COSASE Meeting with the Electricity Supply Industry over the Uganda Electricity Transmission Company Limited (UETCL) failure to pay amounts owed to Rural Electrification Agency for Rural Electrification Levy
Discussed in the Committee on Commissions, Statutory Authorities and State Entreprises on May 28th, 2018
On the 22nd and 23rd of May 2018, the committee chaired by the committee chairman Honorable Abdu Katuntu sought to understand why Uganda Electricity Transmission Company Limited (UETCL) has failed to pay amounts owed to Rural Electrification Agency for Rural Electrification Levy.
Presentation by the Electricity Supply Industry led by the executive director of Electricity Regulatory Authority (ERA) MsZiria Tibalwa Waako
Parliament of the Republic of Uganda noted that Uganda Electricity Transmission Company Limited (UETCL) has not paid amounts owed to Rural Electrification Agency for Rural Electrification Levy.
An amount payable to REA
At the end of February 2018, the amount owned to REA by UETCL was Ugx 58,985,784,856. This amount included the total Rural Electrification levies invoiced Ugx 87,785,460,107 and less the total payments (28,799,675,251). The balance as at 28thFebruary 2018 was 58,985,784,856.
Provision for Rural Electrification Levy
Pursuant to statutory instruments issued by MEMD, five percent of power purchase costs are allowed/recovered through the retail tariff as rural electrification levy.
Over the period 2014-2017, the Electricity Regulatory Authority (ERA) allowed amounts totalling to 237,642,400,599 billion as the electricity levy.
Failure by UETCL to pay the Rural Electrification Levy to REA
UETCL was not able to remit Rural Electrification Levy payable to REA on account of the following;
Between 2005 and 2011, Government of Uganda provided direct subsidization of electricity end-user tariffs. By 2011, the annual subsidy requirement had increased to Ugx 432 billion. During the period, the government of Uganda delayed to remit subsidy requirements to UETCL causing UETCL to default payment to power generators. In 2011 UETCL wrote to Ministry of Finance Planning and Economic Development, and Ministry of Energy and Ministry Development, requesting for authorization to utilize Ugx 28,277,558,452 to pay power generators with the consideration that these amounts will be reimbursed in the financial year 2011/12. To date, the MoFPED has not reimbursed these funds to enable UETCL to make payments to REA.
UETCL has not been able to make payments to REA of balance amount of Ugx 30,708,226,130 because the amounts are withheld by Umeme Limited.
Withhold of funds payable to UETCL by Umeme Limited
Section 5.3 (d) states that if a GoU Entity fails to pay a delivered electricity bill by the due date therefor, the company may defer payment to UETCL of the Bulk Supply Tariff portion of any such time as the non-paying GoU Entity or GoU pays such electricity bill.
To date, Umeme Limited is withholding Ugx 31,850,943,165 from UETCL on account of failure by MDA to pay power bills.
Outstanding Balances to GoU Entities
Failure to pay by GoU entities to pay electricity bills for power consumed is adversely affecting the financial sustainability of the electricity supply industry. For the period 2005-2018, the unpaid bills by GoU entities are Ugx 135 billion. The amounts withheld (by Umeme limited) from UETCL has been offset against the outstanding bills payables of Ugx 34,893,273,014, Ugx 27,050,347,398 has been outstanding for more than 60 days.
Verification of Amounts Offset
The ultimate responsibility of checking the accuracy of the energy bills lies with the consumer of the respective GoU department/Agency. However, since UEDCL is an interested party especially due to the escrow account requirements as per section 4.2 of the LAA, “on a periodic basis UEDCL may require the services of an independent expert to review the accuracy or appropriateness of the deficiency amount claimed by Umeme from the lease fee offset or withdraws from the escrow account.”Thus UEDCL last engaged the services of the expert (PWC) to ascertain this in 2013, now that time has passed (5 years) and the escrow account has not been reimbursed, a procurement for the services of an expert will be done.
Installation of Prepayment metering on GoU Entities
As a measure to address the failure to buy electricity bills on time, Umeme Limited commenced an initiative to retrofit GoU entities from postpaid metering to pre-paid metering.
Of the 469 GoU ENTITIES accounts, 327 accounts have been retrofitted to prepayment metering-representing 70%.
The reaction by the committee;
The committee asked the Ministry of defence to explain why they have not paid Umeme bills for the amount amounting to Ugx 70,610,235,492 yet the government has given the ministry this money. The ministry responded by saying that the installation of Yaka by Umeme in the UPDF premises has delayed the payments because the process has not yet started and the ministry cannot pay before the process has started or ended. The committee gave Umeme and the ministry of defence 6 months to be done with the installation of Yaka.
The committee also asked the GoU entities who were involved in the investigation of the 48 ghost meters that were found and 13 billion had been paid to Umeme. None of the entities had an answer to this. The committee resolved it by saying that it will send auditors to audit to audit that process afresh.
The committee resolved that all the GoU entities in the distribution of electricity should be merged together because they are many and they have failed to do their work mostly in the verification of amounts offset by Umeme. This decision by the committee was not final.
The Chair adjourned the meeting for another day.