Officials at Electricity Regulatory Authority (ERA), Uganda’s power sector supervisor, have explained the newly announced domestic tariff aimed at reducing the use of charcoal for cooking in homes across the country.
As we reported last week, Ruth Nankabirwa, the Minister of Energy and Mineral Development, and officials from power regulator Electricity Regulatory Authority (ERA) led by Board Chairperson Dr Sarah Wasagali Kanabi and CEO Eng Ziria Tibalwa Waako announced changes in the Electricity Tariff structure for customers served by Umeme Limited, effective January 2022.
Michael Mwondha, Electricity Regulatory Authority Senior Economist.
Now, pricing experts have explained how the cooking tariff was arrived at and how it will work. According to Vianney Mutyaba, the Manager in charge of pricing at ERA, through the new tariff structure, the regulator seeks to speak to affordability since some consumers had continued to use charcoal because electricity was not affordable to them. ERA was also aware of the need to promote environmental protection, and encourage the use of renewable energy. The Authority was also aiming at ensuring the sustainability of the electricity supply sector as well as increasing the demand of electricity since Uganda’s Government and private sector players have invested a lot in power generation and there is now need for initiatives that will increase consumption.
Mutyaba says that the new tariff figures are “scientifically derived based on research.” Under the new structure, the first 80 units will be charged under the normal tariff structure, which is Shs747.5 each; the next 70 (meaning from between 81 and 150) will form the cooking tariff and will be charged Shs412 each; while consumption above 150 units will be under the normal tariff of Shs747.5 each.
Vianney Mutyaba, Manager Pricing
On why ERA resolved to charge the first 80 units under the normal tariff structure, Mutyaba explained that the regulator conducted a review and study of customers on the grid and what they use the electricity for. In the study, he noted, a typical Ugandan middle income household was selected. These households use electricity for lighting, ironing, washing, and watching TV, among others. For a typical household, ERA found out that the wattage would be 80 units every month.
“The only thing that can push you into increased consumption is cooking,” explained Mutyaba. “Even if we reduced the tariff to Shs1, it’s not that you are going to watch TV more or leave security lights on during the day because the tariff is low.”
Regarding the cooking tariff (Shs412 per unit) and why the incentive was capped at the units between 81 and 150, ERA looked at what meals a typical household cooks, how often and how long these are prepared. The regulator also put the wattage of cooking appliances such as cookers into consideration.
“We also did a study comparing the price of charcoal and the cost of electricity. We know that a bag of charcoal is between Shs60,000 and Shs80,000; and then how long does a bag of charcoal a typical household, how many meals do they cook using charcoal and of course the wastage that is also associated with charcoal. We were able to derive a tariff that we think is cheaper for you to cook using electricity than cooking using charcoal,” explained Mutyaba.
“Our computation resulted in 70 units for a typical household. We are not really looking at above and below. An average household will need around 70 units to cook using electricity.”
On why the regulator didn’t allow consumers to keep paying the Shs412 cooking tariff above the 150-unit mark, the Pricing Manager noted that “many households are doing many other things inside their homes apart from domestic consumption.” These other activities include cake baking and laundry services. “This initiative is targeting domestic consumers, it is not targeting commercial consumers. We want to make sure there is no abuse,” said Mutyaba, further adding that it was possible that someone can shift their businesses to their homes since the cooking tariff is lower than the commercial one.
While it would be cheaper to use electricity, the cost of electric appliance would still remain a hindrance to some customers. And even when ERA’s mandate doesn’t extend to regulating the prices and standard of electric appliances on the market, ERA came up with an innovative idea where the regulator engaged the Ministry of Energy’s Uganda Energy Credit Capitalization Company (UECCC) with the view of working with banks and appliance sellers for a higher purchase arrangement for domestic users. Under this arrangement, consumers can go into an appliance warehouse, acquire equipment and pay for them over a period of six months. Mutyaba hopes that the framework for this higher purchase arrangement would be concluded by the end of January 2022. ERA is also closely working with the Uganda Development Bank (UDB) on this framework.
Mutyaba also revealed that by announcing the new cooking tariff earlier than previous tariff structure announcements, ERA hopes that consumers will take advantage of promotions for electric appliances during the festive season. (MuleN)
