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Uganda delays electricity price increases

15 January 2013 – Uganda’s Electricity Regulatory Authority (ERA) has delayed the decision to increase electricity prices in the country and provide for automatic monthly adjustments to reflect movements of the inflation rate, exchange rate and fuel prices. It means the authorities bowed to pressure from power consumers.

Ugandan daily newspaper, the Daily Vision, reports that Paul Mubiru, the director of energy resources in the energy ministry, said there was need for wider consultations before the new tariff plan is implemented. The ERA had planned to change the electricity price-setting mechanism to monthly adjustments, and move away from quarterly adjustments.

Dr. Benon Mutambi, the ERA chief, explained that the problem of quarterly adjustments is that there are large increases due to large movements of the variables which cause a shock in the tariffs.“Any shock is undesirable. You would rather have smooth and gradual movement of the tariffs which the automatic tariff adjustments address. We have been adjusting tariffs to reflect the movement of the variables and that explains the tariff shocks.”

Mutambi says the automatic tariff adjustment is a cost recovery mechanism, where consumers benefit from reductions and it allows companies to recover increases in costs as a result of fluctuation in macroeconomic factors of inflation, exchange rate and fuel prices. “Consumers will benefit when costs reduce. Companies will be allowed to recover additional costs incurred. This will ensure financial sustainability of the utilities.”

However, power consumers asked the regulator to suspend the whole process to allow for what they describe as further and meaningful engagement and consultations with stakeholders.