Key issues

in Uganda’s
energy sector
Pro-Biodiversity Conservationists
in Uganda (PROBICOU)
Robert Tumwesigye, Paul Twebaze,
Nathan Makuregye, Ellady Muyambi
This study, prepared by Pro-Biodiversity
Conservationists in Uganda (PROBICOU),
highlights the most salient energy-sector
issues and challenges in Uganda,
and provides recommendations to
strengthen the sector’s performance.

Access to energy series

Series editor Emma Wilson

First published by International Institute for

Environment and Development (UK) in 2011.
Copyright © International Institute for Environment
and Development. All rights reserved

ISBN 978-1-84369-831-9

For further information please contact:

International Institute for Environment
and Development (IIED)
80–86 Gray’s Inn Road
London  WC1X 8NH
United Kingdom

[email protected]
www.iied.org/pubs

A catalogue record for this book

is available from the British Library

Citation: Tumwesigye, R., Twebaze, P., Makuregye,

N., Muyambi, E., (2011) Key issues in Uganda’s
energy sector, Pro-Biodiversity Conservationists
in Uganda (PROBICOU) / International Institute
for Environment and Development. London.

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Key issues
in Uganda’s
energy sector
Pro-Biodiversity Conservationists
in Uganda (PROBICOU)
Robert Tumwesigye, Paul Twebaze,
Nathan Makuregye, Ellady Muyambi

Table of Contents
Executive summary 04
1 Introduction 06
2 Energy issues in Uganda 10
3 Legal framework for the energy sector 36
4 Institutional framework for the energy sector 42
5 Broader issues and recommendations 46
References 52
 Acknowledgements

Acknowledgements Acronyms
The organisation was established EAERDP
in 1999 and registered in November Alternative Energy Resources
2000 under the Non-governmental Development Program
organisations registration Statute 1998.
AfDB
It was incorporated on 14th December
African Development Bank
2007, under the Companies act, Laws
of Uganda as a public limited Company. AFIEGO
The mission of PROBICOU is “To Africa Institute for Energy Governance
conserve biodiversity by promoting
BoU
sustainable development through
Bank of Uganda
shared responsibility and networking.”
The organisation is committed to CBO
improved community livelihoods community based organisation
and sustainable utilisation of natural
CDM
resources. Its main programmes of
Clean Development Mechanism
work include: biodiversity conservation,
waste management and chemicals CIREP
management. Community Initiated Rural
Electrification Project
The organisation is currently the
NGO focal point organization for CSCO
Strategic Approach to International Civil Society Coalition for Oil in Uganda
Chemicals Management (SAICM) in
CSF
Uganda, a member of National Steering
Credit Support Facility
committee on POPs in Uganda and a
member of National Steering committee CSO
on Elimination of child Labour. The civil society organisation
organisation is also accredited by
DWRM
Global Environment Facility and is a
Directorate of Water
partner to UNEP on mercury waste
Resources Management
partnership area. For more information
see: http://www.probiodiversity.org. EA
Exploration Area
EAC
East African Community
EAPMP
East African Power Master Plan
EDT
Electricity Disputes Tribunal
EIA
Environmental Impact Assessment
EITI
Extractive Industry
Transparency Initiative
EPS
Early Production Scheme

2
 Acronyms

ERA NFA SCOUL

Electricity Regulatory Authority National Forestry Authority Sugar Corporation of Uganda Limited
ERT NGO UCPA
Energy for Rural Transformation non-governmental organisation Uganda Consumer Protection
Association
EWT NOGP
Extended Well Testing National Oil and Gas Policy UEB
Uganda Electricity Board
GEF NRC
Global Environment Facility Natural Resources Committee UECT
Uganda Energy Capitalization Trust
GOU NRPC
Government of Uganda National Radiation UEDCL
Protection Commission Uganda Electricity Distribution
IAEA
Company Limited
International Atomic Energy Agency PAC
Public Accounts Committee UEGCL
ICT
Uganda Electricity Generation
information and PEAP
Company Limited
communication technology Poverty Eradication Action Plan
UETCL
IMF PEPD
Uganda Electricity Transmission
International Monetary Fund Petroleum Exploration and
Company Limited
Production Department
IPP
UIA
independent power producer PERD
Uganda Investment Authority
Public Enterprises
LIREP
Restructuring & Divestiture UMA
Locally Initiated Rural
Uganda Manufacturers Association
Electrification Project PPA
Power Purchase Agreement UNBS
MAAIF
Uganda National Bureau of Standards
Ministry of Agriculture, Animal PPDA
Industry and Fisheries Public Procurement and UNFCCC
Disposal of Assets United Nations Framework
MEMD
Convention on Climate Change
Ministry of Energy and PREP
Mineral Development Priority Rural Electrification Project UNEP
United Nations Environment Programme
MoFPED PROBICOU Pro-biodiversity
Ministry of Finance, Planning Conservationists in Uganda URA
and Economic Development Uganda Revenue Authority
PSA
MTTI power-sharing agreement UREA
Ministry of Tourism, Trade and Industry Uganda Renewable Energy Association
PSFU
MW Private Sector Foundation for Uganda URSB
megawatt Uganda Registration Services Bureau
RDC
NAPE Resident District Commissioner USSIA
National Association of Uganda Small Scale
REA
Professional Environmentalists Industries Association
Rural Electrification Agency
NEMA VAT
REB
National Environment Value Added Tax
Rural Electrification Board
Management Authority
WENRECO
RET
NEPAD West Nile Rural Electrification
Renewable Energy Technology
New Partnership for Company Limited
Africa’s Development

3
  
Executive summary

Uganda has abundant energy resources, In recent years, the government of Uganda has
especially hydrological and other renewable promulgated a new Electricity Act and other relevant
resources, yet there is widespread energy poverty laws. It created an independent Electricity Regulatory
throughout the country. The country’s energy Authority (ERA), which has established a strong
sector faces considerable challenges including track record in ensuring the financial viability of
acute power shortages, increased demand, and the sector. The state-owned Uganda Electricity
a lack of new power-generation projects. Climate Board has been ‘unbundled’ into separate entities
change has had an impact on hydropower responsible for generation, transmission and
generation; while investment in other forms distribution, and the generation and distribution
of renewable energy is hampered by the high facilities have been concessioned to the private
upfront cost of technologies such as solar. sector. The number of urban and rural households
Rising international oil prices make thermal with direct access to electricity has been increased.
power generation very expensive, while fuel- The government has promoted grid and off-grid
supply constraints inhibit thermal power generation. private-sector-led rural electrification and
Moreover, protracted procurement processes established a Rural Electrification Agency
delay the implementation of energy projects. (REA). Least-cost power investments have been
pursued to provide adequate and reliable service.
In 1997, the Ugandan government formulated
The Ugandan government has also collaborated
a Strategic Plan to reform the energy industry.
with the East African Community on regional
This was led by the Ministry of Energy and
power interconnection. This regional approach
Mineral Development. The main objectives
is expected to benefit all countries involved
of the plan were to:
by diversifying supply sources and reducing
• increase the sector’s efficiency; investment costs.
• meet the growing demands for electricity Despite the achievements of the Ugandan
and increasing area coverage; government since 1997, the sector still faces
ongoing challenges. Planning for modern energy
• improve the reliability and
supply in Uganda, especially electricity, has been
quality of electricity supply;
limited mainly to urban and semi-urban areas.
• attract private capital and entrepreneurs to improve The power supply system remains inadequate
the sector’s commercial performance; and and inefficient, due to stunted growth in
generation capacity, poor transmission and
• take advantage of export opportunities.
distribution infrastructure and poor commercial
utility practices. The sector badly needs large-
scale investment and prudent utility practices.
Sustainable development in Uganda is difficult

4
 Executive summary

to achieve, as it is incompatible with the poverty 1 The government should use the experience gained
prevalent in the country. The government has in implementing reforms in energy policy to
the challenge of expanding access to affordable, institute appropriate strategies and mechanisms
reliable and adequate energy supplies as a to scale up rural access to energy services.
way to address poverty issues.
2 An integrated approach to rural electrification
Energy development in Uganda and environmental should be pursued, covering the whole
damage are intricately related. The energy sector spectrum of energy resources.
has bigger environmental impacts than most other
3 A strong policy and legal framework is
economic sectors. Hence, energy investments
required as a foundation for the reforms.
in Uganda are subject to greater environmental
scrutiny. The energy sector in Uganda is directly 4 Areas of high commercial risk, such
linked to the other sectors of the economy, and as distribution, should be tackled first.
is a vital input for many. The sector is a major
5 The introduction of independent power
contributor to government revenues, and
producers should start with small projects
decisions taken in the sector have a direct bearing
to create confidence in the market.
on the performance of the other sectors. There
are institutional and legal weaknesses, especially 6 There is a need for considerable public
in the areas of the downstream petroleum awareness-raising on issues such as tariff
industry, renewable energy, energy conservation setting, investment programmes, introduction
and efficiency and atomic energy applications. of new policies, and oil-revenue sharing.
Recommendations Overall, the report recommends better monitoring
This report explores key issues in each of the and regulation of operations, improved regulation
sub-sectors and the potential for development of of access to natural resources by investors, and
renewable energy options, and gives an overview increased stakeholder involvement in the energy
of the legal and institutional frameworks for the sector. It calls for the government to recognise the
sector. Key recommendations arising from the role that improved energy supply can play in poverty
study include the following: reduction by designing sustainable energy policies.

5
 1
Introduction

the last decade, owing largely to the implementation

1.1 Background of an ambitious programme of macro-economic
adjustment and structural reforms.
Overview of energy in Uganda
1.1.1  However, by the definition of energy poverty
as ‘the absence of sufficient choice in accessing
The energy sector in Uganda is predominantly adequate, affordable, reliable, quality, safe,
dependent on wood fuel, which accounts for up and environmentally friendly energy services
to 93 per cent of the country’s total energy needs. to support economic and human development’,1
The main other sources of energy are petroleum there is energy poverty at all levels in Uganda,
products (5 per cent) and hydro-electricity (1.5 and particularly at household level in rural areas.
per cent). Wood fuel is the main source of heating Evidence of this energy poverty can be found
and cooking in rural and urban areas. The high in the low levels of consumption of modern
demand for fuel wood has resulted in the depletion energy forms (electricity and petroleum products),
of forests, and exacerbates land degradation. the inadequacy and poor quality of electricity
Uganda has considerable renewable energy services, and the dominant reliance on wood fuel.
resources including biomass supplies, hydropower
potential (over 2000MW), solar and biomass Previous energy planning in Uganda has emphasised
residues from agricultural production. However, supply-side issues such as increasing generation,
renewable resources are not fully exploited, which and attracting more private investors, especially
further increases the high demand for wood fuel. for commercial sources of energy. Demand-side
The transport sector is the major consumer issues, such as subsidies to counteract the very
of fossil fuels and accounts for about 75 high end-user power tariffs and meeting energy
per cent of the fossil-fuel import bill. demand by increasing area coverage, have received
less attention. This approach has tended to favour
Following the liberalisation of Uganda’s economy the urban population, which is the major user of
from 1987, the energy sector has played a key commercial fuels, while marginalising the energy
role. On one side, the sector provides a major needs of the majority of the population — in rural
contribution to Treasury resources (e.g. fuel taxes, areas — which depends mainly on biomass. The
VAT on electricity, a levy on transmission of bulk rural areas also contain the largest proportion of
purchases of electricity, licence fees and royalties) the poor population. Despite the good national
and foreign exchange earnings (power exports). economic performance, about 35 per cent
On the other side, significant public investment of Uganda’s population still lives below the
has been made in the sector, particularly in the area poverty line (ERA, 2007).
of electricity supply. Uganda has achieved strong
economic growth, averaging about 6 per cent per
annum, as well as macro-economic stability over

1 The International Energy Agency (IEA), 2010.

6
 Introduction 1

According to Uganda’s Medium-Term Competitive

Strategy for the Private Sector (2000–2005), the Regional context: the East
1.1.2 
involvement of private finance in the energy sector African Power Master Plan
is becoming increasingly important in Uganda,
as in many other parts of the world. The country’s Within the regional context, the New Partnership
policy developments acknowledge international for Africa’s Development (NEPAD) offers the
and regional energy trends, especially in areas greatest opportunity for integrating Africa’s energy
of energy investment, pricing and global impacts. systems (e.g. through planning, interconnected
Uganda has completed an inventory of its grids and cross-border oil pipelines) to enhance
greenhouse-gas emissions to meet its commitments energy trade, thus optimising the development
as a signatory to the United Nations Framework and use of resources and providing cost-effective
Convention on Climate Change (UNFCCC). energy services. Within the East African sub-
Consequently, there are considerable efforts region, Uganda is currently spearheading the
underway to develop projects able to benefit NEPAD efforts, recognising the opportunity to
from the Global Environment Facility (GEF) and increase exports of Uganda’s hydro-electricity and
the Clean Development Mechanism (CDM). being able to source and import comparatively
cheap energy supplies from wherever they exist
The government of Uganda (GOU) strategy within the region. A key undertaking so far, in line
on the energy sector has been to: with the NEPAD initiative, is the development of
• promote legal, regulatory and structural the East African Power Master Plan (EAPMP),
sector reforms, including leveraging which aims to address energy trade, exchange of
private sector investment information and experiences, and joint promotion
of petroleum exploration, among other issues.
• provide adequate, reliable and least-cost power
generation with the goal of meeting urban and East Africa has abundant and cost-effective
industrial demand and increasing access resources for producing electricity, including
gas, geothermal, hydro and promising coal
• scale up rural access to underpin resources. These resources can meet future
broad-based development. energy demands and, if well managed, form the
Despite Uganda’s vast potential for electricity economic foundation of future economic growth
production from hydro, geothermal, gas, solar, of countries in the East African Community (EAC).
wind, biogas and thermal sources, the country The EAPMP shows that there are economies of
spends an estimated 212 billion Ugandan Shillings scale associated with electricity interconnection
annually on power subsidy, and its power tariff and trade within EAC countries. In addition, the
remains the highest in the East African region Plan demonstrates that the development of hydro
and the highest in the world after Sweden. The projects in Uganda and Tanzania would increase
country has experienced continuous forest EAC capacity to produce cost-effective electricity
degradation due to the demand for charcoal and reduce its level of dependency on imported oil.
because most people cannot afford the high The EAPMP also provides the basis for co-ordinated
power tariffs. Most industries have failed to take action between Uganda, Tanzania and Kenya, under
off because of the high power tariffs and those the leadership of the East African Community. The
managing to remain in production charge high Plan lays out a 20-year programme (beyond 2015)
prices for their products. This has exaggerated of investment in the energy sector, with clear
the problems of unemployment and poverty. objectives and investment targets, to meet the
expected growth in demand for power. According
to the EAMPM, the economic rationale is clear and
substantive: a co-ordinated, integrated approach
can achieve economic benefits of some $456
million net present value (NPV) over the next 20 years.

7
 1 Introduction

Challenges and constraints of EAPMP

The Plan calls for high-level political commitment 1.2 About this study
in order to attract major private investment to the
energy sector. The Plan states that this commitment Project aim and objectives
1.2.1 
should be translated into measures that will reduce
investor uncertainty, as this type of project requires The overall aim of this assessment is to highlight the
significant financial investment. The Plan calls for most salient energy-sector issues and challenges
fast-tracking the implementation of three key projects in Uganda, and to provide recommendations to
in order to demonstrate EAC’s capacity to lead strengthen the sector’s performance.
complex processes. These projects are the
hydropower dam of Bujagali in Uganda, 360MW The study has the following objectives:
of additional gas-fired power in Dar es Salaam • identify the status and challenges
(Tanzania) aimed at supplying Kenyan demand, of the energy sector in Uganda
and the Arusha–Nairobi interconnector. These • profile the existing legal and institutional
three projects, if underway within 18 months, framework for the energy sector in Uganda
will demonstrate that East Africa is acting together evaluate the current investment opportunities
to meet its power needs in a Kyoto-friendly, in the energy sector
low-cost manner. The Plan also calls also for
targeted activity to identify Kyoto credits that • offer recommendations for improving
arise from implementation of the EAPMP planning, co-ordination and performance
and at monetising these credits as a of the energy sector.
source of finance for implementation.
Assessment methodology
1.2.2 
The Plan goes much further in terms of technical
proposals and specific actions to develop them. This review is based on important key issues
The most important proposals are to set up an affecting supply and consumption/demand of
integrated electricity system for the three countries, energy in Uganda, including both broad-sector
and to create an East African Power Poll. With the and sub-sector issues. The assessment adopted
Plan, EAC priority is to ensure reliable, adequate qualitative methods of data collection and analysis,
and cost-effective access to modern energy to clarify the interface of different issues salient
sources. This access is required to unlock to the energy sector in Uganda. All sub-sectors in
the development of industrial and agricultural the energy sector are covered in the study, which
activities and to increase household connection used three key methods: document reviews,
rates to national electricity grids in the three courtesy visits and key-informant interviews.
countries. However, the EAC crucially needs
international financial and technical resources
to implement this supply-side policy.

8
 Introduction 1

Document reviews • strategic sector plans

The assessment was based on a comprehensive
• electricity service provider reports
review of relevant documents and polices
on Uganda’s energy sector. The following • sector investment plans
sub-sectors were covered:
• budget reports
• petroleum, including with reference to
• recent reports/papers by Ugandan and
potential impacts on the fishing industry
international NGOs and researchers.
• new and renewable sources of energy
Courtesy visits
• atomic energy To contribute to a clear understanding of
broader energy-sector issues, as well as those
• rural electrification
of energy sub-sectors, courtesy visits were
• energy sector financing undertaken to the relevant energy-sector
institutions and private companies.
• legal and institutional framework.
Key informant interviews
The documents reviewed include:
Key informants interviewed during the assessment
• relevant legal and policy documents,
include representatives from the relevant energy-
e.g. the constitution, energy and mineral
sector ministries, departments, parastatals,
policy of Uganda, national oil and gas
corporate bodies, private companies and
policy, and other relevant acts/laws
NGOs involved in advocacy on improved
• ministerial reports and statements services in the energy sector.

9
 2
Energy issues
in Uganda
This chapter explains development trends
in Uganda’s energy sector by looking at the
energy sub-sectors in terms of achievements,
challenges and opportunities for investment.

transmission infrastructure above 33kV,

2.1 Power sub-sector and UEDCL owns and operates the
distribution network at 33kV and below.
The power sub-sector covers electricity generation, On 26 March 2001, a private company called
transmission and distribution including rural Umeme Ltd was formed under the Public
electrification. In 1999, following cabinet approval Enterprises Restructuring & Divestiture (PERD)
of the Power Sector Reform and Privatization Statute, 1993 and the Companies Act Cap 110
Strategy, and enactment of a new electricity law as one of the successor companies of Uganda
(The Electricity Act, 1999), the Electricity Regulatory Electricity Board (UEB), charged with carrying
Authority (ERA) was established to regulate the on the business of distribution and sale of electricity
industry (MEMD, 2002). Thus, while the Ministry to all Ugandans. Umeme Ltd was established by a
of Energy and Mineral Development (MEMD) is Consortium of Globeleq and Eskom Enterprises. It
responsible for policy formulation, the ERA regulates has entered into a lease and assignment agreement
the industry independently of the ministry. with UEDCL, a support agreement with the
In 1999, the Uganda Electricity Board (UEB) was government of Uganda, a power sales agreement
unbundled by the government of Uganda, creating with UETCL, and is licensed by the ERA for
three subsidiary independent companies: distribution, supply and embedded generation.
1 Uganda Electricity Generation Company In 2004, Umeme Ltd entered into a 20-year
Limited (UEGCL) to provide for electricity concession agreement to operate the business
generation services of electricity distribution. The main consideration
for the signing of this agreement was premised
2 Uganda Electricity Transmission Company on an understanding that Umeme Ltd would invest
Limited (UETCL), to provide for the transmission US$65 million in the distribution of electricity
of electricity to the distributor within the first five years of operation that would
3 Uganda Electricity Distribution Company limited help in acquiring the relevant technology to
(UEDCL), to distribute electricity to end consumers. upgrade the electricity distribution system (ERA,
2007). This was intended to guarantee broader
These companies and the ERA are wholly owned coverage of electricity usage, reduce electricity
by the government of Uganda and are mandated losses, and create a modern billing system that
to preserve and protect public interest. would ensure that customers can get accurate
The unbundling of UEB formally began on 1 April and regular bills, with tariffs per unit of electricity
2001. Successor companies were created, and consumed considerably lowered, and load-
assets and liabilities of UEB/government were shedding (deliberate power cuts) eliminated.
transferred to them: UEGCL owns the two major
hydro-power plants at Nalubaale (180MW) and
Kiira (200MW), UETCL owns and operates the

2 http://www.nationmaster.com/energystatistics,
10 electricity production (per capita) (2007).
 Energy issues in Uganda 2

hydropower station is 180MW while that at Kiira

2.1.1 
Large hydropower development in is 200MW. Owing to prolonged drought and
Uganda associated low water levels in Lake Victoria,
the effective generation from this complex
The hydroelectric power potential of Uganda is is currently between 130MW and 180MW.
high and estimated at over 2000MW, mainly along
the River Nile. Current exploitation is about 317MW, • Bujagali Hydropower Project: the third-largest
of which 300MW is on the River Nile and generated hydropower plant on the River Nile is currently
by the Uganda Electricity Generation Company under construction, with an anticipated capacity
Limited, managed under Eskom. Kilembe Mines of 250MW. The project is expected to be
Ltd, Kasese Cobalt Company Ltd and others commissioned in April, 2012 (The Monitor
generate a total of 17MW. Two major independent April 12, 2011)
power producers, AES Nile Power and Norpak • Karuma Hydropower Project: another prospective
Power Company, are in various stages of setting project along the Nile, scheduled to improve
up large power plants. Their combined capacities electricity supply and reliability in Uganda in the
will be 450MW when completed. medium term. Detailed feasibility studies have
Available statistics indicate that Uganda has an been completed and construction is yet to start
electricity generation per capita of 74.547kWh2. and will be implemented under a public–private
The government of Uganda is scaling up the partnership arrangement.
production of hydroelectric power by expanding
the existing dams and commissioning new 2.1.2 
Small hydropower development in
power-generation projects. Large power- Uganda
generation plants and proposed projects
in Uganda include: A number of small hydropower plants, with total
• Nalubale and Kiira Complex: currently, this is the installed capacity of slightly over 28MW, are
largest hydropower generation plant. Nalubale, operating in various parts of Uganda (Table 2.1).
in Mukono district, has been operating since
1954; Kiira in Jinja district has been operating
since 2002. The installed capacity of Nalubale

Table 2.1
Small hydropower plants in operation in Uganda

SITE DISTRICT INSTALLED STATUS

CAPACITY (MW)

1 Bugoye Kasese 13 In operation by Tronder Power Ltd

2 Mobuku (1) Kasese 10 In operation by Kasese

Cobalt Company Ltd

3 Mobuku (2) Kasese 5.4 In operation by Kilembe Mines Ltd

4 Kisiizi Rukungiri Rukungiri 0.29 In operation by Kisiizi

Hospital Power Company Ltd

Sources 11
Electricity Regulatory Authority, 2010
 2 Energy issues in Uganda

The Electricity Regulatory Authority (ERA) has

issued a number of further permits and licences for 2.1.3 
Investment opportunities in the power
the generation of electricity from hydropower plants sub-sector
of capacity less than 20MW. Five independent
power producers are currently in possession of Large hydropower
licences for generation of electricity from small The large hydropower potential along River Nile is
hydropower projects with a combined installed estimated at about 2000MW. With only 380MW
capacity of 47MW. These projects are at various developed at Nalubale and Kiira, and 250MW under
stages of development, as indicated in Table 2.2. development at Bujagali, the unexploited potential
is well over 1300MW. Table 2.4 shows the large
There are other small hydropower sites for which hydropower potential sites along River Nile.
the ERA has issued ‘exclusive permits’, and where
feasibility studies are being undertaken (Table 2.3).

Table 2.2
Sites for which licences have been issued but are not yet operational

SITE DISTRICT EXPECTED STATUS

INSTALLED
CAPACITY (MW)

1 Nyagak Nebbi 3.5 Project being developed by

WERNECO and construction
works are underway

2 Kikagati Isingiro 10 Licence granted to Kikagati Power

Company Ltd, construction not
yet commenced due to unresolved
trans-boundary issues with
neighbouring Republic of Tanzania
3 Ishasha Rukungiri 6.595 Licence granted to ECO Power
(U) Ltd, construction ongoing
and commissioning expected
in November 2011.

4 Buseruka Hoima 9 The project is being developed

by Hydromax Ltd, construction
ongoing and commissioning
expected in November 2011

5 Mpanga Kamwengye 18 The project was developed by

Africa EMS Mpanga, and is
already commissioned

12 Sources
Electricity Regulatory Authority, 2010
 Energy issues in Uganda 2

Table 2.3
Sites issued exclusive permits by ERA

SITE DISTRICT INSTALLED STATUS

CAPACITY (MW)

1 Nshungyezi Mbarara 22 Permit issued to China Shan Sheng

and feasibility studies ongoing

2 Siti Kapochorwa and 25.7 Permit issued to V.S. Hydro Pvt

Bukwo Ltd and feasibility studies ongoing

3 Nengo Bridge Rukungiri 7.5 Permit issued to Jacobsen Elerko

AS and feasibility studies ongoing

4 Kaka Kasese 7.2 Permit issued to Greenewus Energy

Africa Ltd and feasibility studies ongoing

5 Nkusi Kibale 11 Permit issued to Greenewus Energy

Africa Ltd and feasibility studies ongoing

6 Rwizi Mbarara 1 Permit issued to Ntama Bamwine

Hydropower Company Ltd and
feasibility studies are planned
Sources
Electricity Regulatory Authority, 2010

Table 2.4
Large hydropower potential sites along the Nile River

SITE DISTRICT ESTIMATED STATUS

CAPACITY (MW)

1 Karuma Masindi/Apac 200 Feasibility studies by MEMD

paid consultants ongoing; to be
developed as a public project

2 Isimba Kamuli 87 Feasibility studies by MEMD

paid consultants ongoing

3 Ayago North Gulu/Masindi 304 Feasibility studies under support

of Japanese government ongoing

4 Ayago South Gulu/Masindi 234 Preliminary studies available from MEMD

5 Murchison Gulu/Masindi 642 Preliminary studies available from

MEMD; project located in a national park

6 Bugumira Kamuli 109 Preliminary studies available from MEMD

Sources 13
Electricity Regulatory Authority, 2010
 2 Energy issues in Uganda

Table 2.5
Small hydropower potential sites along the Nile River

SITE DISTRICT ESTIMATED STATUS

CAPACITY (MW)

1 Nyamabuye Kisoro 2.2 Preliminary technical studies carried

out under AERDP (2003) by SWECO
(1999) and MEMD

2 Mvepi Arua 2.4 No studies

3 Sogahi Kabarole 2.0 No studies

4. Ela Arua 1.5 No studies

5 Ririma Kapochorwa 1.5 Pre-feasibility carried out by the Mt

Elgon Hydropower Company Ltd

6 Haisesero Kabale 1.0 No studies

7 Nyahuka Bundibugyo 0.65 Preliminary technical studies carried

out under AERDP by MEMD

8 Sezibwa Mukono 0.5 Preliminary technical studies carried

out under AERDP by MEMD

9 Rwigo Bundibugyo 0.48 No studies

10 Nyarwodo Nebbi 0.4 No studies

11 Agoi Arua 0.35 Studies ongoing

12 Kitumba Kabale 0.2 No studies

13 Tokwe Bundibugyo 0.4 Preliminary technical studies carried

out under AERDP by MEMD

14 Amua Moyo 0.12 No studies

15 Ngiti Bundibugyo 0.15 Preliminary technical studies carried

out under AERDP by MEMD

16 Leya Moyo 0.12 No studies

17 Nyakibale Rukungiri 0.1 No studies

18 Miria Adua Arua 0.1 No studies

19 Manafwa Mbale 0.15 Preliminary technical studies carried

out under AERDP by MEMD

14 Sources
Electricity Regulatory Authority, 2010
 Energy issues in Uganda 2

Small hydropower • Complaints with respect to

Small hydropower projects are mainly not on shifting/clubbing of connections.
the Nile River, and have not been fully exploited.
• Complaints relating to concessional
These are important sources of electricity for
tariffs or rebate benefits.
areas not covered by the national grid. Even
though the cost per unit of electricity from isolated • Arrears due from earlier
small hydropower plants may be higher than that consumer/previous connection.
from the national grid, they could sustainably
• Complaints on shifting of
contribute to poverty reduction in households
high-tension electric wires.
in isolated areas. Table 2.5 shows the small
hydropower sites available for development. • Intentional malicious acts.
• Disconnection due to non-payment of bills.
2.1.4 
The electricity tribunal in Uganda
• Charge of tariff plan or schemes.
The Electricity Disputes Tribunal was set up in • Complaints regarding payment
2003 with four members, sworn in during 2004. of minimum charges.
The tribunal was mandated to arbitrate electricity
disputes between consumers and the public • Problems relating to billing.
bodies charged with generation, transmission • Damage and loss of lives due to electrocution/
and distribution of electricity in Uganda. sparking/short-circuits.
Consumer grievances within • Disruption/load-shedding of
the mandate of the tribunal electricity for long durations.
• Denial of public participation in • Meter-related grievances.
policy and legal framework planning.
• Outstanding dues and misuse of connection.
• Violations of rights of electricity consumers.
Administration of the tribunal
• Trespass to private property without The office of the chairperson is charged with
compensation by agents of UMEME. overseeing the daily, ordering and expeditious
• Denial of access to affordable and reliable electricity. discharge of business of the tribunal. The chairperson
is obliged to direct the arrangement of business
• Delay in allotment/release of power connection. before the tribunal, determining places at which
• Reduction/addition in load (power surges). the tribunal may sit generally and determining the
procedure to be followed at a particular place.
• Loss due to voltage fluctuations/power cuts/ The chairperson sets the times and places for
interrupted/inadequate power supply. the hearings of the tribunal while at the same
• Discriminative load-shedding patterns. time observing the need to secure a reasonable
opportunity for litigants and applicants to access
• Restoration of connection. the tribunal with as little inconvenience and expense,
• Complaints regarding refunds. evocative of access to the Tax Appeals Tribunal.
• Reasonableness of service line charges. Quorum of the tribunal is fully constituted with the
presence of three members with the chairperson
• Illegal disconnection. thereof being party to all sittings of the tribunal. In
• Theft or unauthorised load the absence of the chairperson, the vice-chairperson
or unauthorised connection. can be deputised to sit as the chairperson of the

15
 2 Energy issues in Uganda

tribunal. In the conduct of its deliberations, the Appeal. A third and final appeal may be made to
tribunal may seek technical advice and assistance the Supreme Court on matters of law of great public
from persons whose specialised knowledge, importance. In deliberating the appeal, the Supreme
expertise and experience may assist the tribunal Court has all the powers, authority and jurisdiction
in its proceedings. However, any person giving vested under the Electricity Disputes Tribunal.
technical advice shall cease to advise the tribunal
Concerns about the electricity tribunal
if such person is subsequently disqualified from
The conduct of the tribunal does not give satisfaction
appointment, fails to disclose to the tribunal any
to its clients. For example, the tribunal operates from
interest in the electricity sector or in a contract
the premises of the Ministry of Energy which creates
or other matter before the authority or the tribunal
suspicion that it may not be purely independent
or subsequently acquires any interest in the
from influence. The same building houses Uganda
electricity sector. The minister determines
Electricity Distribution Company Limited (UEDCL),
remuneration for the services of technical
always a likely defendant/respondent against the
personnel contracted to advise the tribunal as
tribunal users. This creates a feeling of bias from
may be appropriated by parliament to enable
the already disgruntled petitioners. The officers
the tribunal to perform its functions or from such
of the tribunal are not perceived to dispense justice
grants, donations from sources acceptable by the
in an equally impartial and just manner. In a fair
Minister of Energy and the Minister of Finance.
justice system, there is need to delink the tribunal
Jurisdiction of the tribunal from its parent ministry for it to dispense justice
The tribunal is at liberty to hear and determine without fear or favour; only then will the public
all matters referred to it relating to the electricity respect and trust its decisions.
sector. However such jurisdiction does not include
Although the tribunal was established in 2003,
trial of any criminal offence committed under the
it had handled no single case by the expiry of its
law, or the hearing of any dispute that a licensee
first term of office in 2008. The term has since
and any other party may have agreed to settle in
been renewed, and new officials appointed to fill
accordance with the agreement binding them. In
the gaps left. The tribunal lacks adequate staffing
the exercise of its jurisdiction under the Act, the
and facilities, and its doors remain closed to the
tribunal has all the legal authority of the High Court.
public. The government has made no attempt to
Powers of the tribunal sensitise the general public about the services
The tribunal may on its own volition or upon an offered by the tribunal. The tribunal lacks rules
application by an aggrieved party, review its own of procedure, and so there is urgent need for the
judgments and orders. Judgments and orders of Minister of Energy and Mineral Development to
the tribunal are enforced in the same manner as establish a statutory instrument guiding aggrieved
judgments of the High Court. Persons dissatisfied consumers and stakeholders on the proceedings
with the decisions of the tribunal can within 30 days of the tribunal. Electricity consumers’ grievances
from the pronouncement of the tribunal’s decision concern undue delay in connection, excessive
appeal such decision to the High Court in a similar billing, defective meters, illegal disconnections,
fashion to ordinary appeals from the High Court voltage fluctuations, tariffs, electrocutions and
or with any necessary modifications as the corruption. All this calls for training of the tribunal
Chief Justice may direct. Notably though any officials in electricity jurisprudence, for them to
dissatisfaction with any judgment, finding, ruling dispense justice from an informed perspective.
or order of the tribunal can be challenged only
The location of the tribunal in Kampala further
through an appeal mechanism. In other words,
implies that only electricity consumers in Kampala
the tribunal has no powers to revisit its own
will be able to access it. The cost is likely to be
decision by way of review. If a party is aggrieved
prohibitive for an aggrieved electricity consumer
by the decision of the High Court on appeal, that
to travel from other urban centres or rural areas
party may, within 30 days after the decision of the
to lodge a complaint in Kampala.
High Court, appeal such decision to the Court of
16
 Energy issues in Uganda 2

per kWh, street lighting costs USh364 per kWh,

2.1.5 
Key issues in the power sub-sector while commercial users pay USh358 per kWh.
Medium industrial consumers pay USh333 per
Despite the significant structural reforms kWh, and large industries pay USh185 per kWh.
implemented in the power sector, Uganda faces In Kenya, electricity consumers pay an equivalent
several short- and medium-term challenges in this of USh38 for the first 50 units (kWh). Subsequent
sector, which are affecting growth. Despite the units are categorised into three groups, costing
mandate given to Umeme Ltd in the concession between USh166 and 345 per unit. Electricity
agreement, the company has failed to fulfil the consumers in Tanzania pay an equivalent of only
fundamental terms and conditions therein. The USh52 per unit while in Rwanda consumers are
electricity sector continues to lose power in the charged USh389 per unit. Figure 2.1 shows
grid, and the power tariffs have sky-rocketed from average consumer tariffs in East Africa.
100 Ugandan Shillings (USh) per kilowatt hour
(kWh) at the time of unbundling Uganda Electricity The Electricity Regulatory Authority (ERA)
Board in 1999, to USh385 per kWh in 2011. was established principally to: issue licences
There is insufficient power supply, and electricity for the generation, transmission and distribution
consumers continue to be billed on an exploitative of electricity; establish a tariff structure and
estimation regime with un-tested power meters. investigate tariff charges; develop and enforce
performance standards for the generation,
Uganda has one of the highest electricity tariffs transmission and distribution of electricity; advise
in East Africa, with pricing in four categories: the minister regarding the need for electricity-
domestic, street lighting, commercial and sector projects; and approve standards for the
industrial. Domestic consumers pay USh385 quality of electricity supply services provided.

Figure 2.1
Electricity consumer tariffs in four East African countries, 2011
400
Tariff in Uganda shillings

300

200

100

Uganda Kenya Tanzania Rwanda

Sources 17
Private Sector Foundation Uganda, 2010: Policy Update
 2 Energy issues in Uganda

The ERA has miserably failed in this task, and

Ugandans are left to suffer at the hands of 2.2 Petroleum sub-sector
Umeme Ltd. Further, the ERA has failed to
establish, constitute and operationalise the 2.2.1 
Introduction
Electricity Disputes Tribunal to handle disputes
between aggrieved electricity consumers and Uganda is highly vulnerable to oil price shocks as
the electricity service providers as provided it imports almost all of its 7000 barrels (1100m3)
for under Section 93 of the Electricity Act. of oil per day (2004 figure) from the Kenyan
Summary of key issues refinery in Mombasa, which in turns imports crude
in the power sub-sector oil from abroad (Energy Information Administration,
• Inadequate public financing to develop 2004). In 1995, the governments of Kenya and
electricity supply projects to match growing Uganda agreed to investigate the possibility of
demand. The government prefers to maximise extending the Mombasa–Eldoret pipeline a further
private investment in infrastructure in order to 320km to Kampala. According to the Managing
allocate more resources to the social sector. Director of the Kenya Pipeline Company, the $97
million pipeline would provide 1.2 million cubic
• High subsidy cost of the power sector arising metres in its first year of operation (Olanyo, 2005).
from its inability to service its long-term debt. A bio-code programme was implemented in
• Low quality of electricity 2000, which allows authorities to determine if
supply and customer service. an end user is using officially imported petroleum
products. The government reported a drop in
• High technical and non-technical losses. diluted and adulterated samples taken from gas
• Very low electricity coverage throughout stations from 20 per cent in December 2000 to
the country, especially in rural areas. 1.5 per cent in September 2001 (Gas and Oil, 2002).

• Lack of information on the cumulative Uganda imports all its petroleum-product

environmental and social impacts arising requirements from abroad, since there is no
from cascading power-generating local production. About 85 per cent of Uganda’s
stations along the Nile River. petroleum imports are routed through Kenya,
and 15 per cent through Tanzania. The costs
• Inefficient commercial operations including; of transportation of the products from the
• lack of an accurate customer database seaports (Mombasa and Dar es Salaam) are
high. Because of this problem, government is
• inadequate systems and promoting the extension of the Kenya pipeline
controls for meter reading to Uganda. The possibility of building a 10–12-inch
• high accounts receivable. diameter 1450km pipeline through Tanzania to
Uganda is also being examined.
• High electricity tariffs due to the past very
low or zero investment in power generation One of the most significant problems in the
and distribution, coupled with very low industry is smuggling of petroleum products
operational efficiency. from neighbouring countries. In an effort to
curb smuggling and adulteration of products,
the Ugandan government introduced compulsory
bio-code marking of all officially imported petroleum
products in 2000. Consumption of petroleum in
Uganda currently stands at 550,000m3 per
annum, and is low compared to Kenya and

18
 Energy issues in Uganda 2

Tanzania. Consumption of petroleum grew In July 2007, Heritage Oil and Gas, one of several
at an average of 14 per cent per annum companies prospecting around Lake Albert raised
between 1993 and 1996, then slowed down its estimate for the Kingfisher well (block 3A) in
to about 6 per cent per annum from 1997. Bunyoro, Hoima District, stating that this was
thought to be bigger than 600 million barrels
Petroleum product prices in Uganda were
(95,000,000m3) of crude. Heritage’s partner,
deregulated in 1994. Pump prices are high. Since
London-based Tullow Oil, which had bought
liberalisation was introduced, pump prices have
Hardman Resources, was more guarded, but
risen in nominal terms by nearly 67 per cent
stated their confidence that the Albertine Basin
(though decreased in real terms by between 8.6
as a whole was over one billion barrels. The
and 13.7 per cent). Deregulation has stimulated
Kingfisher-1 well flowed 13,893 barrels (2209m3)
investment in the industry. After liberalisation, the
per day of 30–32 API oil (AFP, 2009). This news
government of Uganda divested its 50 per cent
came just after Tullow’s July 2007 report that the
interest in three oil companies. From 1997, the
Nzizi 2 appraisal well confirmed the presence of
government also opened up the sector to new
14 million cubic feet (400,000m3) per day of
marketing companies. There are 20 licensed
natural gas. Heritage, in a report to its partners,
oil-marketing companies in Uganda, of which 15
talked of Ugandan reserves of 2.4 billion barrels
are in operation. There is no national oil company.
(380,000,000m3) worth $7 billion as the ‘most
However, the government maintains fuel reserves
exciting new play in sub-Saharan Africa in the
at Jinja for strategic purposes. The government is
past decade’. However, development will
offering temporary storage accommodation at its
require a 750-mile (1210km) pipeline to
Jinja Storage Tanks as an incentive to the newly
the coast (Fritsch, 2008).
licensed oil companies, to encourage competition.
Today, Uganda has an estimated reserve capacity
2.2.2 
Oil discoveries in the Albertine Rift of over two billion barrels and a potential flow
rate of up to 350,000 barrels per day (over a 25-year
By the early 2000s, Uganda was seeking domestic period) (AFP, 2009). These statistics place the
petroleum reserves in response to rising oil prices. country in the company of Equatorial Guinea,
In September 2002, Heritage Oil announced the Gabon, and the Republic of Congo (although not in
first exploratory well, in Block 3, located in the the company of Nigeria and Angola — the reigning
Semiliki Valley in western Uganda, in the hopes titans of African oil). The main petroleum company
of confirming seismic studies showing 1.2 billion engaged in drilling in Uganda, Tullow Oil, expects
barrels (190,000,000m3) of oil in the basin (Afrol to begin production within the next two years.
News, 2006). In June 2006, Hardman Resources There are six sedimentary basins in Uganda, of
of Australia discovered oil sands at Waranga 1, which the Albertine Graben is the most highly
Waranga 2 and Mputa. President Yoweri Museveni rated for petroleum exploration. The Graben forms
announced that he expected production of 6000 the northernmost part of the western arm of the
barrels (950m3) to 10,000 barrels (1600m3) East African rift system, stretching from the border
per day by 2009 (Xinhua, 2006). He further with Sudan in the north to Lake Edward in the
announced that a mini-refinery would be set up south, a distance of over 500km. The Graben
to produce diesel, kerosene and heavy fuel oil. averages 45km in width and covers an area of
Prospecting for oil in Uganda’s Albertine Rift more than 22,000km2 in Uganda (Genesis Oil
started in earnest in 2003/04. In 2006, Uganda & Gas Consultants, 2007). Currently, the Graben
made its first commercially viable petroleum is divided into 10 Exploration Areas (EAs), of
discovery. Since 2006, oil companies have drilled which five are licensed (Figure 2.2).
approximately 39 exploratory wells in western
Uganda, only three of which were reportedly
dry (MEMD, 2008).

19
 2 Energy issues in Uganda

The government of Uganda has made efforts Figure 2.2

to attract investment in petroleum exploration Licensing status of oil-exploration areas in Uganda
and production by acquiring geological and
geophysical data in the Graben. The key blocks
licensed to date are EAs 1, 2 and 3A, respectively
in the Pakwach, Northern Lake Albert and
Southern Lake Albert/Semliki Basins. EAs 1
and 3A are jointly licensed to Canada’s Heritage
Oil and UK’s Tullow Oil, with Tullow also holding a
100 per cent interest in Block 2. EA4B (Southern
Lakes Edward-George Basin) is licensed to the
UK’s Dominion Petroleum and EA5 (Rhino Camp
Basin) to another UK-listed small company, Neptune
Petroleum, now known as Tower Resources.
Exploration Area 2 (Northern Lake Albert) was
licensed to Hardman Resources N.L. of Australia
and Energy Africa of South Africa. The Ugandan
government continues to promote the other
unlicensed areas. However, licensing has been
suspended since early 2006 awaiting update
of the country’s regulatory framework for
the upstream petroleum industry.
Since 2006, Heritage and Tullow have undertaken
extensive exploration and made some promising
finds onshore. Despite its significant size, only a
total of about 5522 line kilometres of 2-D seismic
data and 1232km2 of 3-D seismic data have been
acquired in the Albertine Graben to date. In addition,
since 2002, 39 deep wells have been drilled in the
area, the deepest of which, Kingfisher-1, reached a
total depth of 3195m. Most (36) of these wells have
encountered hydrocarbons in multiple reservoir
intervals in the subsurface. This represents a
remarkable drilling success rate of over 92
per cent (Tullow Uganda Operations, 2008).
To date, 16 discoveries of oil and/or gas have
been made in Uganda in excellent-quality reservoir
sands (Figure 2.3). The oil is generally light-to-
medium gravity (API 30 to 330), with low
gas-to-oil ratio and some associated wax.
Eleven wells have been flow-tested and some
have registered cumulative flow rates of over
14,000 barrels of oil per day. The discovered
resources in the Graben are estimated at
over 2 billion barrels of oil equivalent in place.

20 Sources
Ministry of Energy and Mineral Development, 2011
 Energy issues in Uganda 2

Figure 2.3
2.2.3 
Plans for oil production in Uganda Map showing oil and gas exploration
areas in the Albertine Rift, Uganda
While Uganda’s geological potential is promising,
emerging differences between the government
and oil companies over how the oil should be
exploited may represent an obstacle — although
such differences frequently occur at this early
stage of oil development. While Tullow and
Heritage appear to favour a pipeline or other
transport option to export the bulk of the crude
for refining, the government’s preference is first
to address local energy needs, proceeding to
process the oil in-country for export, mainly
for the regional market.
Efforts to agree on a way forward are ongoing,
with Tullow recently announcing that it will service
local demand first, moving towards export planning
only on agreement with the government. In terms
of production levels, Tullow estimates an output of
between 100,000 and 150,000 barrels per day
(bpd) over a possible 25-year production period
(Tullow Uganda Operations, 2008). Tullow inherited
from its predecessor Hardman an agreement with
the government to construct an Early Production
Scheme (EPS), consisting of a 4000–5000bpd
mini-refinery/topping plant using the reserves
identified in the Mputa Field (EA2) for the production
of kerosene, diesel and heavy fuel oil. The heavy
fuel oil was to be used to generate 50–100MW
of electricity to alleviate power shortages in the
country, while the kerosene and diesel produced
are also intended for the domestic market.
In late 2010, Tullow announced that, due to new
finds, the EPS could be expanded to between
10,000 and 20,000bpd over the next few years.
However, by June 20011 plans for the EPS were
publicly shelved by both company and government
officials. According to analysts, the viability of the
original EPS plan was questionable from the start.
While there was little public discussion in Uganda
about the overall cost of the EPS, Tullow stated
that it would cost around US$300 million — and it
was not clear where financial backing was going
to come from. The estimated production costs per
unit of the EPS were also thought to be very high.

Sources 21
Tullow Uganda Operations, 2008
 2 Energy issues in Uganda

In addition, the sites proposed for the EPS, within development of oil fields. They also note that: the
or near a national wildlife park, generated public logistics of the rail option are more complex than
concern due to likely negative environmental and those of a pipeline; rail freighting would involve
social impacts — as well as uncertainty about the health and safety issues; and the cost of upgrading
merits of the EPS plan moving ahead even as further the existing track has not yet been quantified.
discoveries were being made across a wider
The government of Uganda contracted FOSTER
geographic area (Tullow Uganda Operations, 2008).
Wheeler Energy Ltd, a UK-based firm, to carry
Tullow is now suggesting a ‘step-wise’ approach, out a feasibility study on the construction and
to include building a smaller refinery that could development of an oil refinery in Uganda. The
meet domestic energy needs but at lower cost, study will consider the possible size, configuration,
while longer-term options for a larger refinery location, cost, financing options and markets
and/or pipeline are explored. Tullow’s stated for refined products. Tullow has meanwhile also
preference for some time has been that the bulk commissioned analysts Wood Mackenzie to
of the oil be exported via a 1400km pipeline to undertake a study on the strategic feasibility
Kenya, for sale on the international market. The of the refinery option. It is too early to determine
company, for both financial and technical-capacity how the larger refinery project would be financed,
reasons, would seek an equity partner with but cost estimates for a 100,000–150,000bpd
suitable experience for the construction of the refinery start at around US$4–5 billion
export pipeline it plans to bring Uganda’s oil
to the international market. 2.2.4 
Framework for managing
The government, in line with its National Oil and environmental impacts of oil
Gas Policy for Uganda remained committed to the
EPS plan. The national policy of 2008 refers to plans The National Oil and Gas Policy (NOGP)
‘to undertake medium to large-scale refining in the enshrines ‘Protection of the Environment and
country to satisfy national and regional petroleum Conservation of Biodiversity’ as one of its guiding
products requirements in line with the country’s principles. To operationalise this, the NOGP
policy of value addition’ (MEMD, 2008). Perhaps mentions, first, putting in place the right ‘institutional
because of the new finds, other options for meeting and regulatory framework to address environment
both immediate energy demands and longer-term and biodiversity issues relevant to oil and gas
refining needs are being considered. However, the activities’ and, second, ensuring there is ‘the
signs are that the government remains set on refining necessary capacity and facilities to monitor
in-country rather than exporting its crude oil. the impact of oil and gas activities on the
environment and biodiversity’ (MEMD, 2008).
According to analysts, the logistics of building a
pipeline for the required distance, and to deal with The principal agency in Uganda for monitoring
the kind of ‘waxy crude’ found in Uganda, are also environmental impacts and for co-ordination of
not straightforward. Estimates for the cost of the management and protection of the environment
pipeline vary: US$1.5 billion according to Heritage, is the National Environmental Management
and US$3.5 billion according to Tullow. A further Authority (NEMA). For each proposed oil
option for transporting oil to international markets investment, the company in question must
has been proposed by Heritage: via rail to Lake produce an Environmental Impact Assessment
Victoria and then on to Tanzania. Analysts see some (EIA), which NEMA must then make public, giving
considerable advantages to this, in terms of ‘value the affected community and other stakeholders
addition’, in that it would provide the country with the right to respond. In addition, on issues of
valuable transport infrastructure, opening up access national importance such as oil development,
to trade for new areas, and allowing for incremental EIAs can be subject to public hearings.

22
 Energy issues in Uganda 2

Although NEMA is currently still at the scoping

stage in terms of how this consultation process 2.2.5 
Transparency in Uganda’s oil sector to date
will work, and in the identification of stakeholders,
the most worrying issue is NEMA’s capacity to In line with the NOGP, the facilitation of information
manage the likely environmental impacts of the to, consultation of, and participation in planning by
oil industry in Uganda. NEMA largely relies on different stakeholders in all aspects of Uganda’s
comments from other lead agencies, for instance planning and management of its oil resources should
Uganda Wildlife Authority (UWA) in the case of be at the heart of government policy and practice.
protected areas, and in most cases EIAs are not Lack of disclosure on terms of contracts
widely publicised despite being public documents. Despite this emphasis by NOGP, many Ugandans
Concerns have therefore been raised about: are left to wonder why negotiations between
the meaningfulness of public involvement in government and oil companies in Uganda for the
the current EIA process overall; NEMA’s own award of licences on the initial five EAs have been
compliance with EIA procedures and its monitoring carried out in secret, and why the power-sharing
of company operations; and the adequacy of agreements (PSAs) have not yet been made
existing provisions of environmental protection public, nor discussed in or ratified by parliament.
legislation. For example, since the discovery of oil Although the government claims to have shared
in Uganda, only one public hearing took place — in the PSAs with individual Members of Parliament
Hoima in July 2008 over the location of the EPS. (MPs) from the Parliamentary Natural Resources
Committee (NRC) in July 2008, these were not
disseminated more widely even in parliament
(Sunday Monitor, 2008).

Figure 2.4
Uganda’s current position in the petroleum value-chain

Acquisition of Find and prove Start Restoration

concession Commercial hydrocarbons Production of sites

Exploration Field
Pre-bid and Appraisal Development Production Decommisioning

Risk Seismic and Production Production,

Assessment exploration drilling and maintenance and
studies drilling construction transportation
23
 2 Energy issues in Uganda

In new exploration frontiers such as Uganda’s any bonuses being paid. In November 2008, the
Albertine Rift, there may well be an argument in Parliament’s Public Accounts Committee (PAC)
favour of initially conducting closed-door negotiations demanded an investigation, having noted there
over the awarding of licences, given the higher risks had been no accountability offered to date for any
involved and thus the potential difficulties in attracting signature bonuses collected. Given that this issue
industry interest when compared with tried-and- concerns the collection and utilisation of public
tested exploration areas. The government has revenues, it is essential that there is full disclosure
indeed on several occasions cited national security of: (i) the amount of monies received, if any, and
and confidentiality clauses contained in the from whom; (ii) when they were received; and (iii)
PSAs (Uganda Wildlife Society, 2008). There is, their destination. The receipt and use of any sums
however, a growing consensus that international should also be independently audited (Uganda
best practice is for disclosure of contracts — or, Wildlife Society, 2008).
at the very least, of any clauses pertaining to the
Limited information about oil exploration
generation and use of fiscal revenue — and for
activities and production plans
licensing rounds to be conducted in an open and
Several expert sources and observers interviewed
competitive manner, to guard against malpractice.
for this report highlighted the lack of public debate
This practice is in line with the NOGP’s statement about the EPS and larger refinery options. They
that the country should ‘use open and transparent raised the issue of environmental and social
bidding as a basis for licensing and only consider impacts, and also whether in financial terms
other licensing options where necessary’ (MEMD, the EPS or a multi-billion-dollar larger-scale
2008). Without this, it is impossible for ‘stakeholders refinery made sense in light of the NOGP’s stated
to assess how their interests are being affected’ objective of efficient use of oil and gas activities
(MEMD, 2008), as the NOGP promises. Faced ‘to maximize their returns’, and in light of ongoing
with this contradiction between policy and practice, discoveries across the Albertine Rift area.
two Daily Monitor journalists, supported by the
While EIAs produced by oil companies were
Ugandan NGO HURINET, filed a civil suit to
supposed to be shared publicly through NEMA,
compel the government to release details of the
more often than not this did not occur and NGOs
oil contracts to the public under the 2005 Access
had to lobby hard to obtain them, often accessing
to Information Act (Daily Monitor, 2008a).
them too late to analyse and respond adequately.
Limited disclosure of signature In addition, the conditions of approval for EIAs,
bonuses paid by companies which were supposed to be made public, usually
According to the Acting Commissioner of Uganda’s were not, and when they were, contained simply
Petroleum Exploration and Production Department vague and standardised statements rather than
(PEPD), while no signature bonuses were signed detailed comments.
for the first round of licences, bonuses were paid
Other grievances have been noted at the district
on two of the most recent licences, as reserves
level where exploration is taking place, with officials
were by then looking more promising.
complaining about a lack of consultation by central
The most recent licences, according to the NOGP,
government or companies. In Amuru District, for
were awarded to Neptune on 27 September 2005
example, local leaders complain about the secrecy
(EA5 Rhino Camp) and to Dominion on 27
surrounding oil activities by Heritage, and there
July 2007 (EA4B Southern Lakes).
have been all kinds of rumours circulating, many
Despite the PEPD claim that bonuses have been of which, while not necessarily credible, point
made public, none of the civil society organisations to a high level of tension.
and MPs interviewed for this report (nor, surprisingly,
the IMF representative) said they were aware of

24
 Energy issues in Uganda 2

12 December 2010, near Namina village along

2.2.6 
Oil and the fish industry in Uganda Ssezibwa River in Mukono District, many fish were
found floating on the river, dead or struggling for
Fisheries activities provide an important source breath. This was the result of a Kampala- bound
of livelihood for people in the Albertine Graben, train belonging to Rift Valley Railways (RVR) that
and in Uganda as a whole. The Albertine region derailed in the area, spilling 40,000 litres of diesel
contributes 18.7 per cent of the total national fish into the River Ssezibwa. As well as killing fish, this
catch, and 15 per cent is contributed by Lake polluted sources of drinking water and could have
Albert alone (NEMA, 2009). Fish processing has destroyed millions of other aquatic organisms.
become an important activity on the lake, both at Despite complaints to the National Environment
artisanal and industrial scales. At Butiaba landing Management Authority (NEMA), the railway
site, there is a wild-catch fish-processing factory company did not take emergency measures to
processing between 40 and 50 tons of Nile Perch clean out the spilled oil (The New Vision, 2011).
per day and employing a labour force of 150
people. The most important sources of fish in River Ssezibwa originates in Buikwe District
the region are Lake Albert, Lake Edward, Lake crosses Mukono, Kayunga, Luweero and
George and rivers, especially the Albert Nile, Nakasongola Districts before joining Lake Kyoga.
Waki, Wambabya, Semliki and Kazinga Channel. According to NEMA ‘Oil spillage has far-reaching
implications. It will not only affect aquatic life, but
Lake Albert is the richest of the lakes in the region, also poison fish and wild animals. The poison will
in terms of fish biodiversity, having about 53 fish come back to the human population when they eat
species, about 10 of which are endemic, for either fish or the animals’ (The New Vision, 2011).
example Alestes baremose (angara), Hydrocynus It was also noted that in the long run this could
forsnkkahlii (ngasia) and Lates macropthalmus. cause damage to animals and to human immune
Of the endemic species of Lake Albert, Lates systems. The team from NEMA sent to assess
macropthalmus is threatened. In general most the damage confirmed that a large part of the
commercial fish species are under heavy fishing wetland was contaminated by the oil (Figure 2.6).
pressure which could lead to over-exploitation.
Studies conducted in the Albert area have shown
that the Angara Lagoon in the delta and lower 2.2.7  Oil and Uganda’s international relations
floodplain zone of the Hohwa River Valley
supports many species of fish, indicating In what is now being called the largest onshore oil
possible use of the river by upriver migrant or discovery in sub-Saharan Africa in 20 years, and
andromous fish (fish that spawn up-river). as with any new resource discovery involving
some private companies from the former colonial
The currently worrying status of fisheries resources power, questions begin to emerge about Uganda’s
in the region would be greatly exacerbated by oil negotiating power and the implications for regional
spills or pollution resulting from oil-development and international relations. Uganda is now conceived
activities. Deposits of oil block oxygen supply to as a potentially new wealthy oil state, landlocked
the fish, leading to their suffocation, and this has by its neighbours who are watching enviously as
led to some fish migrating to other areas (NEMA, petro dollars promise to double Ugandan state
2009). With fears from oil pollution around Lake revenues. Uganda is also being eyed by other
Albert, some livelihood activities dependent on international actors who wonder how oil might
fishing have been halted to allow oil prospecting shape relations that were once based primarily
to take place. on non-energy trade, the country’s captive labour
There have been cases of pollution of fish arising pool and military training exercises with Ugandans
from poor management of oil. For example, on as a part of a larger strategy to thwart terrorism

25
 2 Energy issues in Uganda

in the Horn of Africa (IEA/OECD, 2007a). the border, proposed that the situation should
be resolved amicably. Uganda needs a stable and
Some Ugandans identify the ongoing employment
secure border in order to attract foreign investment
of Ugandans as private security contractors, trained
for developing the oil reserves, while the cost
and shipped off to Iraq by Western private military
of transporting the oil to the DRC’s sole port
and security companies, as a security advantage
at Matadi is so prohibitive that the Congolese
for Uganda. Their training in Iraq could prove useful
government is nearly obliged to seek pipeline
on the front line of security for Uganda’s new
access through Uganda (The Economist, 2007).
oil infrastructure.
Another interesting dynamic is that: 2.2.9 
Relations between communities
while Uganda’s political risk will increase, western and oil companies
states will have less say in Uganda’s matters. In
the medium term, once oil production starts, Of the companies currently operating in Uganda,
dependence on donor money will fall. However, Tullow has demonstrated the greatest
Uganda will still need significant financing to build seriousness about managing its social and
its oil infrastructure, both physical (refinery, pipeline, environmental footprint in the interests of peace and
railway construction or rehabilitation) and institutional. development. It is perhaps the company with the
But one should expect that there will be support longest-term intentions of operating in Uganda,
forthcoming from non-western partners such as and has a high standing in its country of origin,
China, Iran, India, etc. (The Economist, 2007) Ireland, for its ethical business practices,
including in Uganda. Company representatives
generally seem committed to the idea of
2.2.8 
Oil and the Congo conflict
transparency and openness regarding their own
operations with stakeholders. While Tullow has
In 2007, Uganda and the Democratic Republic of
faced challenges in setting up organisational
the Congo entered into what was perceived as a
structures, systems and capacities to ensure that
conflict arising from oil. This resulted in the deaths
this is achieved in practice, the company is
in August 2007 of a Congolese soldier and a
currently in a phase of learning and adapting, and
Heritage geologist in a clash on Lake Albert (The
seems open to ideas and exchange — with a newly
Economist, 2007). Both the Democratic Republic
expanded team now in place.
of the Congo (DRC) and Uganda moved troops
to the border. This followed the detention by the Tullow reports trying consult as much as possible,
DRC of four Ugandan soldiers it claimed to be on especially with its new block, learning perhaps
their side of the border, and preceded the murder from previous experience. It has Memoranda of
of three Ugandan villagers by an incursion of the Understanding with all the districts to guide its
Democratic Forces for the Liberation of Rwanda, relationships at a local level; it has opened liaison
a Hutu group descended from those responsible offices in both Hoima and Buliisa, and reports
for the 1994 genocide. dealing with 100–300 stakeholders per week
overall. Tullow has also experimented with other
Relations have been tense since the discovery
sources of communication such as media,
of oil, as both countries seek to clarify the border
partnerships with other organisations, and
delineation on the lake in their favour, in particular
publishing information booklets.
the ownership of small Rukwanzi Island. Ugandan
foreign minister Sam Kutesa made an emergency Heritage has a less developed approach to social
visit to Kinshasa in an attempt to smooth tensions. issues, and is only now in the process of recruiting
The Economist magazine, noting that the DRC a staff member to manage its Health, Safety and
has assigned exploration blocks on its side of Environment team which will include ‘corporate

26
 Energy issues in Uganda 2

social responsibility’. Both companies have to date

experimented with small-scale social investment
projects, such as building maternity clinics, supporting
alternative livelihood schemes for fishers, and
financing scholarship schemes for students from
affected areas. The smaller companies, Dominion
and Neptune/Tower also report engaging in
community dialogue, and have each made small
social investments, such as Neptune’s funding of
a public library in Arua. Effects of these advances
being made by companies have perhaps not yet
been felt and deserve to be comprehensively
evaluated in a separate study.
However, despite these advances, the overwhelming
picture presented by the survey reported
here is of inadequate provision of information to
communities by companies, which compounds
the lack of information provided by government.
Further, there are very limited initiatives by
companies to set up dialogue with communities
in order to improve corporate understanding of the
local context and community views. Communities,
districts, sub-counties and traditional leaders alike
highlight the lack of information about access to
employment opportunities or other potential
benefits emanating from company activities,
emerging as a particular source of tension.
The perceived secrecy surrounding oil companies
is creating unwarranted fear and anxiety at the
community level — fertile ground for breeding
rumour and conflict. This is evident in expectations
of compensation from companies for access to
land where exploration or ultimate production may
take place. In the absence of clear communication
strategies from the companies, this is clearly
fuelling speculative land purchasing and tension.

27
 2 Energy issues in Uganda

The lack of effective community communication Community anxiety is increased by rumours about
is generating other tensions such as competition private security forces used by companies, as
among local people for access to employment well as the increase in state security agencies
opportunities, exacerbated by reportedly opaque now found in the oil-rich areas. Some communities
company practices on hiring and firing casual report better communication with the companies
staff. There are perceptions that jobs are being — with at least occasional community-level meetings
offered disproportionately to ‘foreigners’, and being called, and posting of useful information.
some reports of local business people not being Some problems associated with the use of
properly remunerated for their services. There community-level liaison officers were also
are also queries and competition between raised, however, with such individuals reportedly
sub-counties over the inevitably uneven spread exploiting their position for personal gain.
of benefits such as improvements in infrastructure
and service provision occasioned by the companies.

Figure 2.6
An example of Integrated Power Project (IPP) site in Nigeria

28 Sources
Earth Savers Movement
 Energy issues in Uganda 2

2.2.10 
The Integrated Power Project 2.2.11 
Key issues in the petroleum sub-sector

Tullow Oil Uganda has commissioned Jacobsen Upstream industry

Elektro AS (JE) a Norwegian Company with • The limited public resources available
extensive experience in the development, for investment result in:
construction and operation of thermal plants
• ineffective promotional campaigns
to take a stake in thermal plant development under
concession agreement with the Government of • inability to acquire seismic data
Uganda (GOU). Jacobsen Elektro will build, own, in the exploration areas which are
operate, an Integrated Power Project and transfer not yet licensed to oil companies.
the thermal power plant to the Government of
• There is low investment in upstream
Uganda once all the associated debts have been
industry by oil companies.
paid/offset. The thermal power plant together
with a substation and storage tanks is being Downstream industry
constructed on a 300m x 300m area in the • The institutional and legal framework is inadequate
localities of Kabaale Parish, Buseruka Sub-county, to regulate the petroleum supply industry, resulting
which is up on the escarpment. A workers’ camp is in lack of competition and transparency.
also proposed to be constructed within the same
• There is significant smuggling of petroleum
environs. The Thermal Power Plant will generate
products along Uganda’s borders.
53 Megawatts (MW) of power, with the possibility
of expansion to 100 MW. The 11kV power generated • There is low private storage capacity
by the Plant, will be stepped up to 132 kV in a compared to national requirements.
substation located at the Plant. The 132kV power
• Lack of quality control of oil products poses
that is generated will be evacuated via a 132kV
an increasing hazard to public health and the
transmission line to Nkenda in Kasese district
environment.
and Hoima town. The oil-fuel products produced
locally will be transported by road, to the proposed • There are high transport costs and
Thermal Power Plant. A gas pipeline is proposed high margins imposed by oil companies.
to be constructed from Nzizi Gas field to the Plant.
The Plant will be configured to operate on a number
of fuel options, namely: natural gas, crude oil,
heavy fuel oil (HFO) and diesel and a blend
of gaseous and liquid fuel.

29
 2 Energy issues in Uganda

Firewood, charcoal and crop residues provide

2.3 New and renewable almost all the energy used to meet the basic needs
of cooking and water heating in rural and most
sources of energy urban households, institutions and commercial
buildings. Biomass is also the main source of
Uganda is richly endowed with a variety of energy for rural industries. Trading in biomass
renewable energy resources which include energy, especially charcoal, contributes to the
plentiful woody and non-woody biomass, solar, economy in terms of rural incomes, tax revenue
wind, geothermal and hydrological resources and employment. It saves foreign exchange,
(MEMD, 2007). The hydro resources range employs 20,000 people and generates USh36
from large-scale to mini-, micro- and pico-scale. billion (US$20 million) per year in rural incomes.
Presently, with the exception of biomass, only However, fuelwood requirements have contributed
a meagre fraction of the country’s renewable to the degradation of forests, as wood reserves
energy potential is exploited. It is estimated that are depleted rapidly rate in many regions.
renewable sources of energy, excluding large Figure 2.8 shows the current distribution of
hydropower, contribute less than 2 per cent woody biomass throughout Uganda. Charcoal
of Uganda’s total energy consumption. consumption increases at a rate close to that of
the urban population (6 per cent per annum).
2.3.1 Biomass

Over 93 per cent of the energy consumed in

Uganda is obtained from biomass, and mostly
used in households for cooking. Large areas of
valuable ecological resources are being burnt at
the rate of 240 million tonnes per year (NEMA,
2007. The traditional three-stone fire is the main
cooking device, although it is characterised by
very low energy efficiency. Most other traditional
energy technologies (wood and charcoal stoves
and charcoal-production kilns) currently used in
Uganda are also inefficient. Several initiatives to Table 2.6
conserve biomass resources have been undertaken Renewable energy potential in Uganda
by government and the private sector, including
NGOs. These include the promotion of improved SITE DISTRICT
stoves, and afforestation. However, the impact of
these efforts is still limited. One objective of the Hydro 2000
Energy Policy for Uganda is to improve efficiency
in the use of biomass resources, in recognition Mini-hydro 200
that biomass will remain a dominant source
Solar 200
of energy for the foreseeable future.
Biomass 1650

Geothermal 450

Peat 800

Wind …

Total 5300

30 Sources
ERA, 2007
 Energy issues in Uganda 2

Bagasse is the fibrous residue left after juice is The Electricity Regulatory Authority (ERA) has so
extracted from sugar cane, and is burnt in Uganda far issued electricity generation licences to two
to produce electricity and steam (cogeneration). companies to generate electricity using bagasse:
With the escalation of oil prices, biomass-based Kakira Sugar Works (1985) Limited and Sugar
power generation in Uganda is increasingly Corporation of Uganda Limited (SCOUL). Kakira
becoming competitive and considerably cheaper is licensed to generate a total of 18MW, of which
than thermal power based on fossil fuels. The 12MW is for sale to the national grid, while the
need for modern biomass energy has become rest is for its own use. SCOUL in Lugazi is licensed
more tenable due to increased electricity demand, to generate 9.5MW for its own use. More recently,
coupled with unfavourable weather changes that the ERA approved the licence application by
have resulted in decreased water levels in Lake Kinyara Sugar Limited for the generation of
Victoria. Cogeneration is convenient in situations 7.5MW of which 2.5MW will be for its own use
where there are excess agricultural residues such while 5MW will be sold to the national grid.
as bagasse, coffee and rice husks. In the sugar
industry, the amount of bagasse often exceeds
factory requirements, and can be used to generate
electricity for local sale or for feeding into the
national grid. New companies have also entered
generating biomass energy (Box 2.1).

Figure 2.7
Map showing Uganda’s woody biomass

Sources 31
National Biomass Study, 2009
 2 Energy issues in Uganda

makes it possible for both PV consumers and

2.3.2 
Solar power vendors to obtain credit from banks for solar
rural electrification. The application of solar
Uganda is endowed with plenty of sunshine water heating is still very limited.
throughout the year, giving solar radiation (insolation)
of 4–5kWh per square metre per day. This level of The Electricity Regulatory Authority (ERA) has
insolation is quite favourable for all solar technology issued a permit to a company called Solar Energy
applications. Solar energy applications in Uganda for Africa to undertake studies and other activities
include solar photovoltaic (PV), water heating, necessary for development of a 50MW solar thermal
cooling and crop drying. PV systems are generally plant at Namugongo in Wakiso District outside
required for applications where modest power Kampala. Currently, the developer is in the process
needs exist, mainly in areas not served by the of mobilising resources and acquiring all the
national grid. They provide power for lighting, approvals, after which consideration to issue
telecommunications, vaccine and blood refrigeration, a licence will follow.
and radios and televisions in such areas.
This technology has proved very successful in 2.3.3 
Wind energy
providing energy services to very inaccessible
areas, such as on islands and in mountainous Recent studies indicate that the wind speed in
areas, where the national grid cannot be expected to most areas of Uganda is moderate, with average
extend its services in the foreseeable future. The wind speeds in low heights (less than 10m)
government is currently implementing a solar PV ranging from 1.8 metres per second (m/s) to
pilot project through a financing mechanism that about 4m/s. Generally, the average wind speed

Box 2.1
The 40MW Taylor Biomass Energy Project Launched in Uganda

Sesam Energetics 1 LTD a local renewable the companies will invest over US$160 million to
energy company in Uganda , has entered into construct a plant that will recycle almost 1030
collaboration agreement with US Based TAYLOR tons daily of Municipal Solid Waste from Kampala
BIOMASS ENERGY LLC to build own and and the surrounding Wakiso district to generate
operate a Waste to Energy Plant in Kampala renewable clean energy for over 35,000 homes.
Uganda. The project site is located in Lubya The project will provide over 400 jobs and will
Lugala Masanafu along Sentema Road near the save the environment about 3 million tons
Kasubi Tombs. greenhouse gaseous emissions annually and is
expected to create 1100 indirect jobs.
The proposed project will utilize proprietary Taylor
Biomass Energy Technology in an Integrated Taylor Biomass Energy LLC USA the technical
Sorting Separating Recycling and Gasification partner in the business is currently undertaking a
system together with a Combined Cycle Power similar project in Montgomery New York for which
Island to generate 40MW of green electricity. The it has secured loan guarantees from the US
TAYLOR BIOMASS ENERGY UGANDA will government in excess of US$100 million. The
conclude all the project execution instruments company is also expecting cash grants to a tune
including the Power Purchase Agreement with of US$30 million from the US Federal
Uganda Electricity Transmission Company Government. The Taylor Biomass Energy project
(UETCL), and the Municipal Solid Waste in Uganda is the first of its kind in Africa and will
Management Contracts. According to the act as a prototype for similar waste to energy
feasibility studies done by the project promoters, plants in other African Countries.
32
 Energy issues in Uganda 2

in Uganda is about 3m/s. In flatter areas, Electricity Regulatory Authority (ERA) in generating
especially around Lake Victoria and the Karamoja electricity in Uganda using geothermal resources.
region, as well as around the tops of hilly areas,
the speed may go as high as 6m/s and above. 2.3.5 
Peat
The wind data collected by the Meteorology
Department indicate that the wind resource in Peat is not technically a renewable energy source,
Uganda is sufficient for only small-scale electricity as it takes a long time to develop, and is finite.
generation, and for special applications such as However, a theoretical peat volume of about 250
water pumping mainly in the Karamoja region. million oil-equivalent tonnes exists in Uganda.
However, these wind speeds have been recorded Considering the varying quality of the peat, the
at low heights for purposes of predicting weather. rather strict wetland policy in Uganda, and the
No measurements have been made at appropriate impossibility of using conventional peat production
heights (over 10m) for wind turbine design. methods, some 10 per cent could perhaps be
used for power generation. This peat resource
Small industries in rural areas which require volume would be adequate for generation of about
electricity ranging from 2.5kVA to 10kVA could 800MW of electricity for the next 50 years.
benefit from the wind resource. A programme
to this effect is being initiated with assistance The available peat resources in Uganda are mainly
from the African Development Bank and several in the west and southwest of the country. The
private-sector sources. However, no formal Electricity Regulatory Authority (ERA) issued a
expressions of interest have been received permit to Kabale Energy Limited in November
by the Electricity Regulatory Authority (ERA) 2007 to undertake studies necessary for generation
for the generation of electricity from wind. of approximately 33MW of electricity using peat
in Kabale District. Feasibility studies are in
advanced stages.
2.3.4 
Geothermal energy

Geothermal energy is a possible renewable 2.3.6 

Key issues concerning new and
energy source in Uganda, which could supplement renewable sources of energy
other sources of energy. The Ministry of Energy
and Mineral Development (MEMD) is pursuing • Inefficient production and use of biomass
exploratory studies in the East African Great Rift energy in Uganda is having adverse effects
Valley, south of Lake Albert. So far, more than 40 on the environment and the health of biomass
geothermal sites have been studied to assess their energy users, especially in rural households.
temperature, chemistry, natural heat transfer and • There is low public awareness about the
fluid characteristics to identify specific project efficacy and potency of renewable-energy
areas and prioritise those for more detailed technologies. Even if people are aware of these
investigation. technologies, their potential, and technical limits
These investigations have so far revealed three and constraints, are generally underestimated.
major potential areas for detailed exploration: • The markets in equipment and services for
Katwe-Kikorongo, Buranga and Kibiro (Table 2.7). renewable energy are underdeveloped because
These are all situated in or near the Western Rift of high initial investment costs and lack of
Valley of Uganda (the zone of most recent volcanic financial capacity to cover the initial investment.
activity). The combined geothermal potential from
these three major areas is 450MW. Currently, no • There is a distinct public preference for
developer has formally expressed interest to the new and renewable energy sources.

33
 2 Energy issues in Uganda

• Given the lack of mechanisms to monitor

standards and ensure quality control in use
of renewable energy, the poor quality of some
technologies available reduces their lifetime and
damages the image of renewable energy overall.
• There are inadequate financing mechanisms
and other incentives to facilitate investment,
communication, promotion and dissemination
of renewable-energy technologies.
• Inadequate data are available on the potential
of indigenous renewable energy sources in
Uganda, including geothermal, solar, wind,
and mini- and micro-hydro.

Table 2.7
The major geothermal sites in Uganda

SITE DISTRICT TEMPERATURE STATUS

(ºC)

Kasese Katwe-Kikorongo Surface The results obtained from surface

temperature: studies carried out so far indicate a
71°C high potential for development of
geothermal energy.
Inferred reservoir
temperature: Katwe-Kikorongo site has been
150–230°C selected for drilling of a first
geothermal well in Uganda. The site
has a medium- to high-temperature
resource.

Bundibugyo Buranga Surface The results of surface studies so far

temperature: indicate that Nyansimbe and Mumbuga
97°C in Buranga (Sempaya Valley) have the
highest surface heat output among the
Inferred reservoir
thermal prospects considered, and
temperature:
provide a prospect for development of
120–150°C
geothermal energy.

Hoima Kibiro Surface The results obtained from surface

temperature: studies so far indicate that Kibiro site
84°C has moderate surface heat output
among the thermal prospects
Inferred reservoir
considered, and provided sufficient
temperature:
information for development of
200°C and above
geothermal energy.

34 Sources
ERA, 2007
 Energy issues in Uganda 2

2.4 Atomic energy sub- 2.5 Rural electrification

sector Uganda’s electrification rate is very low, with grid
access of only 5 per cent for the whole country and
Atomic energy use in Uganda is limited, and
less than 2 per cent in rural areas. This means that
applied mainly in the agricultural and health
only 200,000 customers are connected to the
sectors. Atomic energy uses must be regulated
national grid, with an estimated annual growth
in order to protect the public and the environment
rate of between 5.5 and 7.5 per cent. Another
from dangers arising out of improper practices
1 per cent of the population provides itself with
and uses of ionising radiation. Atomic energy
electricity using diesel and petrol generators,
matters are regulated in Uganda by the Atomic
car batteries and solar PV systems. The total
Energy Decree No.12 of 1972. The Decree
electricity consumed in Uganda is divided by
established an Atomic Energy Control Board,
sector into: residential (55 per cent), commercial
although the Board was never constituted. The
(24 per cent), industrial (20 per cent), and
absence of an effective legal and institutional
street lighting (1 per cent).
framework for regulating atomic energy matters
has affected operations in the sub-sector and is Recognising the importance of accelerating
likely to affect the flow of technical assistance access to electricity in rural areas, a new Rural
from prospective development partners. Under Electrification Strategy and Plan was adopted
the ongoing Public Service Reform Programme, by Cabinet in February 2001. In terms of network
it is proposed to establish a National Radiation infrastructure development, there is, a total of
Protection Commission (NRPC) under the MEMD. 1115km of 132kV high-voltage transmission
lines and 54km of 66kV lines in Uganda. The
2.4.1 
Key issues in the atomic energy sub- distribution facilities include 3258km of 33kV
sector lines, 3443km of 11kV lines and 6496km of
low-voltage lines. This network provides power
• There is no formal institutional and legislative to only 33 of the 117 districts in the country.
framework for regulating atomic energy activities. The Uganda Electricity Transmission Company
• Budgetary constraints have negatively affected: Limited (UETCL) has export contract obligations
(i) Uganda’s contributions to the International to neighbouring countries as follows: Kenya
Atomic Energy Agency (IAEA), thus lowering (30MW), Tanzania (9MW) and Rwanda (5MW).
the country’s bargaining power; and (ii) However, the 30MW to Kenya is supplied only
co-ordination of activities. during off-peak hours. Further arrangements have
been finalised for Uganda to export firm capacity
• There is a lack of public awareness about of 50MW to Kenya after the commissioning of
the usefulness of nuclear radiation the Bujagali Project. The electricity tariffs, last
techniques in the economy. adjusted along the lines of long-run marginal cost
of supply, were recently reviewed to reflect the
economic cost of supply effective in January
2001. This was done in order to attract private-
sector participation in electricity-supply
operations, but has since led to increased
electricity tariffs for consumers.

35
 3
Legal framework for
the energy sector
The Ugandan legal framework for the energy sector
is compartmentalised, with no general law addressing
issues in the sector overall. This section reviews the
legal framework, and looks at programmes and plans
underway in the legal framework for the energy sector.

3.1 Relevant laws 3.1.4 

Energy Policy for Uganda, September
2002
3.1.1 
The Constitution of the Republic of
Uganda 1995 (As Amended) This policy spells out government’s commitment
to the development and use of renewable energy
The constitution of the Republic of Uganda is the resources for both small- and large-scale
supreme law of the country. According to Article applications. An overall policy goal is to increase
45 of the constitution, electricity is a public good the use of modern renewable energy, from the
and its access and utilisation by Ugandans is a current 4 per cent to 61 per cent of the total
right that should be recognised and protected energy consumption by the year 2017.
at whatever cost. Some key objectives of this policy are to:
• publish a standardised Power Purchase
3.1.2 
Mining Act, 2003 Agreement (PPA) with feed-in-tariffs
determined periodically
This act governs the allocation, and sharing,
of revenue benefits from the energy sector. For • create a renewable energy department
example: according to the Mining Act, 80 per • promote, in collaboration with the National
cent of oil revenue goes to the central government, Forestry Authority (NFA) and Ministry of
17 per cent goes to local governments and 3 per Agriculture, Animal Industry and Fisheries
cent goes to landlords. It defines the respective (MAAIF), the growing of energy crops
roles played by central and local government —
as well as by traditional institutions. • develop appropriate legislation and provide
financial incentives for the production of biofuels.
3.1.3 
Renewable Energy Policy for Uganda,
March 2007 3.1.5 
Electricity Act, 1999

This is a very comprehensive policy document, This act sets the legal basis for the industry’s
setting out government’s policy vision, goals, restructuring, including the establishment of the
principles and objectives for promoting sustainable Electricity Regulatory Authority (ERA). The act is
utilisation of renewable energy in Uganda. The currently in a process of revision, partly to establish a
document includes much detailed information on standardised feed-in-tariff based on the principle
the potential for renewable energy development. of avoided cost pricing, in accordance with the
It also includes a standardised Power Purchase provision of the Electricity Act, 1999. The tariff
Agreement and feed-in tariffs for electricity should be able to translate into cash revenue that
generators below 20MW. will not require the investor to resort to a capital

36
 Legal framework for the energy sector 3

subsidy. The feed-in tariff will be part of the

Standardised PPA. The feed-in tariff will be 3.1.10 
National Oil and Gas Policy for Uganda
structured to differentiate between: peak, shoulder (NOGP), 2008
and off-peak prices, to reflect the higher value of
power in the peak period; and between short-to- In February 2008, Uganda’s Ministry of Energy
medium and long-term prices to reflect the higher published the NOGP, which explicitly recognises
risk of load shedding in the short to medium term. many of the challenges, including the need to
mitigate the potential for negative economic and
fiscal impacts that often stem from a sudden influx
3.1.6 
Electricity Regulations of oil wealth. The NOGP outlines internationally
recognised mechanisms for managing such
By virtue of the Electricity Act, the following impacts and turning the finite resource into
statutory instruments have been issued: sustainable development outcomes
• The Electricity (Installation Permits) The policy also highlights the need for a long-term
Regulations, 2003 national strategy to ensure optimal impacts from
• The Electricity (Licence Fees) oil and gas exploitation by maximising value along
Regulations, 2003 the value chain. The overarching goal of the policy
is that oil and gas development in Uganda will
• The Electricity (Primary Grid Code) ‘contribute to early achievement of poverty
Regulations, 2003 eradication and create lasting value to society’.
• The Electricity (Quality of Service Code) In particular, the NOGP concurs with the
Regulations, 2003 emerging global consensus on the critical
importance of transparency in handling all
• The Electricity (Safety Code) aspects of natural resource management,
Regulations, 2003 with transparency and accountability towards
• The Electricity (Tariff Code) Regulations, 2003 stakeholders enshrined as a guiding principle
in Uganda’s future governance framework.
3.1.7 
Petroleum Act of 1964 Openness and access to information are
fundamental rights in activities that may positively
This act governs the downstream or negatively impact individuals, communities and
industry in the petroleum sub-sector. states. It is important that information that will enable
stakeholders to assess how their interests are being
3.1.8 
The Petroleum (Exploration and affected is disclosed. This policy recognizes the
Production) Act of 1985 important roles different stakeholders have to play
in order to achieve transparency and accountability
This regulates the upstream activities in the oil and gas activities. This policy shall therefore
in the petroleum sub-sector. promote high standards of transparency and
accountability in licensing, procurement,
3.1.9 The Petroleum (Exploration and exploration, development and production
Production) (Conduct of Exploration operations as well as management of revenues
Operations) Regulations of 1993 from oil and gas. The policy will also support
disclosure of payments and revenues from oil
This also regulates the upstream and gas using simple and understood principles
activities in the petroleum sub-sector. in line with accepted national and international
financial reporting standards. (MEMD, 2008)

37
 3 Legal framework for the energy sector

As part of this, the NOGP also recognises in its Company; regulate licensing and provide for safe
closing pages the key role to be played by local and efficient petroleum activities; provide for
governments, civil society organisations (CSOs) refining, transportation, storage and processing
and cultural institutions in promoting the transparency of gas; provide for cession of petroleum activities,
and accountability critical to sustainable oil and payment of royalties and indemnities arising
development through ‘advocacy, mobilisation from exploration activities. The draft bill, intended
and dialogue with communities’. In comparison to operationalise the National Oil and Gas Policy
to other sectors, however, the specific role of of 2008 and repeal the 1985 Petroleum
CSOs is relatively vaguely described. (Exploration and Production) Act, provides
a strong foundation for oil industry oversight.
The NOGP is a very important document and sets
a high standard for the future governance of oil in As it stands, the draft bill has a number of
Uganda. It is, however, more a set of principles gaps that need to be addressed before it
than a detailed governance guide, and is short reaches parliament for debate and enactment.
on specifics such as, for example, the all- Currently, the draft creates a structure for
important question of how revenues will be managing oil-industry regulation and oversight
distributed at a local level, or precisely how civil that, unfortunately, will be both confusing and
society’s role in promoting transparency and ineffective. On one hand, it gives a single minister
accountability will be operationalised at both unchecked power over many aspects of the oil
central and local levels. New legislation industry, including the issuance of licences and
implementing the NOGP across different areas the management of the Petroleum Authority, while
of policy is now eagerly awaited in parliament, neglecting to create formal structures for the
and will help determine many of these issues. involvement of community actors such as local
governments, civil society and cultural institutions.
3.1.11  The Petroleum (Exploration, On the other hand, the draft creates two entirely
Development, Production and Value new government players — the Commissioners
Addition) Bill, 2010 (the Draft, May and the National Oil Company — without providing
2010) any information on their powers or responsibilities
in oil-industry management. The draft should also
In preparation for the future growth of Uganda’s oil emphasise transparency and environmental
industry, the Ministry of Energy and Minerals has protection more strongly than it currently does,
drafted a bill to create structures to regulate and which together will be key to ensuring that oil
manage the oil industry. This draft bill, among production does not harm Uganda.
other things, seeks to: regulate petroleum
exploration, development and production; create
oversight and regulatory roles for the Minister of
Energy and Mineral Development; create a new
Petroleum Authority, and a new National Oil

38
 Legal framework for the energy sector 3

3.2 Programmes and plans 3.2.3 

Concessions Programme, 2001

3.2.1 
Rural Electrification Strategy and Plan, The Ministry of Energy and Mineral Development
2001 has established a programme of awarding
concessions to private developers to generate
This plan was meant to cover the period 2001– and supply electricity direct to consumers. These
2010. It was designed to guide electricity concessions are based on taking over the existing
extension to rural areas, increasing accessibility to isolated generation and distribution facilities
electricity and contributing to rural transformation. and then increasing the number of customers’
connections in line with pre-defined targets. This
will require the concession holders to develop
3.2.2  Energy for Rural Transformation new generation sources to meet the load growth.
(ERT), 2002-2013

The ERT, which is a 10-year programme, integrates 3.2.4 

Cogen for Africa, 2007-2013
rural electrification with the development of
small-scale renewable energy. ERT is managed This initiative is implemented by UNEP/GEF and
by the Ministry of Energy and Mineral Development the African Development Bank (AfDB). It supports
(MEMD) and has attracted US$400 million cogeneration in industries, primarily agro-industries,
in support from the World Bank. The activities by pre-feasibility studies, feasibility studies,
are incorporated into ongoing activities, which assistance to PPA negotiation and mobilising
include the planning of Priority Rural Electrification investment finance.
Projects (PREPs), the, Locally/Community
Initiated Rural Electrification Projects (LIREPs/ 3.2.5 
Rural and Urban Poor Electricity Access
CIREPs) and the extension of grid electricity Programme, 2001
to agricultural enterprises.
This programme will enhance the ongoing
The ERT financial support has two channels: procedures for community schemes, where
project development is supported by the Private the cost of connection to the community is
Sector Foundation for Uganda (PSFU), while subsidised. It will also support the development
investment subsidies are managed by the of independent grids supplied by micro-
Rural Electrification Agency (REA). All projects hydropower and biomass gasifiers to be managed
supported by ERT must comply with environmental by communities in remote settlements. The
and social policies of the government of Uganda programme will prioritise supporting electrification
and of the World Bank. For this purpose, for productive uses and key social services.
the Rural Electrification Agency issued an
‘Environmental and Social Management
Framework’ in 2006, together with a briefer
version (‘A Field Manual’) in January 2007.

39
 3 Legal framework for the energy sector

3.2.6 
Biofuels Programme, 2011
3.3 Observation
This programme will support investments in
The existing legal framework for managing and
production and use of ethanol, biodiesel, methanol
regulating the downstream petroleum industry is
and biogas. Specifically, all dealers in petroleum
out-dated and requires complete upgrading. A
products will be obliged to blend fossil fuels with
review of the legal framework has been undertaken
biofuels up to 20 per cent, as appropriate.
and proposals for a new Petroleum Supply Law
and Regulations have been prepared. Under the
3.2.7  Modern Energy Service Programme, 2011 proposed law, a new licensing and regulatory
regime and an advisory committee of experts will
This programme will involve the promotion be set up, and national safety and environmental
of renewable-energy-based technology for standards will be prepared. This will be harmonised
households, institutions, commercial buildings and with similar standards within the East African
small-scale industries. In particular, these services Community Member States.
will be for cooking, lighting, motive power and ICT.

3.2.8 
Strategic Plan for the Uganda
Power Sector, 1997

This is the strategic plan for the development of

the power sector. Its main mandate is to stimulate
development of the power sector by increasing
generation, accessibility, tariff reduction and
sustainability of the power sector.

3.2.9 
Geothermal Development Plan,
2003-2008

This plan aimed at governing

geothermal projects in Uganda.

40
Legal framework for the energy sector 3

41
 4
Institutional framework
for the energy sector
This section describes all relevant ministries, other government
agencies, local authorities and regulatory authorities required for
issuing licences, permits and approvals for projects generating and
distributing electricity from energy sources in Uganda. In order to
achieve government objectives in the energy sector, a number of
institutions, each with their own legal mandate, are involved.

4.1.3 
Electricity Disputes Tribunal (EDT)
4.1 Public authorities
Part XIII of the Electricity Act, 1999, provides
4.1.1 
Ministry of Energy and Mineral
for the Electricity Disputes Tribunal. This is a
Development (MEMD)
body concerned with the arbitration of cases
in the electricity sector. Any stakeholder, who
The Ministry is responsible for energy policy
may not be satisfied with ERA’s decisions,
formulation, and oversees the operations of the
can appeal to the tribunal.
electric power sub-sector. The Energy Resources
Department has three divisions: Electric Power,
New and Renewable Sources of Energy, and 4.1.4 
Rural Electrification Board (REB)
Energy Efficiency. In consequence of the
Renewable Energy Policy of March 2007, a new This was established in 1998 to manage the Rural
Renewable Energy Department was created. The Electrification Fund (REF). The secretariat of the
mandate of MEMD is to establish, promote the REB is the Rural Electrification Agency (REA).
development, strategically manage and safeguard The REB, as the governing body of REA, provides
the rational and sustainable exploitation and subsides to support rural electrification projects.
utilisation of energy and mineral resources
for social and economic development. 4.1.5 Rural Electrification Agency (REA)

4.1.2 
Electricity Regulatory Authority (ERA) This was established in 2003 to be in charge
of managing rural electrification projects. Its key
The Electricity Regulatory authority (ERA) is a body role is to increase the electricity grid coverage
corporate established in April 2000 by virtue from the present 3 per cent to 10 per cent –
of the Electricity Act, 1999 (Cap. 145), as an originally by 2010. This mandate has been
independent sector regulator. Its budget is renewed for the next seven years.
separate from that of MEMD. Its main function
is to regulate the generation, transmission, 4.1.6 
The Directorate of Water
distribution, sale, export and import of electricity. Development (DWD)
ERA reviews and approves electricity tariffs. ERA
has an elaborated Strategic Plan for 2003–2013. The Directorate of Water Development (DWD)
under the Ministry of Water and Environment is
responsible for managing the water resources of
Uganda in an integrated and sustainable manner
in order to secure and provide water of adequate
quantity and quality for all social and economic

42
 Institutional framework for the energy sector 4

needs for the present and the future. It is the

agency that awards surface-water permits (also 4.1.10  Uganda Investment Authority (UIA)
known as abstraction permits) to project developers.
The Investment Code, which became law in 1991,
established UIA as the autonomous regulatory
4.1.7  The National Environment body to promote and facilitate investments in
Management Authority (NEMA) Uganda. The UIA is a good source of essential
information and free advice relating to investments
This is an autonomous body established by the in Uganda and will advise and assist investors
National Environment Statute, 1995, to be in on how to obtain licences relating to their type
charge of managing natural and environmental of business (e.g. mining, banking, fisheries). It
resources, including the conducting of Environmental is advisable that before any investors begin the
Impact Assessments. NEMA awards certificates investment process they approach the UIA for
of environmental clearance, following review free advice and information. The Authority also
and approval of Environmental Audits (EAs), facilitates investment in Uganda’s energy sector.
Environmental Impact Assessment (EIA) Reports
and Resettlement Action Plans (RAPs).
4.1.11  The Public Procurement and
Disposal of Assets Authority (PPDA)
4.1.8  Ministry of Finance, Planning, and
Economic Development (MoFPED) The Public Procurement and Disposal of Public
Assets Authority (PPDA) is the regulatory body
This is a government ministry in charge of finance, for public procurement and disposal in Uganda.
planning and economic development of the country. It is responsible for drawing guidelines for procurement
It is responsible for mobilisation of resources and disposal of government assets. It was established
and financing government energy projects. through the Public Procurement and Disposal of
Public Assets Act of 2003. The PPDA is responsible
4.1.9 
Uganda Revenues Authority (URA) for guiding the contractual process in Uganda’s
energy sector.
URA is responsible for preferential tax treatment,
tax exemptions, tax holidays, accelerated depreciation 4.1.12 
Uganda National Bureau of Standards
and so on. Uganda’s tax system is divided into (UNBS)
central and local government tax structures. The
principal taxes levied and administered by the This is a regulatory body responsible for enhancing
central government (URA) are Income Tax both development through application of standards in
on individuals and companies, Value Added Tax, trade, industry and consumer protection. It was
Import Duty and Excise Duty. Taxes levied by local established by Act of Parliament of June 1993.
government include Graduated Tax, Ground UNBS is mandated to develop and promote
Rates, and Trading and Operational Licences. standardisation, quality assurance, laboratory
The Authority is responsible for overseeing testing and metrology. In this context, UNBS
taxation related to the energy sector, as well is responsible for development and monitoring
as private investment in the energy sector. standards for renewable-energy technologies,
in addition to biofuels technology.

43
 4 LInstitutional framework for the energy sector

4.2 Parastatals/ 4.2.2 

Uganda Electricity Transmission
Company Ltd (UETCL)
corporations
UETCL was established in 2001, in the process
Until 1999, the Uganda Electricity Board (UEB), of unbundling the previous Uganda Electricity
the national utility company, enjoyed the monopoly Board. UETCL is publicly owned, but operates
on the power sub-sector, which covers electricity as an independent and profit-making business
generation, transmission and distribution including unit. The key roles are:
rural electrification. This monopoly was terminated
through the enactment of the Electricity Act, 1999, • owner, investor and operator of transmission
which created the Electricity Regulatory Authority power lines above 3kV in the country
(ERA) and liberalised the sector. Consequent to • system operator
the Electricity Act, 1999, Uganda Electricity Board
(UEB) was unbundled to create different business • single buyer for grid-connected generation,
entities for generation, transmission and distribution which is sold on to distributors
known as Uganda Electricity Generation Company • exporter to neighbouring countries
Limited (UEGCL), Uganda Electricity Transmission
Company Limited (UETCL) and Uganda • power-expansion planner.
Electricity Distribution Company Limited
(UEDCL), respectively (MEMD, 2002). 4.2.3 
Uganda Electricity Distribution
Company Ltd (UEDCL)
4.2.1 
Uganda Electricity Generation
Company Ltd (UEGCL) UEDCL owns the distribution infrastructure
operating at 33kV and below. It is responsible
This is a generation company owning the two for the retail of electricity including metering and
generating power stations at Jinja – Nalubale and billing of consumers. UEDCL buys bulk power
Kiira power stations. In November 2002, the UEGCL from UETCL in accordance with terms set in a
was privatised through a long-term concession Power Purchase Agreement. UEDCL has granted
of 20 years with ESKOM Enterprises (U) Ltd. a concession (2005–2024) to Umeme (a venture
by Eskom and Globeleq) to manage and operate
the national distribution grid.

44
 Institutional framework for the energy sector 4

4.2.4 
Uganda Energy Capitalization Trust 4.3.3 
Uganda Consumer Protection
(UECT) Association (UCPA)

This includes a Credit Support Facility (CSF), a This is a non-governmental organisation concerned
public trust entity, to facilitate rural electrification with the interests of consumers in general. It
and renewable-energy investments. Participating carries out opinion surveys on tariff increases and
financial institutions include commercial banks, protects consumers against undue increases.
development banks and microfinance institutions.
4.3.4 
Civil society
4.2.5 
Bank of Uganda (BoU)
There are a number of civil society organisations
The Bank’s Refinance Facility and the above- and coalitions working in the energy sector.
mentioned CSF are the two existing financial Some of the lead organisations include:
instruments to hedge private investors’ long-term Pro-biodiversity Conservationists in Uganda
borrowing from local financial institutions. The (PROBICOU), Africa Institute for Energy
detailed operational modalities of these instruments Governance (AFIEGO), National Association
can be accessed from the various legal documents of Professional Environmentalists (NAPE), Water
that established them. The Bank is responsible for Governance Institute (WGI), Earth Savers
financing government energy-development projects. Movement–Uganda, WWF Uganda, Advocates
Coalition for Development and Environment
(ACODE), and Civil Society Coalition on Oil
4.3 Technical and other (CSCO). The civil society organisations are
services instrumental in conducting research and
dissemination of findings on energy-related
4.3.1 
Private Sector Foundation needs and issues, carrying out awareness raising
of Uganda (PSFU) as well as advocating for better legislation on
energy production and governance. Ugandan
This is a private-sector group concerned with the civil society is also instrumental in demanding
development of the private sector in facilitating transparency and accountability of government
and financing private development programmes. energy-development programmes.
PSFU is managing support to project development
(pre-feasibility and feasibility studies) financed by ERT.

4.3.2 
Makerere University, Kampala (MUK)

Makerere University has introduced a number

of training courses focusing on the petroleum
industry. It has introduced a Bachelor of Science
(BSc) degree course in Petroleum Geoscience
to complement artisan and technical training
at the Uganda Petroleum Institute, Kigumba.

45
 5
Broader issues and
recommendations
This section describes broader issues in Uganda’s
energy sector. It presents a summary of issues
covering generation, distribution and supply,
as well as costing and financing. The final sub-
section consists of six recommendations.

5.1 Power shortages 5.1.2 

Improving power transmission
and distribution
The lack of adequate and reliable power is consistently
cited in private-sector surveys as being among In March 2005, Umeme, the private concessionaire,
the top five constraints on Uganda’s economic took over the operations of the distribution system
growth. The quality, availability and reliability of under a concession agreement that includes
electricity services have been major impediments financial incentives to increase the number of
to sustained investment and growth. To mitigate connections, reduce technical and non-technical
the power shortages, the government has taken losses, and increase the collection rate. At the
action on three fronts as detailed below: augmenting time of Umeme’s takeover, system technical and
supply, improving transmission and distribution, non-technical losses were around 38 per cent
and reducing demand. (or 43 per cent including 5 per cent transmission
losses through UETCL’s transmission network).
5.1.1 
Augmenting supply The billing/collection ratio was 80 per cent,
implying that, prior to the Umeme concession,
The Ugandan government has taken three main only about 47 per cent of the energy sent out to
steps to increase thermal power generation. the national grid was paid for. Since March 2005,
Umeme has improved the collection rate from 80
1 In May 2005, an initial 50MW power station to 92 per cent (although the rate dropped again
was installed at Lugogo, on an Independent to 82 per cent in December 2006, after the June
Power Producer (IPP) basis. The average load and November tariff increases). Umeme has also
factor for the Lugogo thermal station was decreased technical and non-technical losses to
subsequently increased from 75 to 90 per cent. about 34 per cent, and connected about 36,000
The plant is now also running on a 24-hour new customers. During the first 22 months of the
basis. These measures added an additional concession, Umeme invested US$13.6 million in
10MW of firm capacity. system improvements, and had committed to
2 An additional 50MW of thermal capacity was invest a total of US$65 million during the first
added at Kiira in November 2006, for a current five years of the concession.
total of 100MW thermal power capacities.
3 The GOU also has procured a 50MW thermal
plant on a build–operate–transfer (BOT) basis,
which is expected to operate for 15 years.

46
 Broader issues and recommendations 5

expansion of the industrial and commercial sectors.

5.1.3 Reducing demand Second, fully cost-reflective tariffs would seriously
hinder or even stop completely Umeme’s ability to
Demand-side management and improving energy expand its customer base as unsubsidised tariffs
efficiency can help to reduce the supply–demand would be unaffordable for a majority of potential
gap by reducing demand. MEMD already has new residential and non-residential customers.
a programme to distribute, on a grant basis,
800,000 energy-efficient light bulbs. This will However, it is thought that the government subsidies
not only help poorer households to cope with the should be needed only until the next least-cost
higher tariffs but also reduce the overall demand hydropower generation facility comes on stream.
for electricity during peak hours. This measure The much cheaper generation costs of the
would result in energy savings of about 10MW World-Bank-supported Bujagali hydropower
on average and 40MW during peak hours. project should help eliminate GOU subsidies
to the sector in the medium term.

5.2 Energy-sector finances

5.3 Longer-term generation
The advantage of the short-term thermal plants expansion
is that power is available quickly on a stop-gap
basis. The disadvantage is that this power The current crisis in the power sector stems from
currently costs US$0.22–0.24/kWh, which a shortage of electricity supply due to the lack of
is more than twice the cost of hydropower. This least-cost generation facilities. In the long term,
is the main factor that has unsettled the sector’s a more sustainable and least-cost expansion
cost structure and finances. Further, the shortage of generation capacities in Uganda is needed.
of power has affected Umeme’s financial viability, Part of this expansion is to be met with the
as it has fewer units available that can be used to completion of the construction of a 250MW
recover fixed costs. The regulator has raised hydropower plant at Bujagali Falls.
end-user power-sector retail tariffs by a cumulative
94 per cent, to US$0.172/kWh. These tariffs The traditional approach of governments to
are high by regional and international standards, monopolistic electricity provision emphasised
but they still do not cover the full costs security of supply and sufficient capacity to cover
of power purchased by UETCL. demand at all times. However, it is also true that
governments have historically made little effort to
The government has provided funds to UETCL to improve electricity access, particularly for the poor.
cover the shortfall, although not fully. Further, the National energy policies instead focused on
government has renegotiated its agreement with modern economic sectors (industry, transport,
Umeme to address financial issues arising from and urban infrastructure) to the neglect of rural
the power crisis. Despite the fact that only 5 per development. Development institutions such as
cent of Uganda’s population has access to electricity, the World Bank and International Monetary Fund
and that only a very low level of power consumption (IMF), as well as the African Development Bank,
is attributed to the poor, the government justifies therefore, sought to provide financial and technical
the proposed temporary subsidies to the assistance to facilitate electricity-sector reforms
electricity tariffs two main reasons: the cost with the cardinal objective of improving electricity
of doing business, and access to electricity. access for disadvantaged social groups.
First, the current fully cost-reflective end-user tariff Unfortunately, upon liberalisation, this was
would have to be around US$0.26/kWh. Such a effectively dropped by developing countries
tariff level would have negative implications on the in favour of improving energy-sector
opening of new businesses and thereby on the efficiency, which at the time was lacking.

47
 5 Broader issues and recommendations

5.4 Summary of broad 5.5 Recommendations

issues in the power 5.5.1 
Reviewing and addressing the
sub-sector in Uganda outstanding issues

1 Government institutions lack the capacity to A number of complaints have been continuously
plan for and monitor the sector and carry out raised challenging current practices in Uganda’s
appropriate research and development (R&D) electricity sub-sector. Such complaints include:
because of: sub-standard meters, high electricity tariffs, and
• understaffing in key areas poor belling regimes based on estimation. It
is therefore recommended that government
• budgetary constraints scrutinises the electricity meters installed by
• lack of appropriate curricula in energy Umeme Ltd at the premises of the electricity
studies at institutions of higher learning. consumers in Uganda. These meters should be
recalled, tested and certified by the Uganda
2 There is inefficient supply and use of energy National Bureau of Standards (UNBS) before
resources due to the neglect of the sector they are re-installed. The government should
during the Uganda’s years of economic continue to build the capacity of UNBS so that
and political turmoil. it can test and continuously monitor electricity
3 There is inadequate co-ordination and equipment. In this case, all electricity meters
information sharing among the various projects, should be certified by UNBS before they are
government institutions and the private sector. supplied to electricity consumers in Uganda.

4 There is inadequate information on The responsible energy-governance institutions

energy supply and demand, as well should ensure that electricity consumers are billed
as on the country’s resource potential. directly and accurately, as opposed to billing by
estimations. The government should enable and
5 Appropriate mechanisms are lacking to increase access to information. Electricity consumers
enable modern and efficient energy services in Uganda should be given a chance to have
to be accessed by the rural population. access to the Concession Agreements as well as
other relevant information in the power sector. The
government of Uganda should work towards reducing
electricity tariffs from USh385.60 to USh100 for
all domestic electricity consumers in Uganda.
The ERA should immediately establish, constitute
and operationalise the Electricity Disputes Tribunal
as provided for under Section 93 of the Electricity
Act, to handle grievances from electricity consumers.
As a means of expediting this process, the ERA
has already come up with a consultative paper
on ‘Electricity disputes resolution (in respect of
electricity consumers, licensees, land acquisition
and royalties)’ from which guidelines on how to
handle electricity- related disputes should be
developed. This could signify the genesis of

48
 Broader issues and recommendations 5

the establishment of ‘The electricity disputes stabilisation fund, is also important, along with
resolution committee (DRC)’ as a special ‘rule-based’ and transparent criteria for sharing
dispute-resolution platform of first instance benefits between central and local government.
where electricity consumers can lodge their
As the World Bank’s Extractive
grievances against licensees concerning billing,
Industries Value Chain notes:
technical faults, wrongful disconnection, delayed
connection, way leaves and refusal to provide to avoid wasteful expenditure and/or the resource
information. It is recommended that those aggrieved curse, in Uganda, special ‘oil and mineral funds’
with the decision of the Disputes Resolution should be created in Uganda. The purpose of such
Committee could then appeal such a decision funds can be to smooth expenditures over time or
before the Electricity Disputes Tribunal. to save revenues ‘for a rainy day’, to combat the
negative impacts of price volatility; to set money
It is important that district dispute committees,
aside for future generations; and as an emergencies
as a modification of Sections 13 and 119 of the
fund to be drawn on in case of extraordinary events
Electricity Act, be established to handle emerging
such as natural disasters. (World Bank, 2009)
disputes at district level, with a right of appeal
from there to the Electricity Disputes Tribunal. There should be consensus on how these funds
The Electricity Regulatory Authority now seems should be managed. First, the government should
willing to engage the public in debating policy institute transparent oversight procedures, including
and the existing legal framework for the good independent audits, preferably enshrined in
of Ugandans. This, once done, will help all a legal framework. Second, the funds should
electricity consumers to be able to access be integrated within the state’s overall fiscal
justice and a platform through which their management — that is, good fiscal discipline
interests and rights can be promoted. should be maintained. Finally, the government
should have prudent asset-management guidelines.
5.5.2 
Improving revenue management
5.5.3 
Awarding contracts and licences
A key recommendation from international best
practice is that all revenue streams and transactions Lessons on best practice from developed
in the energy sector should be clearly traceable countries indicate a need for a proper legal,
and accounted for in the state budget. They should contractual and institutional framework to regulate
also be independently audited, and there should access to natural resources by investors. Ideally
be regular public disclosure of revenues, along this should separate commercial activities from
the lines of initiatives such as the Extractive the state regulatory function such that any national
Industries Transparency Initiative. oil company involved in exploration, production
and marketing of oil should be distinct from those
For example, in the oil sub-sector, once collected,
bodies performing regulatory functions, such
revenues should be managed in the context
as the energy ministry and petroleum agency.
of an overarching macro-fiscal framework that
recognises both the volatility of oil prices and that For example, the risks inherent in not separating
oil is a non-renewable resource, and links revenue the commercial functions can be seen in the case
management to national budget processes. of Angola’s national oil company, Sonangol. Sonangol
The importance of transparent decision-making is not only the sector regulator responsible for
on the use of revenues — whether for current monitoring the operations of other companies
spending, expenditure smoothing, or saving for (including setting the terms for licensing rounds),
future generations — and of good governance it also acts as a fiscal agent for the government
criteria in the management of any saving or (collecting taxes, royalties and profit oil, and

49
 5 Broader issues and recommendations

making expenditures) and takes part in upstream In addition, the government of Uganda should
activities of exploration and production itself. The develop accurate information on the energy sector
opacity of Sonangol’s finances and the ‘twin-track’ by setting up a national data bank. This is key
financing system that has resulted from this to improving transparency, certainty of rights,
confusion of roles is well known. knowledge of the resource base, and the quality
and reliability of government revenue estimates.
In addition, although there is no ‘model’ bidding
Norway, for instance, has a ‘petroleum register’
system of strategy that governments can adopt,
to hold all the data collected by companies for
licensing rounds should ideally be open, competitive
the use of both private and state agencies.
and transparent, and bidders should be suitably
qualified in terms of technical expertise and financial Finally, the most successful examples of
capability to carry out exploration and production environmental and social impact mitigation
activities. Many countries pre-select or pre-qualify and monitoring involve early consultation and
bidders in order to ensure in advance that they are participatory monitoring practices at the local
competent. Again, it is essential that this is done in community level. The Ugandan government
a genuinely transparent manner, to prevent abuse. and oil companies should scale up the level
of community involvement and consultations
While there is no ‘one-size-fits-all’ model for contracts,
in oil-related activities.
setting some bidding parameters in advance (for
instance, royalty or other tax and revenue rates,
and the work programme to be carried out) usually 5.5.5  Design and implementation
reduces the government’s and investors’ transaction of sustainable energy policies
costs. Deciding the specific fiscal regime set by
the contractual terms will also depend on variable If economic prosperity is to be achieved and
factors, such as market conditions, government sustained, and living standards for the majority
policy, and geological and country risks. However, of Ugandans improved, a paradigm shift in policy
one underlying principle is that, whatever the fiscal and planning for energy supply and consumption
regime, it should be ‘progressive’. That is, the is necessary. A sustainable energy policy is one
percentage due to the government on the basis that integrates economic, social and environmental
of tax and other payments increases as the objectives in a way that improves the well-being
revenue basis increases, so the government’s of the current generation while safeguarding
share of the profits increases as the investors’ the welfare of future generations.
costs of exploration and production are reduced. Uganda’s energy policies must also seek compatibility
with global and regional energy policies. Therefore,
5.5.4  Regulation and monitoring of operations government needs to create an energy-policy
environment that attracts investments, while
State bodies charged with monitoring the operations ensuring the achievement of overall national
of energy and oil companies include, for instance, policy objectives. Policy in Uganda must also
the Ministry of Energy and Mineral Development, contribute to the NEPAD initiative by supporting
the Petroleum Exploration and Production faster development of Uganda’s hydropower
Department, and the National Environmental resources through private-sector investments,
Management Agency. These authorities must development of interconnections, cross-border
have clearly defined roles and responsibilities, infrastructure to facilitate energy trade, and
plus sufficient technical capacity to carry out their sharing of information on petroleum resources
roles and co-ordinate their actions effectively. and exploration and the development and use
of new renewable-energy resources.

50
 Broader issues and recommendations 5

Government must recognise the role that improving

energy supply can play in rural areas in contribution
to poverty reduction. Energy for rural areas needs
to be brought into the realm of national energy planning.

5.5.6 
Increasing stakeholder
involvement in the energy sector

Government should continue to involve all

stakeholders in energy issues. The capacity and
independence of government agencies critical to
successful management and improved transparency
in the energy sector should be strengthened.
These agencies should include the National
Environmental Management Agency (NEMA),
the Petroleum, Exploration and Production
Department (PEPD), and the Ministry of Energy
and Mineral Development (including through
creation of a functioning information officer and a
petroleum database), and local government officials.
These government agencies should develop a
strategy to work with other stakeholders such as
civil society organisations, international development
partners, local government structures, the media
and local people. The capacity of parliamentarians,
civil society and the media should also be
strengthened. Government should implement
initiatives and companies to ensure wide public
consultation on specific issues that arise, such
as the current oil-production feasibility studies,
any new licences, and upcoming Environmental
Impact Assessments (EIAs). Oil companies
should pay particular attention to working relations
and interactions in their local areas of operation.

51
  
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54
Uganda has abundant energy resources, The International Institute for Environment and
especially renewable resources, yet there Development is an independent policy research
is widespread energy poverty throughout organisation. IIED works with partners in middle-
the country. The country’s energy sector and low-income countries to tackle key global
faces considerable challenges including high issues – climate change, urbanisation, the
costs for renewable energy technologies, rising pressures on natural resources and the forces
international oil prices and an increased demand shaping markets. IIED’s work on energy aims to
for power. The report explores key issues in each address poverty and energy security issues by
of the sub-sectors, the potential for renewable supporting access to sustainable, affordable
energies, and gives an overview of the legal and energy services for the poorest, as well as
institutional frameworks for the sector. promoting responsible practice in larger-scale
energy services for the poorest, as well as
Despite the achievements of the Ugandan
promoting responsible practice in larger-scale
government in reforming the energy industry
energy sector development, including biofuels,
since 1997, the sector needs significant investment.
oil and gas, and stimulating debate around
The government faces the challenge of expanding
energy policy reform.
access to affordable, reliable and adequate
energy supplies to address poverty issues.
Energy supply is unequally distributed across the
country and the provision of electricity has been
limited to mainly urban and semi-urban areas.
The report recommends better monitoring and
regulation of operations, improved regulation
of access to natural resources by investors, and
increased stakeholder involvement in the energy
sector. It calls for the government to recognise
the role that improved energy supply can play
in poverty reduction by designing sustainable
energy policies.

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