Shs104.4 billion lost to UETCL’s non-evacuated power

In the financial year that ended June 2020, electricity generators received Shs104.4 billion from the government for power that was not evacuated. In a 2020 audit report, the Uganda Electricity Transmission Company Limited (UETCL), which is a company owned by the government that buys electricity from power producers, showed that 9% of the power purchased was meant for deemed energy.

Deemed energy purchases mean that it is the power that is paid for, but it is not consumed nor generated. The report showed that the total cost that was incurred by the UETCL in that year was Ssh1.1 trillion with 104.4 billion for deemed energy costs. The deemed energy costs were Shs10 billion more than the government’s funds to microfinance institutions and Saccos to support small and medium-scale enterprises following the Covid-19 pandemic lockdown period.

The report says the largest share of the deemed energy costs was paid to the Achwa River Energy Project (AREP), which is the developer of the Achwa hydropower project that was commissioned in 2019. The project has a capacity of 41 MW. Other power generators that were billed by UETCL for deemed energy included Tonder Energy-Bugoye, Access Solar Uganda Limited, Eco Power Uganda Limited, Muvumbe Hydro, and Elgon Siti limited, among others.

In 2001, Uganda had only three power generators, but it increased to 41 in 2020. The primary reason for this rapid increase is to prevent the reoccurrence of the load shedding in 2005 because of limited power. Although more emphasis was given on electricity generation, distribution and transmission have been abandoned such that there are power dams without transmission lines to evacuate power. The situation is sticky since the UETCL work hand in hand with the power generators through contracts that urges it to buy available units of power even if they are not yet consumed.

Uganda Electricity Distribution Company Limited (UEDCL), which is a government-owned entity responsible for power supply, has also failed as it has not provided enough power transmission lines. The company reported Shs14 billion energy losses on evacuation since 2018. The UETCL management said that the challenge is due to low market demand and minimal distribution as well as transmission lines before signing the power purchase agreements. The Ministry of Finance and UETCL usually take part in developing PPAs with the approval of the electricity regulator. The management also said that UETCL would not include the deemed energy provisions in the new electricity purchase agreements.