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Electricity Import Deal Amidst Excess Generation Draws Questions

Minister Ruth Nankabirwa says Uganda will not pay for the 60 megawatt power imported from Kenya in cash, but that when Isimba reopens, Kenya will be paid in kind, according to a bilateral agreement between the two countries.
Isimba hydropower plant is shut, reducing generation capacity by 183 megawatts

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The closure of Isimba Power Plant, the third largest hydropower station in the country has left many questions among the public, as parliament engages the Minister for Energy and Mineral Development for answers.

The commonest questions that the public is seeking answers to are mainly around the amount of electricity the country produces, the amount that is generated and not used but paid for, and why the government should import electricity from another country when there is ‘excess capacity’.

Uganda has been a major power producer in the East African region for the last few years and this is expected to increase once transmission infrastructure to countries like South Sudan and the Democratic Republic of Congo are improved, to evacuate additional power from Karuma Power Plant.

The plant is now expected to go live by mid-next year, according to the ministry and Synohydro, the Chinese contractors. Currently, Uganda exports power to Kenya, South Sudan, Rwanda, Tanzania and the Democratic Republic of Congo, DRC.

According to the Bank of Uganda data, Uganda earned 38.5 million dollars (138 billion shillings) last year, up from 20.7 million dollars (74 billion shillings) in 2020, from electricity exports.

The export volume also almost doubled to 411,589-megawatt hours. These exports have not affected the availability of electricity in the country because, according to the ministry, Uganda produced excess power. Over one-third of the power produced is not consumed).

Following the closure of the dam, Uganda has now started importing electricity from Kenya. But Minister Ruth Nankabirwa says Uganda will not pay for the 60 megawatt power imported from Kenya in cash, but that when Isimba reopens, Kenya will be paid in kind, according to a bilateral agreement between the two countries.

The four major generation plants; Kiira, Nalubaale, Isimba and Bujagali, all along the River Nile, also at least 35 other smaller stations around the country, have an installed capacity of almost 1400 megawatts, while consumption is about 800 megawatts.

The ministry, as well the main distributor, Umeme Ltd, insist that even with this surplus capacity, the government should continue investing in energy generation ‘to keep ahead of demand’, so as to avoid a situation of scarcity when demand overtakes output.

Over the last 16 years, the country has paid 1.4 trillion shillings to the generation companies for generating power that is not used, and this ‘deemed’ energy is expected to increase when the 600-megawatt Karuma project is switched on alongside other smaller plants.With 2,000MW, Uganda will be generating 250% of demand with an excess of 1,200MW, before the demand rises beyond the present 800MW.

“All power purchase agreements government signed with independent power producers (PPIs) have what was technically termed as ‘take or pay’ clause that binds government to pay for all power generated by PPIs,” according to the Electricity Regulatory Authority.

This means the buyer, in this case the Uganda Electricity Generation Company Ltd, UETCL, must pay for the produced power, whether it is evacuated or not, because the generation companies have nowhere to sell it and it is not storable.

The Chief Executive Officer, African Institute of Energy Governance, Dickens Kamugisha says the government must explain where the ‘deemed energy’ is and why the country continues to pay for it while at the same time importing electricity when one dam closes.

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While there is this surplus electricity some parts of the country remain ‘in darkness’, while others, like West Nile, have to bear the cost of paying a private producer at costs much higher than what the rest of the country pays.

According to the ministry of energy, the current surplus is expected to be consumed by the growing number of industries, especially in the 26 industrial parks being established across the country.

But before that, the taxpayer will continue paying for the unused power.

Currently, government, through UETCL needs 19.5 million dollars (more than 73 billion shillings) annually compensating electricity generators for supplying excess power to the grid.

According to the 2020/21 Auditor General’s report, the government paid at least 87 billion shillings that year on unused electricity.

Stephen Birahwa Mukitale, former Buliisa MP says while the country might need more investments in electricity generation, it is currently not convincing that with so many plants currently, critical areas still have no electricity.

He cites the Central Process Facility and other oil projects in the Albertine Graben which are going to be using a lot of diesel to run because there are no transmission lines. 

To him, the unplanned investments will continue to impact the national budget as the taxpayer pays for redundant energy produced.

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Mukitale says that unfortunately, such costs are not considered when calculating Uganda’s national date, and yet it is a cost to the country.

Mukitale said it is wrong for the government to allow go for commercial loans to finance generation projects, adding that it is one of the reasons the country is suffering high costs of energy influenced by the Bujagali plant.

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