Is Umeme Authorized to Charge a Customer Forex Exchange Adjustment, Inflation Adjustment and Fuel Adjustment?
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The adjustment of the retail tariff for movement in inflation, exchange rate and fuel prices has always been imbedded in the tariff methodology. The difference is that previously the impact of the adjustments for the macroeconomic factors above was not separately shown on the electricity bill. In order to ensure/encourage transparency, the adjustment factors are shown separately on the bill.
In 2005 the Government of Uganda made a decision to subsidize electricity consumers. By 2011, the subsidy levels had increased to unsustainable levels that adversely affected the creditworthiness of the operators in the Electricity Supply Industry and eroded private sector investment and confidence in the electricity sector.
In 2012, Government made a decision to reduce direct subsidization of the electricity consumers and instead invested in large hydro power generation projects and transmission infrastructure. Between 2005 and 2012, the retail tariff was being adjusted for movement in inflation, exchange rate and fuel prices but the increase/decrease in the costs as a result of changes in these macroeconomic parameters being absorbed by Government of Uganda through provision of subsidies as the retail tariff remained relatively unchanged.