Working Paper 325

Power Sector Reforms in Uganda: Meeting the Challenge of Increased Private Sector Investments and Increased Electricity Access Among the Poor

 by Simon Peter Engorait

Executive Summary 

This research addresses the theme of power sector reform with a special focus on Uganda. Power/Energy Sector reforms are recognised as one major vehicle of social transformation and technological change, a crucial element in economic growth. The main concern in developing economies, however, is how the reforms can be enhanced and sustained. It seems clear that sustainability is related to the status and level of functioning of the legal and regulatory frame work, tariff setting systems and the licensing policies and procedures. Government policy may contribute to both the inward diffusion of private investments in the sector and the acquisition of such a capability. Using various approaches, this study assesses the nature and the possible role that policy initiatives could play in enhancing the inward diffusion of private investment and growth in the local energy sector, as well as improved access to electricity among the poor. 

The findings of the study reveal that the existing licensing policy framework and arrangements are clear, set good ground for transparency and efficiency in the licensing process and thus make the sector attractive to private investments. The findings also indicate that the Legal and Regulatory Framework as set out by the current laws sets out mechanisms for tariff setting and a framework that should ensure both increased private sector investments and increased electricity access by the poor. However, despite the existence of these laws, there is still need for specific policy measures geared towards implementing and enforcing the legislation, in order to ensure the benefits in terms of private investments and increased access to electricity among the poor are realized. 

The recommendations and policy options from the study therefore emphasize the need to fully implement the provisions set out in the legal and regulatory framework. The key policy options are summarized below: 

1. Expeditious implementation of all the provisions set out in the electricity act should be undertaken. This will enable the achievement of the desired goals of the act. 

2. It is recommended that there be a more independent electricity regulatory authority. This would mean a change of the appointing mechanism to a more independent entity such as that of the Chief Justice.  In addition, the appointments should be vetted by Parliament. The dismissal of members should be made more transparent. These changes, among others, will ensure independence of the authority, and therefore improved performance of the electricity sector. 

3. Although the law makes provisions for exemptions for small scale electricity generation, there is need to provide financial support to individuals/enterprises that undertake these ventures. Special programmes that provide financial and technical support to these ventures are therefore recommended. 

4. Public-Private partnerships are important in the delivery of energy services to the poor. These partnerships should be public sector led, because rural areas are not attractive area to private investors therefore government must take a lead in making these areas attractive to investors. In addition, it is recommended that these partnerships are initially targeted at rural social and community service points (schools, hospitals, entertainment centres etc). 

5. There should be greater involvement of the Local Governments (especially at District levels) in electrification projects, to ensure that the rural and urban poor are catered for.

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