Inflation, dollar, to define power tariffs

In Summary

The Electricity Regulatory Authority attributes the change to removal of subsidies by government on energy consumption.

Kampala

Power consumers should brace themselves to pay more for power following a decision by the power regulatory authority to factor in inflationary pressures, volatile fuel prices and a fluctuating exchange rate into power tariffs.

The changes are effective October. This means if the shillings lose ground against the dollar by Shs200, the domestic consumer who has been paying Shs524.5 per unit, will have the Shs200 added to his or her bill.

Although the tariffs will remain fixed for each sector, the additional amount a consumer will pay monthly will vary depending on the exchange market and fuel prices.

Electricity Regulatory Authority announced a 47 per cent increment in power tariffs in January with domestic consumer tariffs increased to Shs524.5 per unit from Shs385.6 per unit. Meanwhile, commercial power tariffs increased from Shs358.6 per unit to Shs458.6 per unit.

However, with the proposed metering system dubbed the Automatic Electricity Tariff Adjustments, consumers could pay extra or less money depending on changes in inflation, exchange rates and fuel prices.

Burden to consumer
ERA attributed the changes to government’s removal of subsidies on energy consumption in order to accelerate capital investment in electricity infrastructure. The removal of the subsidies means the costs have to be transferred to the consumer.

According to Bank of Uganda, yesterday’s exchange rate was at a dollar buying Shs2, 520.72 and selling at Shs2, 530.4. This shows that the shilling has continued to lose against the dollar since January, when it traded for Shs2,300 for a dollar.

Mr Julius Wandera, the ERA spokesperson, said tariff rates were being pegged to inflation and fuel prices because they “influence the cost of electricity from generation to transmission, adding that the new adjustment will reflect “real and genuine cost of electricity”. He added that they buy power in dollars from power generators and so the fluctuations in the dollar against the shilling will have to be burdened by the final consumer.

Umeme General Manager Sam Zimbe, told our sister media outlet NTV Uganda, that “the power tariff will not change but there will be another line on the bill showing the surcharge in those movements [foreign exchange and fuel price]”.

Umeme cunaware of tariff method
Umeme’s chief financial officer Selestino Balungi admitted knowledge of the new metering system, but said Umeme was not yet aware of the methodology that ERA intends to use in computing the new tariffs.