The Ugandan government has threatened to impose financial penalties on Umeme from the month of March for any frequent and prolonged supply outages, the Electricity Regulatory Authority (ERA) has warned.
The warning follows the recent complaints about high tariffs and long power cuts that have added extra costs to businesses in the country as owners use stand-by generators to keep operating.
ERA said in a notice published on its website recently that it intended to set targets for “reliability and quality” of power supplied by Umeme, which secured a 25-year licence in 2005 as the sole distributor of electricity in the country.
“Frequent and long power outages/interruptions impose a cost on consumers in terms of the cost of energy not supplied,” the notice said. “The licensee will incur a financial penalty for failing to achieve the targets,” the notice read in part
However ERA did not give details of the proposed penalties.
ERA spokesman, Julius Wandera, said they planned to impose the new terms in March, after a public consultation.
Umeme is majority owned by the state-controlled pensions fund NSSF, while South African funds including Allan Gray, Kimberlite Frontier Africa Master Fund and Investec Asset Management Africa Fund also have stakes.
Uganda’s electricity grid cover just 23 percent of the population of 40 million.
Umeme plans to spend $1.2 billion over seven years to expand and upgrade the grid to cope with additional supplies from new dams being built that will double the country’s generation capacity from about 800 megawatts now.