Umeme technician carries out a connection. PHOTO/ FILE
A picture of how life will look like once Umeme Limited exits Uganda next year is starting to crystallise. Sunday Monitor understands that the Energy ministry has regained ownership of five electricity distribution concessions and counting across the country.
When Umeme’s 20-year concession with the government of Uganda runs its course on March 30, 2025, several binding concession agreements enshrined in the mother concession will also lapse. One such concession agreement is that of Kilembe Investment Limited (KIL) that spanned 10 years, covering the western districts of Kasese, Buhweju, Bushenyi-Ishaka, Sheema, Rubirizi and Mitooma.
On October 1, KIL handed over the country’s electricity distribution infrastructure to Uganda Electricity Distribution Company Ltd (UEDCL).This was not without problems. UEDCL inherited not only a creaking system with fraying wires but also the headache of clearing Shs3.5 billion KIL is demanding after incurring losses between 2018 and 2022.
“The government did not have the evacuation lines for the three-generation plants in Kasese District and it had to use our network to transmit that power to the Nkenda substation. During that period, they were supposed to pay us Shs3 billion,” Mr Ericana Bwambale Musoka, the KIL board chairman, disclosed during the handover ceremony.
Mr Bwambale also revealed that during the implementation of the Electricity Connection Programme by Rural Electrification Agency (REA), the Energy ministry borrowed their spares and equipment. He added that ministry officials promised to return the hardware once theirs were supplied, yet they failed to commit to it. He put the outstanding debt accrued from the usage of the hardware at Shs501 million.
A bad hand UEDCL also took over the electricity concessions of FERDSULT Engineering Ltd, Bundibugyo Energy Cooperative Society (BECS) in 2021, Pader Abim Community Multi-Purpose Energy Cooperative Society (PACMECS) in 2023 and Kyegegwa Rural Energy Cooperative Society (KRECS) Limited in 2024.
On January 1, 2011, the Electricity Regulatory Authority (ERA) handed PACMECS a 10-year licence to distribute and sell electricity in the Northern Service Territory. This includes the districts of Pader, Agago, Abim, Omoro, Lamwo, Otuke, Kitgum, Kotido, Kaabong and Karenga.
Following the expiry of the licence in December 2020, ERA has, over time, granted short-term renewals of the license to PACMECS. The last licence expired on June 30, 2023, paving the way for a UEDCL takeover.
After the takeover, it was discovered that amongst the network’s dilapidated infrastructure were leaning poles, broken pole structures, vandalised stay wires, broken transformers, looping on the network, and offline vending mechanisms, among others.
“We take note that some of the parts of the network are insecure. We are already in touch with the security heads in these areas to work out with us a modality of how our operations shall flow without endangering the life of our staff,” Mr Jonan Kiiza, the UEDCL spokesman, said.
Despite the absorption of KIL ballooning UEDCL’s working areas from 96 districts to 103 districts, Ms Judith Naiga, the Director Technical Operations at ERA, is confident in its abilities “to deliver a reliable and quality electricity power to the communities […] across the country.”
Optimistic
UEDCL currently operates 11 service territories under the licence for electricity distribution and sale as issued by the ERA.
Dr Patricia Litho, the Assistant Commissioner for Communications in the Energy ministry, says the takeover is to rid the sector of losses incurred by the government in cushioning the private investors from crunching the sector.
“In the first reforms, when the government decided to privatise, we had a lot of challenges with that where the investment costs in the energy sector is quite heavy and the government still had to come in and support the private sector,” Dr Litho noted.
“The government has decided to retake the distribution of networks but also pay attention to the gaps that we experienced for the reasons why we handed over our network to the private sector. We have built UEDCL’s capacity overtime and, since 2017, they have been slowly taking over different service territories.”
Dr Litho also told Monitor that the ministry is organising a stakeholder meeting to harmonise KIL’s claim before it is paid. “Normally there are power purchase agreements. UETCL is the one in-charge. ERA only gives the licence and now we have got to sit down the three of us, Ministry of Energy, ERA, UETCL and KIL and we see what investment was brought on board.”
With the World Bank’s support, the government rolled out two schemes—2018 Electricity Connection Policy and the Electricity Access Scale-up Project. The scale-up project targets close to 1.2 million customers across the country with a target of a minimum of 300,000 customers a year.
“We are sure that if we secure power reliability and increase customers on the grid as well as find the right investment capital to put into the distribution segment, we are sure that we shall make the UEDCL business more sustainable or running sustainably without burdening the consolidating fund,” Mr Paul Mwesigwa, the Managing Director of UEDCL, said.
“We are looking at 100 percent digitising our operations. And this is the only surest way for us to achieve business operational efficiency. We are not only targeting to have most of the services digital but also ensure that for every service that UEDCL offers to its customers, it should be in formats that are convenient for the modern generation,” he added.
To efficiently operate and manage the electricity distribution network, UEDCL needs to upgrade its system to enable grid monitoring through Supervisory, Control and Data Acquisition (SCADA), a digital network monitoring tool that was recently established.
Sub-sector reforms
In February 2022, the Cabinet decided to merge, mainstream and rationalise government agencies, commissions, authorities and public expenditure. In the electricity sub-sector, under the second-generation reforms, the government decided that UEDCL, UETCL and UEGCL should be merged into one company to increase efficiency in service delivery, accelerate access to electricity and also lower end-user power tariffs, especially for industrialisation.
While the Executive branch of the government resolved to create the Uganda National Electricity Company (UNEC), it also resolved not to renew all the concessions within the sub-sector.
To steer the second-generation power sector reforms, the government secured the World Bank’s backing to support the Energy ministry under the Electricity Access Scale-up Project (EASP).
The project is estimated to cost Uganda approximately US$638 million
The non-renewal of the concessions is said to have resulted from the underperformance of the private sector players. A March 2023 ministerial statement of the sector reforms stated in no uncertain terms that private sector players focused largely on profit maximisation and shied away from extending power or managing concessions in rural areas.
“The return on investment by the private sector is very high resulting in high tariffs which is counter-productive to industrialisation. The need to strike a balance on low cost of financing to make the electricity service affordable for economic development,” it stated.
It further proceeded to note that the fragmentation of the distribution concessions made most of the same financially unviable while the sub-sector struggled with deemed energy costs burden.
Junior Energy minister Sidronius Opolot Okasaai confirmed that the government has already cleared UEDCL to take over Umeme Ltd on April 1, 2025.
Minister Okasaai added that the process is on schedule and that the government rolled out the Free Electricity Connections Policy & Electricity Access Scale-up Programme to tackle the country’s suppressed demand and reduce supply gaps across the country.
“There is currently some redundant electricity in this [sub-]sector which is mainly due to significant unutilized energy as a result of a knowledge gap on the use of electricity to enable development but also suppressed demand due to limited strength of the distribution network,” he said.
“This requires deliberate efforts to plan and invest in both segments to consume this electricity. UEDCL should pay attention to the challenges that will require attention including implementing the Electricity Connections Policy to accelerate electricity access, a weak distribution infrastructure which affects the reliability and security of Power Supply, and vandalism of electricity equipment, among others,” he added.
Starting all over
UEDCL now plans to inject up to $350 million in upgrading an ageing distribution infrastructure.
“We have estimated about $70 million to be invested in the first year in the distribution segment and this will be appropriated across the five years. The current challenges we have in the distribution space can only be remedied if you have a commensurate investment in the distribution space,” Mr Mwesigwa said, adding, “There is a lot of development coming up, especially on the urban investments. All these are looking up to a robust infrastructure.”
The government plans to borrow $765.75 million (about Shs2.812 trillion) from external lenders to cover the costs of Umeme’s exit. The estimated buyout amount due to Umeme is US$225.75 million (about Shs859.430 billion).
The entity was concessioned in 2005 to run a 20-year contract to manage and operate the country’s electricity distribution infrastructure on behalf of UEDCL after the Uganda Electricity Board (UEB) was unbundled into three sister companies—UEDCL, Uganda Electricity Generation Company Limited (UEGCL), and the Uganda Electricity Transmission Company Limited. (UETCL).
Due to a dilapidated network, the sus-sector lost 4kWh for every 10kWh of power produced and heavily relied on government subsidies to operate, a World Bank 1998 study indicated.
As of 2021, Umeme had improved its electricity distribution efficiency from 50 percent in 2005 to 83 percent in 2022. It did this by reducing energy losses from 38 percent in 2005 to 18 percent.
The number of transformers has increased from 6,000 to 4,833 over the same period. Customers connected to the power grid have increased by more than fivefold, from 294,000 in 2005 to over 1.6 million in 2022.
Between 2017 and 2024 when UEDCL began to assume the management of concessions, the customer numbers swelled from 42,706 in 2017 to 205,000 in 2024. Cash collections also improved from 78 percent to 106 percent in the same period.
Low voltage network length is reported by UEDCL to have grown six-fold from 1,780km in 2017 to 12,374km with medium voltage network growing two-fold from 3,624 to 10,329 in the same period.
The Uganda Bureau of Statistics (Ubos) May 2024 national census indicated that while Uganda has up to 10.2 million households, only 2.2 million are connected to the national grid.
