Uganda s Experience with Promotion of Rural Electrification - Connection subsidies

Transcription

1 Uganda s Experience with Promotion of Rural Electrification - Connection subsidies A Presentation Made at the Initiative Practitioner Workshop 14 th -16 th November 2011 Radisson Hotel, Dakar Senegal By Dr. Benon M. Mutambi Ag. Chief Executive Officer, Electricity Regulatory Authority 1

2 Background. Uganda has a population of 30.4 million or 6.2 million households. The country s GNI per capita is estimated at US$380. At a macro level, the country has enjoyed strong economic growth rate averaging over 6% over the past two decades. National electricity access is estimated at 12%. Rural electricity access rate is estimated at 4%. Over 80% of the population lives in the rural areas. 2

3 Electricity Sector Reforms Government implemented comprehensive power sector reforms over the past 10 years. Unbundled the vertically integrated state monopoly (Uganda Electricity Board) into generation, transmission and distribution. Enacted an enabling legislation (Electricity Act, 1999). Established an independent regulator (Electricity Regulatory Authority). Leased the generation and distribution assets under 20 year concession agreements. 3

4 Institutional Framework for Rural Electrification Rural Electrification Strategy and Plan (RESP) formulated in Rural Electrification Agency (REA) set up in 2001 as a semi-autonomous agency. Rural Electrification Fund (REF) established to provide grants and subsidies on investments in rural electrification. Sources of funding for the REF include:- Money appropriated by Parliament; A 5% levy on transmission bulk purchases of electricity for generation stations; Loans and grants from Development Partners like: World Bank/IDA, SIDA, JICA, Government of Norway, GEF, KfW and GTZ. 4

5 Approaches to Rural Electrification/Projects 1. Grid Extensions: These are concessioned out to private operators through a competitive bidding process. Two private distribution company-ferdsult Engineering Services Ltd and Kilembe Investments Ltd. Two cooperatives Bundibugyo-Ntoroko and Pader-Abim-Agago Cooperative Societies. Supported by SIDA. 2. Minigrids: Where demand is not large and the distance to the grid is great. West Nile Rural Electrification Co. Ltd. Was the first to be supported. 3. Solar PV: Appropriate for isolated and dispersed electricity requirements. Over 20,000 solar PV installations made. 5

6 Connection Costs and Methods of Subsidization Initial concept of rural electrification based on the concept that the private sector would provide the required investments. Government would participate to buy down the huge initial investment costs. The regulator would set the tariffs at cost reflective levels such that the tariff revenues are sufficient to recover the costs. Tariffs expected to vary in different concession areas (different parts of the country). 6

7 The Case of West Nile Rural Electrification In West Nile (i.e the first mini-grid supported by REA) in 2004 with support from World Bank/IDA, the utility received US$100 for each connection made. Connections remained minimal but largely constrained by electricity supply. Consumers meet the full cost of connection (US$148 for no pole service and US$548 for single pole connection. Supply was based on a 1.5 MVA HFO generator. A 3.5 MW hydro power plant was expected to be constructed within the next three years but this delayed. COD now expected in March This significantly affected the project cash flows. 7

8 The Case of Ferdsult and the Cooperatives Initial connections enjoy a subsidy of up to 80%. Supported by SIDA. The arrangement has worked fairly well. Initial connection response is high but slows down drastically. The wiring costs remain a constraint to connection. Cost of wiring in rural areas estimated at US$ Material cost (single phase) Premises inspection charge Cost (Ushs) Cost (US$) 250, ,000 8 Security Deposit nil nil Monthly service fee Start-up energy payment 2, ,000 8 VAT (18%) 52, Total 344,

9 Grid-Based Output Based Aid (OBA) Objective of the grid-based OBA is to provide improved access to electricity to poor households. Design based on the Global Partnership on Output Based Aid (GPOBA). Provides a one-time connection subsidy to poor households living within no-pole distance of existing grids HHs unable to pay the connection fees but can afford to pay for internal wiring of the house and the energy consumption costs once connected. The Development Partners for the OBA facility include GPOBA, IDA (as part of ERTII, KfW and GoU. 9

10 Grid-Based OutPut Based Aid (OBA) All the licensed distribution companies qualify to participate in the scheme. Excludes some urban areas. Covers only no pole connections. At the time of application, a HH should have remained unconnected for at least 18 months after the distribution line from which the HH will be served was in place. HH is able to do pay for internal wiring and the cost of inspection. The OBA subsidy is paid in Shillings to the utility after verification by an Independent Verification Agent. Refunds the pre-financing charges to the utility. 10

11 Approved Connection and Inspection Fees under OBA Licensee Inspection Fees (US$) Connection Costs (VAT Excl.) US$ Umeme Ltd US$17 US$64(Conventional meter) US$125 (Prepaid meter) Kilembe Investments Ltd US$15 US$156 (Prepaid Meter) Ferdsult Engineering Ltd US$8 US$140 (Prepaid Meter) West Nile Rural Electrification Co.Ltd na US$66 (The cost of a meter is covered by KfW) 11

12 Institutions Under the OBA Scheme Ministry of Energy and Mineral Development (MEMD) Rural Electrification Board (REB) Rural Electrification Authority (REA) Licensed Distribution Companies (LDC) Customer Awareness Consultant (CAC) Independent Verification Agent (IVA) Electric Regulatory Authority (ERA) Development Partners Local Governments Households 12

13 Conclusions Electrification rates in Uganda are partly constrained by the high upfront costs of connection (wiring costs and connection costs paid to the utility). Promoting rural electrification requires well designed strategies to subsidise connection costs; Uganda has tried different approaches to subsidization of connection costs. Recorded mixed successes. High poverty levels in rural areas remain an impediment to rural electrification. 13

14 Conclusions In addition to connection costs, rural electrification in Uganda still faces a number of other challenges. Dispersed Households. Low income per capita for the Rural population. High system losses. Negative net cash flows in the initial years. The Rate of Return regulation is inapplicable!! Cost reflective tariffs. Can consumers from rural areas meet the energy usage costs? Prepayment metering is a solution. Equitable rural electrification. High costs of wiring. 14

15 Thank You for Listening 15