IBRAHIM E. KASITA: From Darkness to Surplus: A 40-Year Journey of Uganda’s Electricity Pricing (1986–2026)

2026-03-18 - 08:35

In 1986, as the National Resistance Movement (NRM) government took the reins of a war-weary Uganda, the nation’s electricity grid was more a memory than a utility. With an installed capacity of 150 megawatts (MW) at the Owen Falls Dam—of which only 60MW was actually functional—and an access rate of less than 2%, electricity was a luxury for the elite. Fast-forward to the first quarter of 2026, and the landscape is unrecognizable. Uganda now boasts a generation capacity exceeding 2,000MW, a grid access rate of over 60%, and a dynamic tariff structure that targets everything from “lifeline” social equity to industrial competitiveness. The journey from 1986 to 2026 is not merely a story of poles and wires; it is a four-decade analytical map of shifting economic ideologies—from state monopoly to aggressive privatization, and finally to the modern “hybrid” model of state and private cooperation. A ground transformer in Tororo, near the Simba Cement Factory. Uganda’s continued investment in the distribution grid has significantly contributed to increased stability and reliability of electricity in Uganda. The UEB Era (1986–1999): The Illusion of Cheap Power For the first 13 years of the NRM government, the Uganda Electricity Board (UEB) operated as a vertically integrated monopoly. It generated, transmitted, and distributed power. During this era, pricing was largely a political tool rather than an economic one. Tariffs were heavily subsidized, but the “low price” was an illusion. By 1993, the tariff stood at an average of 7.3 US cents per kWh (a unit of electricity), but the system was collapsing. Revenue collection was as low as 50%, and distribution losses were staggering, often exceeding 40%. Because the government could not afford to maintain the infrastructure, “load shedding” became a national anthem. Power was “cheap” on paper but unavailable in practice. The government, working with development partners, eventually stepped in, arguing that the only way to save the sector was through “cost-reflective” pricing and private-sector efficiency. The Great Unbundling (1999–2005): Shock Therapy The passage of the 1999 Electricity Act was the seismic shift that defined the next 20 years. UEB was unbundled into three entities: Uganda Electricity Generation Company Limited (UEGCL – responsible for generation), Uganda Electricity Transmission Company Limited (UETCL – responsible for transmission), and Uganda Electricity Distribution Company Limited (UEDCL – responsible for distribution). This period saw “shock therapy” in pricing. Between 1999 and 2002, electricity tariffs nearly doubled in shilling terms as the government moved to satisfy donor requirements for a self-sustaining sector. The establishment of the Electricity Regulatory Authority (ERA) in 2000 ushered in an arm’s-length independent regulator—one of the key pillars in fostering cost reflectivity and attracting much-needed private capital. The Concessionaire Model Era (2003–2024): Growth at a Cost In 2003 and 2005, the government handed over the generation and distribution networks to Eskom Uganda Limited and Umeme Limited, respectively, under 20-year concessions. This era was defined by a paradox: massive expansion coupled with public outcry over high costs. Eskom was tasked with efficiently running, at the time, the largest power generation facility in the country, while Umeme had the more uphill task of revamping and expanding the distribution network. Umeme succeeded in growing the customer base from 280,000 in 2005 to over 2.3 million by 2024. However, the early years of the concession were brutal for consumers. In 2005, prices jumped by 24%, followed by twin hikes of 35% and 41% in 2006. These increases were driven by a supply crisis—a drought in Lake Victoria reduced hydro output, forcing the government to rely on expensive emergency thermal (diesel) generation. By 2012, when the Bujagali Hydropower Plant was commissioned, Uganda achieved “cost-reflective” status. But this meant domestic consumers were paying some of the highest rates, often exceeding 18 US cents per unit. The narrative of “expensive power” became the primary political grievance of the 2010s. The 2025 Pivot: The Second-Generation Reforms In April 2025, the 20-year Umeme concession expired, and the government, through UEDCL, took back the national grid. This transition was driven by a desire to lower the return-on-investment costs required by private players, thereby creating room for tariff reductions. The commissioning of the 600MW Karuma Hydropower Plant in late 2024 provided an even cheaper source of electricity generation, which is expected to translate into lower end-user prices as consumption increases. For the first time in 40 years, the government had more power than the market could consume—shifting the focus from rationing electricity to marketing it. 2026: A Sophisticated Social and Industrial Balance As we stand in the first quarter of 2026, the ERA tariff schedule reflects a mature, multi-tiered strategy that would have been unthinkable in 1986. 1. The Industrial Engine (The 5-Cent Dream): The flagship policy of 2026 is the 5 US cent tariff for extra-large manufacturers. Currently, the average rate for extra-large industrial consumers is UGX 203.6 per kWh (approximately 5.6 US cents). During off-peak hours (midnight to 6:00 a.m.), this drops to UGX 184.6 (5 US cents). This is a strategic move to turn Uganda into a regional manufacturing hub, shifting the burden of sector costs away from factories to stimulate job creation. 2. The Social Lifeline: For the “bottom of the pyramid,” the 2026 tariff maintains a “lifeline” rate of UGX 250 for the first 15 units. This ensures that even as the standard domestic rate sits at UGX 756.2, the poorest households can afford basic electricity use. 3. The Cooking Transition: To save Uganda’s disappearing forests, the 2026 schedule includes a “cooking tariff” of UGX 412 per unit for domestic users who consume between 81 and 150 units. This is a direct attempt to shift households from charcoal to electricity for cooking. The Analytical Verdict: Was the Journey Worth It? Comparing 1986 to 2026 requires looking beyond the numbers to the underlying mechanics. Currency Vulnerability: In 1986, the shilling was in freefall. Today, while it has depreciated significantly over 40 years, the 2026 tariff is stabilized by a stronger-than-expected exchange rate (averaging UGX 3,624 to the dollar). Losses: Distribution losses have dropped from over 40% in 1988 to roughly 18% in 2026. These efficiency gains are what allow for the current lower tariffs. Knowledge Transfer: Unbundling UEB enabled knowledge transfer by creating specialized entities (UEGCL, UETCL, UEDCL), attracting private-sector expertise, fostering institutional capacity, and developing local skills through training, research, and benchmarking best practices. This transformed a struggling monopoly into a modern electricity sector with improved service delivery and increased generation capacity. Conclusion Uganda’s electricity pricing history from 1986 to 2026 mirrors the country’s broader economic evolution. The sector has moved from a broken state monopoly to a high-cost private regime, and now to a state-led “surplus” era. While the 2026 tariffs are among the most competitive the country has seen in decades—particularly for industry—the challenge for the next ten years will be reliability. As the grid now powers over 2.5 million customers, the focus is shifting from “how much does it cost?” to “can we keep it on?” After 40 years, the lights are finally on—and for the first time, the price is beginning to make sense. The author serves at the Electricity Regulatory Authority.