It is now several years since Uganda’s electricity industry was liberalised. The industry, which since Uganda’s independence had been run under the monopoly of a statutory corporation, the Uganda Electricity Board (UEB), saw the passing of the Electricity Act Cap 149 in 1999, which provided the framework pursuant to which electricity ownership was unbundled through the separation of generation, transmission and distribution. The move was seen as a vehicle for fostering competition and increased investment in the sector through greater private sector participation.
The Electricity Act of 1999 (the Act) established the Electricity Regulatory Authority (ERA) to regulate the generation, transmission, distribution, sale, export and import of electrical energy in Uganda.
With the legal framework for unbundling of services in place, UEB’s generation assets, in particular the power plant assets at Owen Falls dam were privatised in 2003 and a 20-year concession granted to a private entity, Eskom Uganda Limited. This has since been followed by the emergence of several Independent Power Producers (IPPs), who include Bujagali Energy Limited, the developer of the 250 MW Bujagali dam, and many other IPPs of varying smaller generation capacity.
The unbundled transmission services were taken over by a new government-owned company, Uganda Electricity Transmission Company Limited, which remains the single operator of the transmission system and the executer of Power Purchase Agreements with power producers.
The distribution segment was subsequently privatised in 2005 under a 20-year concession granted to a private company, Umeme Limited which has remained the primary electricity distribution company in Uganda that notwithstanding the availability of other mini-grid distributors.
On privatisation of the Generation and Distribution segments, the Uganda Electricity Board successors companies of Uganda Electricity Generation Company Limited (UEGCL) and the Uganda Electricity Distribution Company Limited (UEDCL) remained asset holders for the Nalubaale 200MW and KIIRA 180MW operated by Eskom Uganda Ltd and distribution network up to 33KV operated by Umeme Ltd respectively.
The legal framework
The primary instruments for the regulation of the electricity sector in Uganda include the Electricity Act 1999, the Energy Policy, the National Environment Act Cap 153 and Statutory Instruments and Guidelines issued by ERA.
The Electricity Regulatory Authority
The ERA, which is responsible for the regulation of the electricity sector, is established as a body corporate with capability to sue or be sued. It consists of five members appointed by the Minister responsible for electricity, with the approval of cabinet.
As part of its mandate, ERA is inter alia responsible for the issuance and regulation of compliance with licenses, establishment of a tariff structure, approving rates of charges and terms and conditions of electricity services of transmission and distribution companies. In the conduct of its functions, ERA is charged with the duty to be open, objective, fair, reasonable, non-discriminatory and to promote fair competition.
The licensing regime
Licenses are required and issued by ERA for the execution of any of the following activities: the generation, transmission, export and import, sale, system operation and bulk supply of electricity.
Scope of licenses
The Act provides for licenses not to exceed a maximum period of 40 years, except licenses for hydro power generation of a capacity not exceeding 10 MW.
In respect of generation licenses, the Act provides for reversion to the Government of any generation rights, property and installations upon expiry of a license for hydropower plants with a generation capacity exceeding 10MW, with no compensation payable. This however, does not apply to power plants in which the Government owns 50% of more of the plant.
Licenses may be granted following an invitation of tenders by ERA or pursuant to an application by a person who intends to develop a project. ERA is required to process applications within a maximum of 180 days of receipt of an application. The process involves the advertisement of notices in the Gazette and a prominent newspaper, to solicit objections. A person aggrieved by the refusal of a license may appeal to a tribunal established under the Act.
Todate, Uganda’s electricity sector has grown from three generation sources to over ten and still growing. Total installed generation capacity has grown from 60 megawatts (MW) in 1954 to 682 MW in 2012.