Proposed amendments to the electricity sector law—via the Electricity (Amendment) Bill, 2022—seek to address the sector’s institutional regulators and to allow isolated power generation plants to sell electricity to distribution companies or directly to consumers for both technical and commercial expediency.
Proposed reforms to the regulation of the electricity sector under the Electricity (Amendment) Bill, 2022
The Electricity Act, Cap 145 (the “Act”) was enacted in 1999 and a lot has changed in the electricity sector since then. The Electricity (Amendment) Bill, 2022, tabled on January 14, 2022, seeks to remove inconsistencies in the law, introduce flexibility in its implementation, and streamline the operations of the electricity sector.
The current Act does not effectively address issues of institutional responsibilities and efficiency, enforcement of compliance, and does not have adequate penalties for theft of electrical energy and vandalism of electrical facilities. The Act does not empower the Electricity Regulatory Authority (ERA) to impose sanctions on licence holders for breach of terms of the licence and, in addition, the purchase of all electricity generated in Uganda is performed by a single institution whose network does not cover the whole country.
The successor companies to the Uganda Electricity Board (UEB)—(UEGCL, UETCL and UEDCL)—diversified from UEB were mandated to report to the Minister for finance and not the Minister responsible for electricity and, over the years, this created challenges in the management of the electricity sector.
The Act is now out-dated and has failed to address the current energy challenges in Uganda which has left lacunae in the law. The 2022 Amendment Bill seeks to address the above institutional and regulatory aspects as highlighted below.
Proposed Reforms under the 2022 Amendment Bill
(a) Monopoly of the bulk supplier (UETCL and UEDCL): The Bill proposes to remove the monopoly of UETCL and UEDCL as the single buyers and suppliers with the licence to purchase all electricity generated.
The Bill prescribes a position under which a holder of a generation licence may sell and supply electricity to holders of a distribution licence, transmission licence or directly to a specified class or category of customers.
The purpose for the amendment is to increase coverage of the national grid and cater for places in the country where it is not economically viable to extend the transmission grid.
(b) Electricity distribution licenses: The Bill grants power to ERA to classify licences taking into account the size and technology to be used or market segment to be served by a licensee. The Bill proposes that other electricity distribution companies may obtain a licence to distribute and transmit electricity and ERA may, through a fair, open and competitive process, invite applications for licences under the Act.
At the expiry of the licences, the hydro-power plants, installations, and property shall be transferred to the Government in a procedure prescribed by the Minister.
(c) Royalties by renewable energy projects: The Bill amends the Act to incorporate, in addition to hydropower projects, all renewable energy projects including wind, biomass, peat and solar to be liable to pay royalties to the district local government. It empowers the ERA to prescribe the maximum royalties payable by generation licences of renewable energy projects.
(d) New penalties: The Bill introduces deterrent penalties for theft of electricity and vandalism of electrical equipment, e.g., electrical meters, works, and public lamps. Persons caught stealing electricity or vandalising electrical meters, works, or lights shall be liable on conviction to a fine not exceeding twenty thousand currency points (UGX 400,000,000/=) or imprisonment not exceeding ten years or both.
(e) Term of office for ERA: The Bill amends the Act and provides for the term of office of the chairperson of ERA and two other members to be five (5) years and that of the other two members shall decrease from the five (5) years to four (4) years. This is meant to ensure continuity of the activities of the authority at the expiry of the term of some members.
(f) Functions of ERA: The Bill proposes in addition to the functions under the Act to empower ERA to impose fines on licensees for breach of the terms of the licence before suspending or cancelling the licence.
(g) Funding for ERA: The Bill increases funding of ERA from 0.3% to 0.7% of electricity sold to improve its performance.
(h) Constitution of the Tribunal in panels: The Bill proposes that the chairperson may constitute the Tribunal into panels, each with at least three members, and cases may be transferred upon the request of the chairperson or one of the parties to another panel for disposal.
(i) Immunity from suits: The Bill proposes to grant members or employees of the Tribunal immunity in respect of any acts done or omitted to be done in good faith in the discharge of any functions under the Act.
(j) Dispute resolution with consumers: The Bill proposes procedures for dealing with complaint from consumers. A person aggrieved by a decision or action may apply to the licensee for redress.
Licensees are expected to develop dispute resolution procedures to address the complaints from customers before the complaints are referred to the Tribunal.
(k) Shareholder in the successor companies: The Bill proposes to include the Minister responsible for electricity as a shareholder of the successor companies of UEB, i.e., UEGCL, UETCL and UEDCL. The Minister responsible for electricity shall be the majority shareholder and the Minister for finance as the minority shareholder.
The proposed amendments in the 2022 Bill, if passed, would transform the transmission and distribution of electricity in Uganda, by allowing isolated power generation plants to sell electricity to distribution companies or directly to consumers in order to cover distribution throughout the entire country.
Further, the Bill, if passed, would provide the ERA with functions and powers that would help in the improvement of their operations as discussed in this alert. Finally, the Bill, if passed, would streamline line-ministry responsibilities for the electricity sector.
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No information contained in this alert should be construed as legal advice from ALP East Africa or ALP Advocates or the individual authors, nor is it intended to be a substitute for legal counsel on any subject matter.
For additional information in relation to this alert, please contact the following:
– Irene Namuli
Head, Corporate & Commercial Department
– Latigi Lamaro V. Fiona
Associate, Regulatory and Compliance Department