Noticias

Fuente: The Observer

Uganda’s ministry of Energy and Mineral Development is scouting for a consultant to draft a legal framework for private investments in the country’s electricity transmission segment, the first of its kind.

The framework is expected to be one of the most anticipated legal documents in Uganda’s energy sector as it will determine how private companies recoup their investments. It is not clear when the ministry of Energy will zero down on a consultant, although sources say the procurement process is at an advanced stage.

In creating space for private investors in the electricity transmission segment, Uganda will break new ground, and relieve the burden the Government-owned Uganda Electricity Transmission Company Limited (UETCL) has shouldered for the last 20 years. The shift in policy could also see a change in the way the regulator sets the electricity tariff for UETCL.

“The transmission tariff for UETCL as determined by ERA has largely been recovering transmission operation and maintenance costs, with limited recovery of capital expenditure/investment-related costs,” according to a March 2020 document compiled by ERA for the development of a framework that allows the participation of private players in the transmission segment.

The change in the setting of the tariff is likely to attract investors into the segment. The Electricity Regulatory Authority in a recent report says Uganda could have more power generated soon, and hence the need for more transmission infrastructure.

THE MEDIUM TERM

“Based on the installed capacity of generation plants (including operation­al, licensed but still under construction and committed plants), Uganda in the medium term is expected to experience surplus generation of electricity,” ERA writes in a March 2020 report.

The electricity regulator warns that “there is a risk of the planned genera­tion power plants achieving commercial operations date without the requisite evacuation lines in place, thus creating a need for investment in the transmission backbone to facilitate growth in electric­ity demand and to avert deemed energy payments that would otherwise affect the financial sustainability of the Electric­ity Supply Industry.”

According to figures from the ministry of Energy, Uganda had 2,989km of electricity transmission network by the first quarter of 2020, higher than the 2,888 during the same time last year. UETCL owns and operates the high voltage transmission grid above 33kV.

On top of managing the transmission network, UETCL also buys power from the grid-connected generators. It then sells that power to the distribution utilities. UETCL sells the larger portion of power (currently 91 per cent) to Umeme Limited, and two per cent to other distribution companies such as UEDCL.

The remaining seven per cent is exported to neighbouring countries such as Kenya, Tanzania and Rwanda mainly for purposes of grid stability. In 2019, UETCL sold 3,824.5 GWh to Umeme, its biggest customer, compared to 3,053.2 GWh in 2015.

As more Ugandans build homes and businesses grow, demand for electricity continues to grow, putting pressure on the transmission network.

ERA says the “system peak demand (including exports to Kenya and Tanzania) in the year 2019 was 723.76 MW, signifying a 12 per cent increase compared to a three per cent growth in 2018. This growth is mainly attributed to growth in domestic demand.” 

To meet this demand, UETCL has to invest in its network, especially in further bringing down transmission losses and putting in place more infrastructure such as substations.

According to the Electricity Supply Industry Performance report for 2019, the transmission losses were 3.6 per cent in 2019 compared to 3.8 per cent reported in 2018. Transmission energy losses are projected to drop to 3.03 per cent in 2021. Transmission losses occur when energy is lost through the system, meaning the electricity generated is lower than what is consumed at the household.

Some of the transmission losses occur due to the limited investments in the segment. A large chunk of the available funds have gone towards setting up substations. There are currently 22 transmission substations in the country. A substation steps down high-voltage electricity from a transmission line, from where it can be channeled onto a distribution line into customer premises.

Government has many financial demands outside the energy sector, which is partly the reason it is attracting private investors into the transmission segment.

LONG HISTORY

Uganda has come a long way in growing the electricity transmission network of the country. In 2003, the transmission network stood at 1,178km, up from the close to 3,000km today.

In truth, the transmission network has not grown as fast as the country’s generation capacity. A number of factors explain this. With government facing many competing interests, finding the money for the electricity transmission network has been a problem. UETCL also borrows concessional loans from development partners.

The development partners have mainly funded the pre-construction activities, such as the compilation of environmental reports and the resettlement action plans. 

Even then, due to the long lead times for energy transmission projects, it is difficult to have proper financial planning partly because of the fluctuating prices of materials and land. From the point of inception to its completion, an electricity transmission project takes between five to seven years. And this is when there are few delays.

The land question for infrastructure projects also remains a critical issue. There has been a challenge of getting the right of way for the projects, mainly because many people do not want to lose their land. Others dispute government’s valuation of their land. UETCL also faces a big problem of theft and vandalism of its equipment. This problem negatively impacts the reliability of Uganda’s energy supply and adds to UETCL’s costs.

The draft national energy policy of October 2019 calls for the enforcement of stringent punitive measures against theft and vandalism of energy infrastructure, equipment and materials. Most of these challenges remain unresolved since the unbundling of the Uganda Electricity Board two decades ago.

FINDING SOLUTIONS

For the most part, the government has looked more at the legal frameworks to improve UETCL’s service offering. As early as 2003, the government put in place the Electricity (Primary Grid Code) Regulations, 2003. The regulations were partly meant to offer more clarity and boost the Electricity Act of 1999.

The 2003 regulations were also meant to improve the transmission grid system by forging a way of how it could be handled in moments of emergency such as outages. It is when UETCL released its Grid Development Plan 2015 – 2030, where it lists the projects that it intends to execute and the money needed for them that the need for expanding the transmission network became clearer.

Some of the transmission projects include the construction of sub-stations, development of regional interconnection power projects, and increase in the transmission line length. 

However, due to the huge financial burden of pulling off all the planned projects by 2030, government has, in the time being, encouraged the setting up of industries – especially those in the incentivized industrial parks - so that the power being generated can be consumed by the new factories being set up.

In the financial year 2018/2019, UETCL spent Shs 30 billion to pay the generators of the electricity that had not been consumed, sometimes known as deemed energy. In order to stop paying this money, government needs more consumers of power. UETCL is mandated to book this cost because the Power Purchase Agreements it signed with the generators of electricity are designed along a take-or-pay model, the kind where if you do not evacuate the power you pay the generator.

PAY MODEL

Some quarters in the public have suggested to government to review the take or pay model, and shift to something more cost-effective. Government is yet to officially pronounce itself on what it intends to do with that model.

For now, it is the invitation to private investors into the electricity transmission network that is bound to change the face of the segment.

Government is not just looking for a consultant who will write out the legal framework for the transmission segment, but one who will also offer it transaction advisory services when it comes to sourcing investments.

“The consultant shall support and provide comprehensive transac­tional and advisory support services to the Government and its agen­cies in the procurement of a Private Transmission Developer using an international competitive bidding process for the execution of a pilot project under the framework adopted. The consultant shall ensure that the relevant applicable procurement standards and guidelines are observed during the tendering process,” the March ministry of Energy report points out.  Done swiftly, the government will have resolved part of a big problem that has affected the transmission segment over the last 20 years.