Uganda’s power distributor, Umeme Ltd has explained some of the clauses in the contract between the government of Uganda and the electricity distribution company.
Blessing Nshabo, the Chief Corporation and Regulations Officer told Parliament that the Umeme deal was made to protect the electricity company against the vice of Government agencies failing to pay their bills, with a clause mandating Umeme to withhold levy fees from Uganda Electricity Transmission Company Limited (UETCL) so as to recover their monies.
He quoted section 5.3 (d) of the agreement that stipulates that where government fails to pay its bills, Umeme may defer payment to UETCL until when the bills are cleared.
Nshabo revealed that the offset that dated back as early as 16th March 2016 has seen Umeme withhold Shs153.4bn. He said Shs58.85bn has been paid back to UETCL, noting that 84 government agencies currently owe the distribution company Shs34.89bn.
“There are no funds available to pay UETCL because not only was the money insufficient to pay, [but] we are still owed money by Government,” he said.
Umeme officials together with Electricity Regulatory Authority (ERA), (UETCL) and Rural Electrification Agency had appeared before the Committee of Commissions, Statutory Authorities and State Enterprises (COSASE) on Thursday to answer queries raised in the 30th June 2016 audit report.
The report highlighted that REA disclosed receivables amounting to Shs61.53bn, with UETCL having failed to remit the 5% transmission levy totaling to Shs32.5bn over five years.
After Nshabo’s revelations, COSASE) Chairman Abdu Katuntu asked Umeme if the agreement signed with Government provided for review, with the electricity company confirming that the review is ongoing.
Katuntu then noted that it was the right time Parliament interested itself with the review of the agreement so as to cater for the interest of Government.
“Whoever negotiated this agreement, I don’t know which law school they went to. It is an agreement that is risk free for Umeme because the contracting party is the one collecting money on behalf of Umeme,” Katuntu said.
“No reasonable commercial lawyer would be in position to negotiate such an agreement, unless he has interests. That agreement is risk free for Umeme because they have all legal safeguards; it is only Government that didn’t protect their economic safeguards. It is only Umeme that had its interest protected,” Katuntu added.
The Committee also wants an audit undertaken on the billings Umeme has been issuing to Government institutions after questions were raised on the money the electricity company claimed remained unpaid by Government agencies.
Secretary to the Treasury, Keith Muhakanizi questioned why Umeme hasn’t connected Government entities on the prepaid metering commonly known as Yaka despite the fact that the directive was issued two years back.
Nshabo told MPs that Umeme is yet to connect some Government institutions due to their sensitivity and pointed out State House and Ministry of Defence.
Umeme’s power distribution concession is due to expire in seven years (March 2025). According to the law regulating the power sector, a concessionaire can, three years to the expiry of its concession, apply for a renewal. Umeme had expressed interest in having it extended.
