"NRM supports UTODA reform" as load shedding improves

So the day is done and I have two shows to report here apart from everything else that is happening. Some things will have to wait. First the show we had with the Electricity Regulatory Authority folks (14/07/2011) Benon Mutambi, former director economic planning now Acting Chief Executive Officer is the top honcho there. He was joined by Engineer Semitala Norbert (Technical Regulation). The show made some interesting revelations. Energy Status Statement

Like I reported here before Aggreko contract (the diesel run energy producer contracted several years ago as an emergency power facility) is drawing to a close on the back of high oil prices and a government deficit.

In 2010 Uganda paid 280 billion to Aggreko. It’s the most expensive power in the country’s history. The company produces 20% of the energy Uganda consumes but receives 60% of total energy dollars (my research). I have asked ERA for a full cost report but am yet to receive the final tally.

To deal with the shortfall ERA asked the Directorate of Water Development (DWD), a sort of regulator for the water sector to increase the controlled releases at the source of the Nile. It’ s literally pouring cold water on the fires of the energy shortfall. There is talk that manufacturers were planning industrial action to protest the load shedding.

The result is that while Aggreko shuts down one of its 50MW facility (which resulted in load shedding) the shortfall will now be met by some 40 MW produced by the Nalubaale hydro-power stations at the Nile.

The increase granted by DWD is to release 200 more cubic meters by second of water. It raises the water releases at the cusp of the Nile by Lake Victoria in Jinja to 1000 cubic meters per second. That is the price that Uganda has to pay.

Hydropower is cheaper so ideally the decline of expensive thermal in favor of hydro is good for the energy mix. Mutambi promised that load shedding would end by this Christmas when Bujagali Hydro Power Dam comes online. Testing will take until March when it is commissioned so my own prediction is March if only because there are always technical issues to expect.

The problem with Uganda’s energy sector of course is management. The planners in the sector have failed to balance the energy mix by ensuring cheaper sources dominate (like hydro or Heavy Fuel Oils). Instead Aggreko ensured very high costs from light diesel and with the rising oil prices it became unsustainable causing the current crisis.

In the meantime I had some suggestions for the ERA folks including taking Uganda’s massive subsidy (the result of buying down the tariff of expensively procured energy) and directing it at rationalizing the power grid. Close to 30% or more of the power produced is either stolen or lost to an obsolete grid. Rehabilitating the grid means relief or if you like harvesting where there were losses. The other is to focus Uganda’s petroleum program on HFO products.

Focusing on recovering from losses instead of longer-term investments in new infrastructure is particularly pertinent in Kampala, which provides more than half of the 450 thousand customers of Umeme – the electricity distributor. According to Umeme some of the fastest growing areas for new customers are also outside Kampala (in Banda and Najjanamkumbi, a new substation is being set up in Lubowa to cater for the new customer base).

All this may be mumbo-jumbo for those just joining this conversation but it is pretty serious stuff. Uganda has the highest energy costs in the region, which perhaps may explain why industry here is stunted. Uganda relies mainly on trade for taxes. It has an import bill of 4.5 billion dollars meanwhile largely raw exports bring in a measly 1.5 billion in export earnings. Some call this an import bias- but not surprisingly new investments likely take into account the high cost of electricity in the country.

Why open a processing plant instead of a hotel or disco? One requires an assurance of electricity.

MEANWHILE we had the new Executive Director of Kampala Jennifer Semakula Musisi. A very interesting conversation. For starters she said off air that she had spoken directly to the highest political authorities about one of the major headaches of the city; its transportation system currently run by UTODA. The position of those higher ups (who won’t be named here) was to insist on reforms of the city’s transport system. Being that UTODA is viewed wrongly as a government body or an extension of the ruling party- this is a very interesting path.

May UTODA as we know it be on its way out? She is determined as well to kick out the cordinator of intelligence Gen David Tinyefuza from a city owned mansion. She already kicked out the former Mayor Al Haj Nasser Ssebagala. More on Jennifer’s story next round.

Posted on July 14, 2011 and filed under The Ugandan Reader.