Overview:
Umeme’s exit was sealed a few years ago amid accusations of not investing in power distribution and high charges.
Power distribution company Umeme has confirmed that they will exit Uganda in 2025 after government notified them it will not renew their 20-year concession upon expiry.
In a statement issued on Thursday, 08 December 2022, Umeme said it will continue to perform its obligations as per the existing Concession Agreements.
It also said it will continue to operate and maintain the electricity distribution system in line with prudent utility practice to ensure continued service delivery through to the end of the concession.
“The concession is enshrined in several binding Concession Agreements. The Company has formally received written communication from the Government of the Republic of Uganda, notifying it that the current Concession will continue to run until its natural end in March, 2025 as stipulated in the Concession Agreements after which, there will be no renewal,” Umeme said.
However, it should be noted that Umeme’s exit was sealed a few years ago amid accusations of not investing in power distribution and high charges.
For instance in 2014, Parliament demanded that government cancels its contract with Umeme after an Ad hoc committee on Energy questioned the manner in which Umeme was procured and the ‘outrageous’ terms of the agreements it signed with the government.
“The committee found out that because of the peripheral role played by the Attorney General in the drafting of the power concession agreements, their terms and conditions were skewed to favour Umeme at the expense of the government and the people of Uganda as evidenced by the scandalous provisions…” read part of the committee report.
In April 2022, Parliament passed the Electricity Amendment Bill, 2022, which among others, permits generation and transmission licensees to supply electricity in bulk directly to categories of customers specified by the minister.
The decision by Parliament ended decades of Umeme’s monopoly as the sole bulk power supplier.
“This action would of necessity eliminate Umeme in service territories where it is not licensed and in effect implement the presidential directive on selling power to industries at a tariff that eliminates the expensive distribution costs of Umeme,” the report by the Natural Resources Committee read in part.
President Museveni has often criticised Umeme, saying its poor distribution network and the high electricity tariffs have continued to frustrate government’s industrialisation efforts.
For example, during last year’s Labour Day celebration, he said once Umeme’s concession ends, government will take over power distribution. He added that power for industrial parks will go straight from generation to the factories without any third party.
Uganda Electricity Distribution Company Limited (UEDCL) is the government entity on whose behalf Umeme Ltd runs the electricity distribution infrastructure.
Mr Paul Mwesigwa, the UEDCL managing director, says the company has built a specialised capacity to manage electricity distribution.
“We are ready and prepared to manage the activities because, currently, we monitor on behalf of the government the distribution network investment run by Umeme,” he says.
However, the termination of Umeme’s concession will come at a cost to Government of Uganda.
According to Mr Mwesigwa, the UEDCL managing director, the government will need $311m (about Shs1.16 trillion) to compensate Umeme.
The Ministry of Energy recently sought Shs256.2 billion as part of the money to start the Umeme buyout in phases.