Alternative Energy & Power 2019 Comparisons

Last Updated July 31, 2018

Law and Practice

Author



Kateera & Kagumire Advocates (formerly Hunter & Greig Advocates) is a leading law firm in Uganda. For over a century, the Firm has established a multi-disciplinary professional practice, combining its legal expertise with other corporate advisory services to provide its clients with unique and highly specialised solutions. The Firm has participated in negotiations relating to power supply power purchase agreements and advised diverse clients on matters relating to the acquisition of easements for power line construction and attendant, legal due diligence. In addition, the Firm has offered advisory services on hydroelectric power dam construction projects and advised on financing agreements for construction of electrical installations, power supply licenses, sector regulatory compliance, litigation and arbitration of disputes. The Firm has unparalleled expertise in the renewable energy sector in Uganda. It was the principal legal advisor to UEB under the unified energy sector regime in Uganda prior to the unbundling of the sector into distinct generation, transmission and distribution segments.

The principal laws governing the Power industry in Uganda are as follows: 

  • The Electricity Act 1999, Chapter 145 (http://energyandminerals.go.ug/downloads/Elecact99.pdf)and regulations thereto. The Electricity Act 1999 established the Electricity Regulatory Authority, which licenses and regulates the generation, transmission and supply of power. Before the Act came into force in 1999, the Electricity Act, Cap 135 (http://www.qenergy.com.au/flux-content/qenergy/pdf/ElectricA94.pdf)provided for the establishment and re-establishment of the Uganda Electricity Board (UEB), a corporate body whose function was the generation, transmission, distribution and supply of power and the ownership of all assets necessary to fulfil its functions. The 1999 Act provided for the unbundling of UEB into successor companies Uganda Electricity Generation Company Limited (UEGCL), Uganda Electricity Transmission Company Limited (UETCL), and Uganda Electricity Distribution Company Limited (UEDCL).
  • The Public Enterprise Reform and Divestiture (PERD) Act (https://www.ulii.org/ug/legislation/consolidated-act/98)was enacted in 1993 to provide for the divestiture of public enterprises, including UEB, into successor companies. 
  • The 1995 Constitution, inter alia, provides for the tenure and ownership of land and the compulsory acquisition of property. The Land Act 1998 provides for the tenure, ownership and management of land. 
  • The National Environment Authority Act, Chapter 153 (https://www.nwsc.co.ug>Statutory acts) provides for the sustainable use of the environment. 
  • The Water Act, Chapter 152 (https://www.ulii.org/ug/legislation/consolidated-act/152)provides for the use, protection and management of water resources and supply, in order to provide for the constitution of water and sewerage authorities and to facilitate the devolution of water supply and sewerage undertakings.
  • The Rivers Act, Chapter 357 (https://www.ulii.org/ug/legislation/consolidated-act/357).
  • Public Private Partnership Act Uganda 2015 (https://ppp.worldbank.org/public-private partnership/sites/ppp.worldbank.org/files/ppp_testdumb/documents/uganda_the_public_private_partnership_act_2015.pdf) provides a framework for public-private partnership and establishes a committee to manage public-private partnerships. 

Generation

Generation companies are owned as follows:

  • by the Government through a state-owned entity known as UEGCL, which owns the two main power stations –  Nalubaale Power Station (formerly the Owen Falls Dam) and Kiira Power Station. These are managed under a 20-year concession that was awarded by the Government/UEGCL to Eskom Uganda Limited. The concession ends in 2023;
  • by various private-sector owned entities, mainly for power plants generating less than 10 MW or co-generation plants;
  • by a combination of privately owned and state entities such as Bujagali Energy Limited, which owns and operates the Bujagali hydroelectric power station; and 
  • by Build-Operate-Transfer (BOT) projects, which are public-private partnerships in respect of power plants generating more than 10 MW. For example, the Achwa hydro power project is owned by ARPE Limited, the Bugoye hydropower project is owned by Bugoye Hydro Limited, and Mpanga Power Station is owned by EMS Africa.

Transmission

UETCL is the single operator of the transmission system and deals directly with independent power generators.

UETCL is the only entity licensed to operate a high voltage transmission grid in Uganda, which is used for the transmission of electric energy from generators to electricity suppliers.

Distribution

UEDCL manages electricity distribution. It is a state-owned company whose primary purpose is to distribute electric power to domestic and commercial end-users in Uganda. UEDCL entered into a 20-year concession with Umeme Limited, which is listed on the Uganda Stock Exchange, to distribute electricity to end-users; the concession ends in 2025.

Umeme Limited is now Uganda’s main electricity distributor, distributing 97% of all electricity used in the country.

The Electricity Regulation Authority (ERA) issued licences to the following community-based entities for the distribution of electricity to areas not covered under the Umeme Concession:

  • West Nile Rural Electrification Company (WENRECo);
  • Bundibugyo Electricity Co-operative Society (BECS);
  • Kyegegwa Rural Energy Co-operative Society (KRECS);
  • Pader-Abim Community Multi-Purpose Electric Co-operative Society (PACMECS);
  • Kilembe Investments Limited (KIL); and
  • Kalangala Infrastructure Services Limited.

The power industry consists of disaggregated (unbundled) entities of generation, transmission and distribution. 

The Electricity Act 1999 mandated the unbundling of UEB, which was a monopoly managing the generation, transmission, distribution, sale, import and export of Uganda’s electricity.

Uganda’s electricity sector is now in three segments. UEGCL manages the electricity generation, UETCL manages electricity transmission and UEDCL manages electricity distribution. All three companies are licensed and regulated by ERA.

State-Owned Entities

  • UEGCL is a state-owned company whose primary purpose is to generate electric power for use in Uganda.
  • UETCL is a state-owned company whose primary purpose is to make bulk electricity purchases and transmit the electricity along high voltage wires to local and foreign distribution points.
  • UEDCL is a state-owned company whose primary purpose is to distribute electric power to domestic and commercial end-users in Uganda.
  • The Rural Electrification Agency (REA) is a statutory entity whose primary purpose is to extend electricity to rural areas. REA owns several distribution lines in rural areas not previously connected to the country’s main power grid.

Key Investor-Owned and Public-Private Partnerships 

  • Bujagali Energy Limited is a public-private partnership between private investors and the Government of Uganda, and owns and operates the 250 MW Bujagali hydroelectric power station. As of September 2016, the shareholders in Bujagali Energy Limited were the Government of Uganda, Jubilee Investment Company, Sithe Global Power, Industrial Promotion Services and Aga Khan Fund for Economic Development.
  • Eskom Uganda Limited is a subsidiary company of ESKOM Enterprises (Proprietary) Limited (the investment arm of the South African public utility Eskom) and operates the Kiira and Nalubaale power plants under a 20-year concession agreement with UEGCL. The combined capacity of the two power plants is 250 MW.
  • ARPE Limited is the developer of the 42 MW Achwa 1 and 41 MW Achwa 2 hydropower projects, and is owned by the Africa Renewable Energy Fund LP. The project is structured as a Build-Operate-Transfer (BOT) project and will revert to the Government of Uganda after 40 years.
  • Bugoye Hydro Limited is the developer of the 13 MW Bugoye BOT hydropower project and is owned by the Africa Renewable Energy Fund LP.
  • Of the two active HFO-fuelled thermal plants in Uganda, which have a combined capacity of more than 100 MW, Jacobsen is a BOT project and Electromaxx is privately owned. 
  • Soroti Solar Power Station in Eastern Uganda is owned by a consortium of private investors and has a generation capacity of up to 10 MW.
  • UMEME was awarded a concession licence by UEDCL to distribute electricity for 20 years from 2005. It is a publicly traded company on both the Uganda and Nairobi Securities Exchange. 
  • Kilembe Investments Limited is a private investor-owned company operating a mini hydro power plant generating electricity in western Uganda.
  • Kakira Thermal Power Station is a privately owned bagasse-fuelled station with a generation capacity of more than 50 MW. 
  • Other electricity distribution companies include West Nile Rural Electrification Company (WENRECo), Bundibugyo Electricity Co-operative Society (BECS), Kyegegwa Rural Energy Co-operative Society (KRECS), Pader-Abim Community Multi-Purpose Electric Co-operative Society (PACMECS) and Kalangala Infrastructure Services Limited.

Principal State-Owned Authorities or Investor-Owned Companies That Sell Electricity to End-Users

  • UEDCL is a state-owned company whose primary purpose is to distribute electric power to domestic and commercial end-users in Uganda.
  • UMEME is an investor-owned publicly traded company. It was awarded a concession licence by UEDCL to distribute electricity for 20 years from 2005.
  • There are a number of community-based entities that distribute electricity to areas not covered by the Umeme Concession.

There are no restrictions on capital inflow and outflow from Uganda. The Uganda Investment Authority was set up to encourage investment in Uganda, and all foreign investors in Uganda need to apply for an investment licence from Uganda Investment Authority. To qualify for an investment licence, the foreign company should be registered in Uganda with the Uganda Registration Services Bureau. Foreign investors must also acquire a Trade Licence and register for tax. They must provide a feasible work plan for the intended investment project, and prove the availability of funds for the project. 

Article 237 of the Constitution of the Republic of Uganda and the Land Act Cap 227 provide that non-citizens may only acquire leases in land not exceeding 99 years.

Article 26 of the Constitutionprovides adequate safeguards against the compulsory deprivation of property, and the following conditions have to be satisfied before the compulsory acquisition of property by the Government:

  • the taking of possession or acquisition must be necessary for public use or must be in the interest of defence, public safety, public order, public morality or public health; and
  • the possession or acquisition must be made under a law that provides for prior payment of fair and adequate compensation and the right to contest the process through the courts of law.

The Investment Code Act Cap 92provides that the business enterprise of an investor that is licensed, or an interest or right over any property or undertaking forming part of that enterprise, shall not be compulsorily acquired, except in accordance with the Constitution of Uganda. Where the business enterprise of a licensed investor is compulsorily acquired, compensation in respect of the fair market value of the enterprise shall be paid within a period not exceeding 12 months from the date of taking possession or acquisition. The compensation paid out to the investor shall be freely transferable out of Uganda and shall not be subject to exchange control restrictions under the Exchange Control Act or any law made under that Act.

Section 28 of the Investment Code ActCap 92 further provides for the settlement of disputes arising between a foreign investor and the UIA or the Government in respect of a licensed business enterprise. In the first instance, all efforts shall be made to settle the dispute through negotiations for an amicable settlement.

A dispute that is not settled through negotiations may be submitted to arbitration through the following methods, as may be mutually agreed by the parties:

  • in accordance with the rules of procedure for arbitration of the International Centre for the Settlement of Investment Disputes;
  • within the framework of any bilateral or multilateral agreement on investment protection to which the Government and the country of which the investor is a national are parties; or
  • in accordance with any other international machinery for the settlement of investment disputes.

Where the parties to a dispute do not agree on the mode or forum for arbitration, the party aggrieved by compulsory acquisition or possession or the amount of compensation payable, or in respect of any matter relating to the business enterprise, may apply to the High Court for determination of the matter.

Foreign investors are provided incentives such as tax holidays to encourage investment (Sections 21–26 of the Investment Code Act Cap 92). Depending on the nature of the project, the Investment Authority also provides free land to investors in the various government industrial parks.

Under Section 21 of the Investment Code Act Cap 92, an investor importing any plant, machinery, equipment, vehicles or construction materials for an investment project shall benefit from the concessional rates of import duty and other taxes as may be specified in the Finance Acts from time to time.

Under Section 25 thereof, a holder of a certificate of incentives shall be entitled to a drawback of duties and sales tax payable on imported inputs used in producing goods for export, as provided in any law imposing such duties and taxes.

The Electricity Act 1999 and the Electricity (Application for Permit, Licence and Tariff Review) Regulations 2007 govern the electricity sector (http://www.era.or.ug/or https://ulii.org>legislation>2007).

The ERA is the regulator responsible for the transfer of assets. Section 46 (1) of the Electricity Act 1999 provides that a licence shall not be transferred without the written consent of the authority.

Under Section 46 (2) of the Electricity Act, a licensee may apply to the Authority for transfer of the licence. The application shall be in Form C set out in the schedule to the Electricity (Application for Permit, Licence and Tariff Review) Regulations 2007.

The application is accompanied by the application in the prescribed form of the person to whom the licensee intends to transfer the licence, and the prescribed transfer fee shall be paid on the approval of the transfer. 

In determining the application, the authority shall satisfy itself of the legal, technical and financial competence of the transferee (Section 46(4) of the Electricity Act 1999). 

Under Reg. 12(2) of the Electricity (Application for Permit, Licence and Tariff Review) Regulations 2007, before approving a transfer or assignment of a licence the Authority shall be satisfied that:

  • the transferee or assignee has fulfilled the requirements for licensing under the Electricity Act;
  • the transferee or assignee has accepted and is willing to undertake the obligations under the licence; and
  • the transferee or assignee has paid the transfer fee.

Under Reg. 12(3) of the Electricity (Application for Permit, Licence and Tariff Review) Regulations 2007,  within 30 days of receiving an application to transfer or assign a licence the Authority shall:

  • publish the application in the Gazette or in at least one newspaper of wide circulation in Uganda; and
  • communicate its decision to the applicant.

However, he transfer process generally takes a minimum of three months.

Section 46 (6) of the Electricity Act 1999 provides that the authority shall not unreasonably withhold consent to any application to transfer unless it has reason to believe that the public interest is likely to be prejudiced by the transfer.

Section 46 (7) of the Electricity Act 1999 provides that a licensee may appeal to the tribunal against the decision of the authority not to consent to a transfer a refusal, within 30 days of receiving said decision. 

Under Circular No. ERA 001/2011, no developer shall be allowed to transfer its permit during the feasibility study stage.

It is important to note that, since the operation of assets in the power industry may require other licences under the different laws that govern the ownership and structure of the power industry, it may also require compliance with the various procedures under those laws – for example, the National Environment Act, the Water Act and the Rivers Act, among others.

The transferee must satisfy the authority that it has the legal, technical and financial capacity to take over the project. The requirements depend on the nature of the project that is intended for transfer. The transferee must have the technical expertise for the project and access to finance required for the project. 

Under Reg. 12(2) of the Electricity (Application for Permit, Licence and Tariff Review) Regulations 2007, before approving a transfer of a licence the Authority shall be satisfied that the transferee has fulfilled the requirements for licensing under the Electricity Act and has paid the transfer fee.

However, the authority may be hesitant to approve the transfer of a licence where construction has not commenced, financial close has not been achieved and overall construction has not reached 70% completion.

UETCL is a state-owned company that develops and manages transmission facilities (http://www.uetcl.com/). It was issued with a licence from ERA to construct, own and operate installations for the high voltage transmission of electricity in Uganda (above 33kV), under which its functions are as follows: 

  • to co-ordinate the power supply system to obtain instantaneous balance between the generation and consumption of electricity; 
  • to co-ordinate transmission outages, monitor the import and export of electricity, and prepare forecasts of capacity requirements; and
  • to purchase power in order to provide a continuous and economic supply of electricity to meet the load requirement for customers served directly or indirectly from HVTG facilities at lowest reasonable cost, and to import and export electricity power to neighbouring countries pursuant to the terms of the agreement(s) for such international power transactions.

Under Power Purchase Agreements with UETCL, project companies are usually required to carry out the development, design, financing, procurement, construction, operation and/or maintenance of generation facilities in a manner consistent with the Electricity (Primary Grid Code) Regulations, 2003 and Prudent Utility Practice. 

Prudent Utility Practice refers to the generally accepted industry operating and maintenance practices with respect to the electric power generation, transmission and distribution industry. This covers standards of practice obtained by exercising a degree of skill, diligence, prudence and foresight that could reasonably be expected from a skilled and experienced person engaged in the same type of undertaking.

The Electricity (Primary Grid Code) Regulations, 2003 provide the guidelines and procedures for licensees of the electric power system to operate the Uganda power system. The code is administered by the Uganda Grid Code Committee.

As far as is known, there have been no material changes to laws or regulations regarding the power industry over the past year.

There are no more “take or pay” agreements. . In order to encourage investment in the power generation, UETCL used to pay for the electricity it buys from generators, and also pays for the electricity that the generator would have been able to sale if it was producing at capacity. This are referred to as “take or pay” agreements.Changes have been made to the standardised Power Purchase Agreement where the stakeholder is no longer willing to take any “take or pay” agreements.”

Going forward, the Power Purchase Agreements have been structured as energy deals where the investor is only paid for energy consumed, as per the dispatch instructions received from UETCL.

The Parliament of Uganda is currently deliberating on the Local Content Bill, 2017, which, if passed into law, will bring into action a requirement for investors to prioritise the use of local expertise, goods and services.

Uganda’s power industry was unbundled and liberalised following the enactment of the Electricity Act 1999, which established ERA as the body to regulate the workings of UEGCL and other electricity generation companies, as well as UETCL, which is the only electricity transmission company, UEDCL and other electricity distribution companies. 

The electricity tariff in Uganda is adjusted quarterly in order to prevent loss of revenue to investors in the industry. The quarterly adjustment takes into consideration changes in the cost of fuel, forex rates and other factors that may have affected the cost of the generation, transmission or distribution of electricity. The tariff is adjusted to cover any loss that may be made in the next quarter.

The law governing the wholesale electricity market and the price of electricity is the Electricity Act 1999 and the Electricity (Tariff Code) Regulations, 2003 (https://uliiorg>2003>200323)

The Uganda Renewable Energy Feed-in Tariff (REFIT) Phase 3 Guidelines 2016 are meant to provide clarity and guidance on the key components and operational structure of the REFIT, in order to protect developers, investors and key institutional stakeholders. The REFIT applies to small-scale renewable energy systems of prescribed priority technologies up to a Maximum Installed Project Capacity of 20 MW, and greater than 0.5 MW, as defined by the Electricity Act 1999.

There is no competitive wholesale market. Under the single buyer business, UETCL purchases all power in bulk at a Bulk Supply Tariff set by ERA, based on the guidelines in the Electricity (Tariff Code) Regulations, 2003. The code provides for tariff objectives, the principles of tariff calculations and the regulation of costs and investments (which invariably affect the tariff).

Under the current tariff structure, ERA considers the revenue requirements of UEGCL, UETCL and UEDCL, and applies the rate of return regulation. The aim is to ensure that the revenue earned is equal to the cost of supply of electricity plus a return on rate. The tariff is adjusted quarterly to allow for changes in the price of fuel and the forex exchange rate. 

There is a capacity market, whereby generators are paid for “deemed energy” (that is payment for idle capacity), to encourage them to produce at capacity. There is no energy market and there is no nodal pricing in the market. 

The market uses a “merit order dispatch” system to dispatch electricity from generators, with priority given to generators with the least cost of electricity. However, this is subject to the renewable energy policy, which requires that electricity from renewable energy plants is dispatched first. 

With respect to generators that produce 20 MW and below, the renewable energy tariff is established by ERA as above and updated periodically. However, for plants that produce more than 20 MW, the tariff is negotiated between UETCL and the generator, and approved by ERA.

Imports and exports of electricity with other jurisdictions are permitted.

Section 60 of the Electricity Act 1999 provides that no person shall import or export electricity without an export or import licence granted by the authority.

UETCL is the only entity with the licence to import and export electricity to other jurisdictions. Uganda exports electricity when the production of electricity is higher than the demand in Uganda and there is a shortfall in a neighbouring country, or when there is a surplus in the neighbouring country and a deficit in Uganda.

The price of electricity imports and exports is determined by the Energy Exchange Agreements executed between the transmission authorities in those countries, such as Kenya Electricity Transmission Company Limited (KETRACO) in Kenya, Tanzania Electricity Supply Company Limited (TANESCO) in Tanzania, and Electricity, Water & Sanitation Authority (EWSA) in Rwanda. 

As of April 2018, the electricity supply was made up of the following supply mix (era.or.ug):

  • 85.8% from hydro;
  • 0.6% from cogeneration;
  • 0.06% from thermal; and
  • 0.06% from solar.

As far as is known, there are no concentration limits on energy supplied by one entity.

Uganda is not a competitive electricity market.

The Uganda National Climate Change Policy, 2015 is the principal policy governing issues of climate change in Uganda (http://www.mwe.go.ug/sites/default/files/library/National%20Climate%20Change%20Policy%20April%202015%20final.pdf).

Uganda is in the process of drafting legislation on energy efficiency and conservation, which, once enacted, will promote the efficient use of energy resources (http://www.energyandminerals.go.ug/downloads/ERDreportEnergy%20efficiancyandconservation1.pdf).

The National Environment Act, Chapter 153 established the National Environment Management Authority to provide for sustainable management of the environment (http://www.wipo.int/edocs/lexdocs/laws/en/ug/ug019en.pdf).

Uganda is also a signatory to the United Nations Paris Climate Agreement, the central aim of which is to strengthen the global response to the threat of climate change by keeping a global temperature rise below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. The Agreement aims to strengthen the ability of countries to deal with the impact of climate change.

Uganda does not mine coal nor produce electricity using coal.

Uganda enacted the Atomic Energy Act 2008 to provide a framework for the promotion and development of nuclear energy (https://ulii.org/ug/legislation/act/2015/24).

Uganda also has a renewable energy policy that encourages the use of renewable energy as a substantial part of the energy consumed (https://eaenet.org/wp-content/uploads/2017/02/The-Renewable-Energy-Policy-for-Uganda-2007-2017.pdf).

The Global Energy Transfer Feed in Tariff (GET FiT) Programme encourages investment in renewable energy generation (https://www.GETFiT-uganda.org/).

The renewable energy policy set a target for renewable energy to contribute 61% of the energy consumed in Uganda by 2017. Solar, wind, geothermal, hydro power, biomass and peat were identified as the principal sources of renewable energy. 

Generated renewable energy takes precedence in the merit order, and is bought and dispatched for supply before carbon-produced power. 

The GET FiT programme encourages investment in the generation of renewable energy by providing subsidies. Over and above the tariff negotiated with UETCL in the Power Purchase Agreement, the generator approaches the GET FiT committee and gets a top up on the tariff. Small-scale renewable energy generation projects with a valid development permit issued by ERA may apply for premium payments through participation in competitive Requests for Proposal and the subsequent evaluation process. This increases the financial viability of generating alternative energy. The programme also provides the option of a Guarantee Facility to secure against off-taker and political risks, as well as a Private Financing Mechanism that offers debt and equity to investors in renewable energy at competitive rates (https://www.GETFiT-uganda.org/for-developers/).

The principal laws are the Electricity Act 1999 and the Electricity (Application for Permit, Licence and Tariff) Regulations 2007, which provide the procedure for applying for any licence, including a licence to construct, own and operate a generation facility (http://www.era.or.ug/index.php/resource-centre/regulatory-instruments/laws; http://www.era.or.ug/index.php/resource-centre/regulatory-instruments/regulations-codes).

The Electricity (Installation Permits) Regulations 2003 (https://ulii.org>2003>200319) provide the procedure for the application and grant of permits to entities and individuals as installation persons. Individuals are required to apply for their own installation permits even though they are employed by entities that already have permits. 

The Electricity (Safety Code) Regulations 2003 (https://ulii.org>2003>200322) provide a safety code for the operation of generation facilities.

The National Environment Management Act (https://www.nwsc.co.ug/files/Statutory%20acts/national_environment_act.pdf) provides a framework for acquiring a licence to build installations that affect the environment.

The Water Act, Chapter 152 (https://www.ulii.org/ug/legislation/consolidated-act/152) provides for the use, protection and management of water resources and supply, to provide for the constitution of water and sewerage authorities and to facilitate the devolution of water supply and sewerage undertakings.

The Rivers Act, Chapter 357 provides for the licensing of dredging rivers (https://www.ulii.org/ug/legislation/consolidated-act/357).

The same procedure is followed to acquire licences to build, manage and operate generation, transmission and distribution facilities. 

An entity that intends to construct a generation facility files a notice of intended application with ERA. The notice is accompanied by information on the financial and legal status, the technical and industrial competence and experience of the intended applicant; a description of the project and the time plan for the execution of the project; a review of the use of land for the project and the relation of the project to local authorities; a review of public and private measures necessary to carry out the project; information relating to permissions required from public authorities; a description of the impact of the project on electricity supply, socioeconomics, cultural heritage, the environment, natural resources and wildlife; and any other relevant information as may be required by the Authority.

The notice of intended application is published by ERA in the Gazette and in at least one national newspaper of wide circulation in Uganda, within 30 days of receipt. The published notice is intended to inform the public of the details of the notice. It contains a summary of the notice of intended application and informs members of the public that the notice may be inspected at the offices of the Authority or at any other appropriate place as the Authority may determine.

The Authority invites directly affected parties and affected public agencies to make comments on the notice within a fixed period of no less than 30 days after the date of publication of the notice. The Authority forwards the comments from the affected parties and affected public agencies to the intended applicant, and the applicant responds to said comments within 15 days of receipt.

Within 30 days of the expiration of the notice, the Authority issues a permit to the intended applicant, taking into account the responses and comments made by the applicant. The permit issued at this stage is for a specific period (renewable), and is intended to allow the applicant to carry out studies and other activities to prepare for an application for a licence. The permit is renewable on terms and conditions determined by the Authority. 

When the applicant is ready and has obtained the permits and permissions from various entities, they can then submit an application to ERA for a licence.

An application for a licence is submitted to the Authority and contains the following:

  • information on the legal and financial status of the applicant;
  • a technical and economic description of the project;
  • a description of how the project fits in with the existing and planned power supply system;
  • the planned time of commencement and completion of the construction of the project;
  • a view of the project's adaption to the landscape, including necessary maps and drawings;
  • an assessment of the impact of the project on public interest and possible mitigation;
  • the results of assessments, including environmental impact assessments and studies carried out, and reports of those assessments and studies; and
  • an assessment of the impact of the project on private interests, including the interests of affected landowners and holders of other rights, consents and permits required under any other law.

Furthermore, the application is accompanied by the applicant's evaluation of all the comments from affected parties and affected public agencies. Within 30 days, the Authority may request more information, and shall confirm in writing to the applicant within 30 days of receving a complete application. The Authority may require an applicant to make arrangements for the execution of a bond or other form of security for the performance and observance of the conditions to which the licence may be subject, and shall require the applicant to take out the necessary insurance policies to protect against liabilities that may arise as a result of activities done under the licence.

Within 40 days of receiving a complete application for a licence, the Authority shall cause a notice of the application to be published in the Gazette and in at least one national newspaper of wide circulation in Uganda. The notice shall indicate receipt of the application for the licence; contain a description of the nature and location of the proposed undertaking; inform members of the public that the application may be inspected at the offices of the Authority or at any other place that the Authority may determine; and invite directly affected parties and public agencies in the area affected by the project to submit any objections and comments on the project, in writing, within 30 days of the notice being published.

Where the Government or a government agency initiates a project under the Act that is likely to benefit from public finances, the Authority shall invite applications for licences through a fair, open and competitive process, in accordance with the Public Procurement and Disposal of Public Assets Act, 2003 (https://www.ulii.org>act>2003-14).

Where the Authority identifies a need for a project under the Act in the public interest, it may invite applications and award licences through a fair, open and competitive process.

Where a privately initiated project is converted into a public-private partnership, the Authority may award a licence through a fair, open and competitive process.

Where two or more investors or developers have an interest in the same site or project to generate, sell or distribute electricity to the same community or to the national grid, and the required capacity or energy can be supplied conveniently by only one investor or developer, the Authority may award a permit or licence through a fair, open and competitive process.

However, a competitive process of issuing a licence shall not apply where a private entity has carried out a feasibility study at its own expense, unless the Authority determines that it is in the public interest to do so. Where a private entity has carried out a feasibility study, the Authority shall refund the costs of the feasibility study and other expenses incurred by the private entity. Where the Authority uses the competitive process, Parts IV and V of the Public Procurement and Disposal of Public Assets Act, 2003 or the procurement rules of the funding agency involved in the project shall apply.

In granting a licence, the Authority takes into consideration the policies of the Government, legal requirements and the report of the public hearing. 

If the Authority declines to grant a licence, it shall give the applicant a statement of its reasons for refusal within 30 days of the refusal. The applicant shall have a right of appeal to the Electricity Disputes Tribunal. 

Typical terms and conditions imposed in an approval are as follows:

  • proof of financial capability, including proof of payment of performance guarantee, to ensure that the applicant will be able to meet the costs of the project;
  • proof of technical competence, including CVs of the key team members, to ensure that they have the competence and experience needed for the project;
  • a feasibility study report;
  • an Environmental and Social Impact Assessment Study report supporting the project;
  • a Resettlement Action Plan to minimise the negative impact of the project on the residents of that area. The applicant must also have agreements with the owners of the land on which the project will be situated; and 
  • the Applicant must have signed a Power Purchase Agreement with UETCL, as it is the single buyer of all electricity generated in Uganda. 

Rights to the surface of land are acquired by purchasing or leasing the land from its owner. The price of land/quantum of compensation is determined through negotiation with the owner. If the Government of Uganda is a partner in a project, the Chief Government Valuer must approve the compensation rates.

Under Section 49 of the Electricity Act, a holder of a generation, transmission or distribution licence shall remove all installations considered by the Authority to be inappropriate for further operations upon expiry of the licence. The decommissioning of electrical installations used for the generation, transmission and distribution of electricity in Uganda must be undertaken by the licensee upon the expiry of the licence and/or when the subject electrical installation is considered to be no longer useful in the power system, which could be as a result of operation and maintenance activities, expiry of the item or transfer of the installation from one place to another on the power system.

Before decommissioning, the licensee submits a decommissioning plan to ERA for approval, with the budget for decommissioning and an Environmental Social Management plan approved by the National Environment Management Authority (NEMA). 

The licensee shall ensure that the public is consulted and that public concerns are integrated into  the decommissioning exercise through public participation. Therefore, the licensee shall be required to prepare a statement of liability to other parties, particularly regarding cases of ill health and accidents that may occur during and/or after the decommissioning process. The licensee shall maintain the post-decommissioning activity monitoring system until ERA and NEMA are satisfied that there is no foreseeable risk to public health and the environment.

The decommissioning exercise will be considered complete after approval from both NEMA and ERA. During the approval process, ERA and NEMA shall take the necessary measures to satisfy themselves that the licensee has successfully executed the approved decommissioning plan.

ERA and NEMA shall ensure that the licensee has fully complied with the relevant laws, regulations and standards governing environmental management and electricity supply industry, and thereafter shall each issue a certification letter confirming successful decommissioning to the licensee.

It is the duty of the licensee to pay for the decommissioning process at the end of its physical or economic life. 

UETCL is the sole transmission system operator in Uganda, and is responsible for the bulk purchase of electricity from generating companies and for selling the electricity in bulk to distributors. The Electricity Act forbids the construction, ownership and operation of an installation for transmission without a licence from ERA. 

The laws governing the construction and operation of transmissions and associated facilities are as follows: 

  • the Electricity (Application for Permit, Licence and Tariff) Regulations 2007provide the procedure for applying for any licence under the Act, including a licence to construct, own and operate a transmission facility; 
  • the Electricity (Installation Permits) Regulations 2003 provide the procedure for the application and grant of permits to entities and individual as installation persons. Individuals are required to apply for their own installation permits even though they are employed by entities that already have permits; 
  • the Electricity (Safety Code) Regulations 2003 provide a safety code for the operation of transmission facilities;
  • the Electricity (Licence Fees) (Amendment) (No. 3) Regulations, 2014 provide for the licensing fees payable under different applications (https://era.or.ug>index.php>doc_details);
  • The National Environment Act provides the framework for acquiring a licence to build installations that affect the environment; and
  • the Land Act Chapter 227 and the Registration of Titles Act Chapter 230 (https://www.ulii.org>legislation>230) provide the process and form of acquisition of land for the construction of transmission lines and associated facilities. 

The applicable regulators are the Electricity Regulatory Authority and the National Environment Management Authority.

The process for applying for a licence to construct and operate a transmission line is the same as the process for applying to construct and operate a generation facility.

Typical terms and conditions imposed in an approval are as follows:

  • proof of financial capability, including proof of payment of a performance guarantee to ensure that the applicant will be able to meet the costs of the project;
  • proof of technical competence, including CVs of the key team members, to ensure that they have the competence and experience needed for the project;
  • a feasibility study report; 
  • an Environmental and Social Impact Assessment Study report that supports the project; and
  • a Resettlement Action Plan to minimise the negative impact of the project on the residents of that area. The applicant must also have agreements with owners of the land on which the project will be situated. 

UETCL is owned by the Government of Uganda, and can therefore acquire land compulsorily to construct transmission installations. The Government can only take possession of the land after all people having an interest in the land have been fully and adequately compensated, in accordance with the Land Acquisition Act, Chapter 226 (https://www.ulii.org>legislation>226).

The compensation rates are determined by the Chief Government Valuer. Adequate compensation must be paid promptly, before possession of the land is taken.

UETCL has the exclusive right to construct and operate transmission facilities in Uganda. The Electricity Act empowers ERA to designate a person holding a transmission licence to be a system operator. ERA designated and licensed UETCL to be the single system operator, single buyer and bulk supplier of electricity in Uganda (http://www.uetcl.com/index.php/site-map/licence).

The Electricity Act 199, Chapter 145 (https://www.ulii.org/ug/legislation/consolidated-act/145) establishes ERA, which has the mandate to designate a person holding a transmission licence to be a system operator and to recover all reasonable costs connected to the person. 

The Electricity (Tariff Code) Regulations, 2003 (http://www.era.or.ug/index.php/resource-centre/regulatory-instruments/regulations-codes) provide a framework under which ERA determines transmission charges.

Transmission charges are part of the tariff. The tariff is determined and/or approved by ERA as the cost of the service. ERA approves the budgets and revenue requirements for UETCL, and said revenue requirements determine the tariff.

The tariff is determined by ERA based on the guidelines in the Electricity (Tariff Code) Regulations, 2003. The Code provides for tariff objectives, the principles of tariff calculations and the regulation of costs and investments (which invariably affect the tariff).

Under the current tariff structure, the ERA considers the revenue requirements of UETCL and applies the rate of return regulation. The aim is to ensure that the revenue earned is equal to the cost of provision of transmission services plus a return on rate. The tariff is adjusted quarterly to allow for changes in the price of fuel and the forex exchange rate. 

UETCL is owned by the Government of Uganda and is the sole transmission system operator; therefore, development of transmission lines is not competitive. It does not affect the tariff. 

Anyone who is displeased by the decision of the Regulator may refer the dispute to the Electricity Disputes Tribunal, whose decisions can, in turn, be appealed to the High Court of Uganda (https://www.ulii.org/ug/legislation/statutory-instrument/2012/53).

Transmission service is on an open access and non-discriminatory basis. UETCL provides a transmission service to generators and distributors that are licensed by ERA. 

The procedure for applying for a licence to construct and operate distribution facilities is similar to the application for a licence to construct and operate a generation facility.

The procedure for obtaining the necessary approvals to construct and operate electric distribution facilities is similar to the procedure for obtaining the necessary approvals to construct and operate a generation facility, as discussed above.

The terms and conditions imposed in approvals to construct and operate electric distribution facilities are similar to those imposed in approvals to construct and operate generation facilities, as discussed above.

Rights to the surface of land are obtained through negotiation with and purchase from the owner.

ERA grants distribution licences to distributors for a specific geographical area (https://webcache.googleusercontent.com/search?q=cache:Qlnad3IcDOMJ:https://ppp.worldbank.org/public-private-partnership/sites/ppp.worldbank.org/files/documents/3.6%2520License%2520Application%2520Form%2520%25281%2529.docx+&cd=10&hl=en&ct=clnk&gl=ug&client=firefox-b).

The laws applicable to the provision of electric distribution services and the regulation of electric distribution system charges and terms of service are similar to the principal laws that govern the construction and operation of generation facilities, as discussed earlier.

ERA is responsible for the regulation of distribution charges and terms of service. The law governing the determination of distribution charges is the Electricity (Tariff Code) Regulations, 2003.

ERA determines the rate of distribution charges. In determining the rate, ERA takes into account the revenue requirements of the distribution company and adds a rate of return, just as it does with generation and transmission charges, as discussed above. 

If a distribution company is not pleased with an ERA decision, it may refer the dispute to the Electricity Disputes Authority, whose decisions may, in turn, be appealed to the High Court. 

Kateera & Kagumire Advocates

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dwamala@kateeraandkagumire.com www.kateeraandkagumire.com
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Kateera & Kagumire Advocates (formerly Hunter & Greig Advocates) is a leading law firm in Uganda. For over a century, the Firm has established a multi-disciplinary professional practice, combining its legal expertise with other corporate advisory services to provide its clients with unique and highly specialised solutions. The Firm has participated in negotiations relating to power supply power purchase agreements and advised diverse clients on matters relating to the acquisition of easements for power line construction and attendant, legal due diligence. In addition, the Firm has offered advisory services on hydroelectric power dam construction projects and advised on financing agreements for construction of electrical installations, power supply licenses, sector regulatory compliance, litigation and arbitration of disputes. The Firm has unparalleled expertise in the renewable energy sector in Uganda. It was the principal legal advisor to UEB under the unified energy sector regime in Uganda prior to the unbundling of the sector into distinct generation, transmission and distribution segments.

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