How new electricity tariffs will affect you

The move benefits commercial enterprises, medium industrial, large industrial, and extra-large industrial consumers, with a weighted average cut of 1.6 percentage points.

“The electricity regulator has focused on the commercial and medium industries with a tariff reduction of 1.8 percent and 2.8 percent respectively to support [economic growth by concentrating on] the small and medium industries. This is in addition to the tariff initiatives towards tariff reduction for the large and extra-large industrial consumers,” the Electricity Regulatory Authority (ERA) explained in a statement.

This translates into an average annual savings of Shs40.32b in electricity bills for all businesses in the aforementioned industries, which number over 5,000 across various sectors.

“The continuation of implementation of the measures to reduce the electricity end-user tariffs for manufacturers is pegged on pre-determined demand growth targets for the year 2024 as approved in February 2023,” said Dr Sarah Kanaabi Wasagali, the chairperson of ERA, adding that electricity demand is predicted to increase by 9.53 percent in 2024.

What is the backstory to all of this?

President Museveni, in his 2021 strategic guidelines and directives, issued his ministers a blueprint to lower the price of electricity to $5 cents, or Shs185, per unit so that their operational costs stem from power.

The President further ordered that, since power from Kiira and Nalubaale dams costs $1.1 cents per unit, the manufacturing sector be encouraged to purchase electricity directly from government power plants.

Isimba dam’s power has consequently been valued at $4.16 cents per unit and Karuma dam $4.97 cents per unit.

What factors are behind the changes in the tariffs?

The money invested in power plants is recouped through the tariff on the electricity used. These tariffs are subject to quarterly adjustments in response to shifts in macroeconomic variables such as inflation, the value of the shilling in relation to the US dollar, and the price of fuel internationally.

So what do the new rates look like?

Domestic consumers now pay Shs7.7 less per unit for every unit consumed in the three months leading up to March 2024 than they did in the previous quarter when they paid Shs805. However, in order to support the least consumptive customers, the first 15 units are sold for a lifetime price of Shs250 per unit.

Commercial energy customers will now pay Shs600.2 instead of Shs611.8 from the previous quarter.

This quarter, medium industrialists will pay an average of Shs448.7, down from Shs461.8, and large industrialists will pay Shs379.2 per unit, down from Shs384.4.

Large industrialists, such as those who produce heavy metal, will pay Shs320.6, down by Shs4.4 the previous quarter. 

“This tariff determination has considered the costs of power acquisition from power generation plants based on the projected quantities of power required to be supplied to end user consumers and the generation prices as provided for in the respective generation licenses and Power Purchase Agreements,” said Dr Wasagali.

According to government plans, industrial consumers with potential to increase their power consumption will continue to be billed at $6.85 cents per unit during peak hours (6pm to midnight) and shoulder hours (6am to 6pm).

The domestic cooking tariff (declining block) at Shs412 per unit will continue to be implemented by the government to encourage domestic consumers to cook with electricity between 81 kWh and 150 kWh per month.

“We will continue to implement the institutional cooking tariff of Shs451 per unit to support over 500 institutions such as schools, hospitals, and prisons to transition from the use of biomass (firewood and charcoal) to cooking using electricity,” said Dr Wasagali.