in time, go to reconnect if the customer pays the bill and disconnection fees, monitor the consumption…

The meters were also presumed harder to manipulate. Unfortunately, like the post paid meters, the yaka meters are being given to consumers without being tested and certified by Uganda Bureau of Standards to ensure that they are not faulty. Perhaps, it is this reason the yaka meters have not translated into good services and lower costs for the consumers. Instead, people are complaining of inflated bills and high and varied costs of paying the bills.

For example if you pay your bill through mobile money, you get three units of electricity less than those who pay from Umeme offices. Fewer units are also got when you pay at a supermarket or other Umeme-sanctioned points (even though this is less costly than paying through mobile money). The cheapest means remains going to an Umeme office. So people have to spend a lot of time cuing at Umeme offices so that they can pay less money. The time and money spent travelling to these offices make it a very costly option.

6. What then is the role of ERA?

Ideally, it is ERA’s role, as provided for under the Electricity Act Cap 145, to regulate the sector and protect consumers from exploitation. Yet, the regulatory authority had been pushed to the periphery of the sector. Even to the customers, ERA is remote- a mysterious “regulator” whose role appears ambiguous as customers are treated to electric drama.

ERA’s mandate is buried deep in the Electricity Act, the statute that establishes it as an independent authority with an ombudsman over the electricity sector. Still, not many people have heard a chance to read or understand these laws- Certainly the majority of Ugandans who get ripped off by electricity sector politics have not. So, someone should explain to Ugandans on who is telling the truth about electricity tariffs. Ever since ERA established and Umeme got a concession, electricity tariffs have persistently increased

For instance, in 2001, the electricity tariffs increased by 69% for domestic consumers and 56% for industrial users. In 2006, the tariffs increased twice- by 35% in June and by 41% in November. In 2005, the increment was by 24%. In 2012 there was a 69% and 36% for large scale and domestic consumers respectively. January 2014 is when Umeme made the yet-to-be determined application to have a further increase.

In all circumstances, ERA and its flowery roles as laid down under the Electricity Act have been impotent to save consumers

a. Establishment

The Electricity Regulatory Authority (ERA) is established under S.4 of the Electricity Act, cap 145 as a body corporate with power to sue or be sued. Its general functions are provided for under S.10 of the Act as follows:

b. Licensing

• To issue licenses for the generation, transmission, distribution or sale of Electricity: ERA is therefore a licensing body with powers to grant or reject applications for licenses to distributors like Umeme. It has the power to determine who gets a license to own or operate transmission systems.

It thus has to:

• Receive and process applications for licenses
• Prescribe conditions and terms of licenses
• Modify licenses issued
• Make and enforce directions to ensure compliance with licenses
• Prescribe and collect license fees, and,
• Establish a uniform system of accounts for companies it licenses
  • Establish a tariff structure and to investigate tariff charges, whether or not a specific complaint has been made for a tariff adjustment
  • Approve rates of charges and terms and conditions of electricity services provided by transmission and distribution companies
  • Review the organisation of generation, transmission and distribution companies or other legal entities engaged in the generation, transmission and distribution of electricity.
  • Develop and enforce performance standards for the generation, transmission and distribution of electricity
  • Encourage the development of uniform electricity industry standards and codes of conduct
  • Advise the minister regarding the need for electricity sector projects
  • Prepare industry reports and to gather information from generation, transmission and distribution companies
  • Provide for the procedure for investment programmes by transmission and distribution companies
  • Approve standards for the quality of electricity supply services provided
  • Approve codes of conduct in respect of the operation of transmission and distribution systems
  • Acquire information and carry out investigations relating to any of its functions

c. Tariff controls and quality assurance

ERA is also responsible for electricity tariffs. Under the Act it is expected to:

Under S.11 (1) the authority is required to perform its functions and exercise its powers in a manner that is open and objective, fair and reasonable, nondiscriminatory and Promotes fair competition.

d. Supervisory function

• Promote efficiency, economy and safety on the part of licensees and the efficient and safe use of electricity
• Ensure that licensees carry out the activities which they are licensed to perform
• Ensure that licensees comply with the conditions of their licenses
• Protect the interests of consumers in respect of the prices, charges and other terms of supply of electricity and the quality, efficiency, continuity and reliability of the supply services
• Promote competition in the generation and marketing of electricity
• Enable all licensees to connect to transmission systems and facilities in Uganda on a nondiscriminatory basis
• Ensure transparency in relation to the activities of the power sector and the authority
• Ensure a fair balance of the interests of the consumers, the government and participants in the power sector
• Promote continuity in the supply of electricity

e. Independence and impartiality

Independence of ERA while performing its functions is guaranteed under s.16 which provides that:

“The authority shall, subject to the declared policy of the Government and, except as is otherwise provided in this Act, be independent in the performance of its functions and duties and exercise of its powers and shall not be subject to the direction or control of any person or authority.”

7. ERA, a toothless barking dog

S.16 of the electricity Act, while guaranteeing ERA’ s independence, takes it away by subjecting it to government policy and declarations as well as other provisions of the Act.

ERA’s independence thus seems the lowest in the hierarchy of importance and this has also been reflected in the reality of the electricity sector in Uganda. Umeme, for instance, signed a watertight agreement that ERA cannot penetrate even if it wanted to. Under the agreement that government signed with Umeme, Umeme gets hefty compensation regardless of the circumstances of terminating their contract- whether or not it is Umeme’s fault.

How then would ERA effectively report and monitor Umeme’s activities under the Act to ensure compliance with the license provided and also to ensure quality, reliable and affordable electricity when Umeme is clearly an untouchable heavy weight.

Despite a parliamentary report of Oboth Oboth, Salim Saleh’s report, a court case filed by AFIEGO in 2010, damning media reports and public outcry, Umeme continues to operate as if Uganda does not have a government.

Almost ten years after they came into Uganda’s electricity sector with a promise to overhaul and improve it, problems such as load shedding, power outages, negligent deaths due dangerous connections, faulty meters, high tariffs, limited access remain. And then, we must ask. Is this problem that flowery provisions on the role of a “regulatory authority” can solve?

There have however been a few “victories” for ERA- Like the recent 1% reduction in electricity prices. But what is a 1% reduction after half a decade of being fleeced? Half a decade of being a toothless barking dog that cannot hold its own against the strength and might of an internationally and politically connected company like Umeme. What is a 1% reduction when three weeks later an increment is announced? And more increments still loom over the heads of Ugandans. What is 1% when Umeme is in court for automatic tariff increment based on unfair concession agreements through which some government officials committed our country to profit Umeme irrespective of the quality of services? What is 1% tariff reduction and what ERA do when the executive is delaying or has refused to implement the resolutions of Parliament to terminate UMEME’s concession.

8. Conclusion and recommendations

ERA’s functions remain on paper and it has failed to cater for consumer interests and control price hikes. A 1% pseudo reduction in tariffs and half-hearted attempts to “regulate” will have no impact on the recurrent electricity sector problems. ERA remains a weak body operating under the control of some corrupt government officials and electricity companies. It is therefore proverbial toothless barking dog. There is urgent need for the following interventions to address the problems of electricity sector in Uganda.

• There is need for relevant players in the electricity sector to revisit, review and rethink their roles and promote regular inter-sector dialogues and mutual respect of each one of them so as to promote effective regulation and management of the sector as a means promote access to quality and affordable electricity services for everyone
• Government should negotiate a revision of Umeme licensing agreement so as to bring it in harmony with the Electricity Act and make it possible to hold Umeme to account, as the major electricity distributor. A credible body should be put in place to work with government on this; and legal redress sought on grounds of unconscionable terms if renegotiating the terms is unsuccessful.
• There is need for a spirited campaign by civil society organizations dealing with energy to inform the people of their rights as recognized by the Constitution and The Electricity Act and empower them to advocate for their rights as consumers. The AFIEGO case against Umeme, UETCL and ERA, while never decided, can be a tool for advocacy to check the powers of the players and government. Civil society should capitalize on efforts like this to amplify their energy advocacy voices.
• Government should implement the recent resolutions of parliament.
• Government should commence discussions to renationalize the power sector as countries such South Africa, Kenya and others who are still in control of the biggest part of their sectors are doing better.
• The independence of ERA should be strengthened through ring fencing.• The Government should establish branches of the Electricity Disputes Tribunal at district levels to facilitate access to justice to the public aggrieved with electricity companies and ERA’s services.
• Parliament should strengthen its oversight over the ministry of energy and mineral development to stop her interference in the operations of ERA.