Parliament has rejected a proposal by Ministry of Energy and Mineral Development to spend Shs45.7bn in the buyout of South African based company, ESKOM.
This was during the consideration of the 2022/2023 national budget.
While tabling the report by the Budget Committee on the Appropriation Bill 2022, Patrick Isiagi the Chairperson Parliament’s Budget Committee revealed that the ESKOM Concession ends in 2023 and negotiations are underway for Government to takeover the company, but recommended to Parliament to reject approval of the funds.
“Although there is need for a seamless buyout of ESKOM, the Committee observes that this must be done based on an assessment by OAG (Office of the Auditor General)and Government Chief Valuer(GCV),” Isiagi said.
Parliament also approved the proposal by the Budget Committee to halt the purchase of Albatros Energy to a tune of Shs57.600Bn, after the Budget Committee recommended to have the priority be put on transmission, distribution and connection to the last mile.
The decision by lawmakers come at the time the Auditor General, John Muwanga warned in the February 2021 audit report about the accumulating debt in deemed energy that stood at at Shs110.79bn, warning that the debt is unsustainable and may cause a significant strain on government resources if not passed through the tariff system, because the current trend negatively impacts consumer prices, which may be a hindrance to electricity demand.
Government signed several Power Purchase Agreements (PPAs) and other implementation between the Independent Power Producers (IPPs), GOU, and Uganda Electricity Transmission Company Limited (UETCL), where Government committed to construct power evacuation infrastructure from the IPPs generation facilities to the distribution network upon commencement of generation of power by IPPs.
In the said agreements, Government was given the obligation to dispatch power, this constituted deemed Energy and the obligation fell on UETCL to make payments to IPPs for the unconsumed Energy in accordance with the provisions in the agreements.
The Auditor General has blamed Government for the ballooning unconsumed electricity bill stating that the Regulator has not allowed these payments to pass through the tariff system nor has it pronounced itself on their settlement.
Government however attributed the cause of deemed energy mainly on the lack of demand in the local areas and weak distribution infrastructure to evacuate the excess energy from the embedded power generators to load centers.
The audit report cited deemed energy payments to Achwa River Energy Project that hit Shs64.69bn for which, only Shs10.33bn was released by Ministry of Finance leaving unpaid claims of Shs54.36bn.
disputes in court.
The Audit report further revealed that UETCL incurred deemed energy payments amounting to USD.5,964,592.18 about Shs22.2bn and USD.6,425,017.89 equivalent to Shs23.9bn in 2019 and 2020, respectively.
Muwanga said, “The deemed energy liabilities/payments amounting to Shs46.1bn at UETCL as at 30th June, 2020 are unsustainable and cause a significant strain on Government resources. In addition, deemed energy charged through the tariff negatively impacts on consumer electricity prices, which may be a hindrance to electricity demand, thus slowing economic growth.”
According to Government, the deemed energy clause in power purchase agreements was initiated when Government had no sufficient power generation capacity to meet the demand. The initiative was intended to attract investors in the electricity sub sector.
Now, Auditor General has called for provision of funds for construction of appropriate transmission infrastructure to evacuate any amount of power generated.
It should be recalled that in September 2020, Parliament rejecting Government’s proposal to construct a 360MW hydro-power dam at Uhuru Falls in Murchison Falls National Park, saying Uganda is already paying for unconsumed electricity generated, so there is no need to endanger the tourism site for another hydro-dam.
Parliament cited presence of ongoing power projects along the Victoria Nile, including; Karuma, Oriang Hydro, Ayago, Kiba, and Murchison hence, saying there was no need for this hydro power project to be pushed since available dams can provide more power generation.
