President Musevei has written to the Energy Minister Irene Muloni complaining about the continued exorbitant power prices by South African based company UMEME limited.
Umeme Limited is Uganda’s main electricity distribution company having acquired a 20 year concession from 2005 ending 2025.
According to the lease and assignment agreement signed between government and UMEME to distribute electricity around the country, the Uganda Electricity Distribution Company Limited leased its assets to UMEME to operate for 20 years.
However, according to Museveni, the concession was messed up by certain elements in the Energy ministry and subsequently in the process, it has led to the continued exorbitant prices for electricity in the country.
“The cheating started with fraud of inflating the magnitude of the technical and commercial losses. The Auditor General had calculated the two categories of losses to be 28 percent in 2005,”Museveni says in a letter dated March 12 directed to Muloni.
“Then all of a sudden, a delegation of Ugandans went to USA and mysteriously together with the investors hiked the magnitude of the technical and commercial losses to 38 percent.”
Museveni says that when Gen.Salim Saleh wrote an investigative report in 2009,the losses mysteriously went back to 28 percent and of this 15 percent were caused by old wires ,13 percent by non-collection of debts by the defunct Uganda Electricity Board.
He explains that since that time, commercial losses have shrank to only one percent while technical losses have climbed to 17.3 percent yet investors claim to have invested $500million in the distribution infrastructure, a thing the president says does not add up.
“If they have invested so much money, why do the technical losses not decline,”Museveni wonders.
According to Museveni,there is the incredible provision of guaranteeing the profits to the investors of 20 percent which he says must be collected from the tariff before adding that the alleged investments account for 22 percent of the price for electricity and the losses account for 26 percent of the tariff.
Museveni wonders whether technical losses were not supposed to have been eliminated.
“Why is the consumer being penalised for that ? If investments were made, why then the losses? Why do consumers have to pay for both the mysterious investments and the losses that should have disappeared long ago.”
He has directed the Energy Ministry to to explain to him the circumstances surrounding the matter.
“In the meantime, there should be no question of renewing UMEME’s concession. Let us look for a cheaper way of modernising and expanding the transmission and the distribution lines,”Museveni says in the letter copied to the Vice President, Prime Minister, Attorney General and Finance Minister.
In 2014, Parliament recommended that the government terminates the UMEME concession citing that contrary to provisions by the constitution, the Attorney General’s chambers did not participate in the drafting of the concession.
Article 119 of the Constitution provides for the Attorney General to draw and peruse agreements, contracts, treaties, conventions and documents by whatever name called, to which the government is a party or in respect of which government has an interest.
In response, UMEME Shinobi Musoke, the company secretary says they have not received the letter by President Museveni but have seen reports of the same via social media.
“Nevertheless,in accordance with the provisions of the regulations, UMEME would like to inform its shareholders and the general public that the company is committed to working with the government of Uganda ,all key stakeholders and development partners to ensure development and improvement of the electricity distribution infrastructure.”
The company also says its committed to increasing grid electricity, further reduction in energy losses and drive towards reduction in tariffs.
The future of the South African company now looks to be hanging in balance following President Museveni’s letter to Energy Minister Irene Muloni.