SAVE BUJAGALI CRUSADE

CHRISTIAN WRIGHT IS MISLEADING THE NATION ON BUJAGALI HYDRO POWER PROJECT

In this fourth paper we wish to start by expressing our appreciation of the overwhelming support we have received from all those who read our first three papers. The letters, telephone calls and individual contacts have been very encouraging. It is now clear to us that Uganda has a vibrant civil society. The struggle is on and success is ours.

Let us start with an article by Christian Wright Country Director AES Nile Power entitled, "Why  we need Bujagali dam" that appeared in the New vision of Monday, February 8th, 1999, and the clarification and response by the Minister of Energy and Mineral Development, Hon. Richard Kaijuka on issues raised by Parliamentary committees. Save Bujagali Crusade wish to present our reaction to the above submissions.

ACCESSIBILITY TO AND DEMAND FOR ELECTRICITY

Mr. Wright stated that less than 5 % of the population have access to electricity leaving the rest to rely on the quick diminishing resources of charcoal and wood fuel for energy. We wish to make it clear to the Uganda population that the major question that should be addressed by any serious investor is not access to electricity but its demand. It is a well established fact, according to research by the statistics department, that over 65% of the Ugandan population live below the poverty line. Another 20% of the population, mainly the middle class, are just surviving.

This means that less than 15% of the Uganda population can afford electricity. The demand for electricity is very low not high as Mr. Wright and some government officials would like Ugandans to believe. For this reason the Rural electrification Program has been shelved by government because donors consider it un-economical. Also, that is why the current demand is estimated at only 230 MW with only 5 % of the population having access to electricity. The rest of the population have no choice but to continue to use fuel wood and charcoal due to the high cost of power and high level of poverty.

Production of more electricity will not reduce use of fuel wood and charcoal until deliberate Programs are evolved to reduce poverty and the cost of power. Efforts to produce more power should go hand in hand with plans to increase demand for power.

Demand for power call be increased by either increasing the economic status of the population. reducing the cost of power or a combination of the two. As evidenced during the recent Presidential Tour of the Luwero Triangle, the economic policies currently being pursued have not led to improvement in peoples incomes. The credit schemes like Entandikwa have not been successful. More well-planned and better managed poverty alleviation programs are yet to be put in place.

Several examples are available to illustrate this issue: Budondo sub-county, Jinja District is the sub-county where the Owen Falls Dam is located. Electricity generated at the dam has been transmitted to distant districts in the country and neighboring countries, but the same power has not reached Bujagali Village in Budondo sub-county. It is unrealistic that the residents of Bujagali hope to get electricity from the proposed AES Dam, yet they cannot get power from Owen Falls dam in the same sub-county.

REDUCING COST OF POWER

Ivukula sub-county with over 26,000 people deep inside the rural areas of Busiki county, Iganga District, 30 miles from Iganga Town has a three phase-electricity line. However, there is only one bulb at the home of Iganga District Speaker, Mr. Baite Munobwa burning. UEB staff go there once a year to collect charges because it is uneconomical. It is also true that availability of electricity alone without any other programs to alleviate poverty does not lead to economic development. Naigobya town in Luuka county which used to be very busy and fast growing in the 1970s is now a ghost town, with three-phase electricity.

The cost of power can be reduced by reducing cost of power production and improving power distribution and management. UEB should purchase power from the cheapest Independent Power producers (IPP). The power to be produced by AES/Nile Power is very expensive and not affordable. According to Power Purchase Agreement, AES/NIP power will cost US cents 6.5 KWH at source. Transmission costs are estimated at US cents 3 bringing the cost of power to US cents 9. According to Hon. R. Kaijuka's clarification to parliamentary committee on National Economy, the maximum consumer tariff for AES/ power, power will be US cents 12 in current dollar terms. The power to be produced by AES Nile Power is too expensive for a developing country like Uganda.

Comparative prices of electricity (US cents) for selected developed and developing countries are as below:

PRICE IN US CENTS PER KWH

Developing Countries

Industrial Countries

          Source: Economic Development Institute of the World Bank.

Taking into account the per capita income of the above countries, the cost of power of US cents 12 in Uganda with per capita Income of US $ 240 is absurd. The comparative prices of electricity circulated by AES corporation have been fabricated by the company to mislead Ugandans.

Hon G. Opio, an authority in the field of Financial Management and a senior lecturer in Makerere University Business School confirms that the AES Nile power is producing power at a very high cost. In a working paper on the Generation of electric power, Hon G. Opio presents the "Rule of thumb" estimation: To generate 1 MW of electric power we need US $ 1 million minimum or US $ 1.5 maximum.

Therefore the minimum costs of producing 250 MW by AES Nile power is US $ 250 million and the maximum cost is US $ 375 million. The cost of US $ 500 million AES/Nile power cannot be explained in economic terms!

After taking into account the other assumptions made by AES Nile power. Hon G. Opio estimates the minimum cost of producing I KW per hour to be US cents 2.4 and the maximum possible US cents 3.6. NORPARK is ready to supply power from Karuma Falls at only US cents 4.8 per KWH. This cost is acceptable since it satisfies the rule of thumb if you take into account dam location costs.

EXPERIENCE OF AES

Save Bujagali Crusade is therefore alarmed to learn that government and UEB prefer to buy electricity from the expensive source first. The decision is irrational and is not in the best interest of this country. The experience of AES in power production at high cost outside Africa is therefore irrelevant.

Africa has its own unique problems and therefore direct importation of power and other projects cannot work. This explains why there is not a single successful power project developed by IPP in Africa. The major problem in the power industry where African countries need more technical expertise is in distribution and management.

POWER DISTRIBUTION AND MANAGEMENT

On power distribution and management, it is well documented by, among others, the several  IDA/World Bank missions, that UEB's poor performance is the most pressing issue confronting the power sector in Uganda. UEB is characterized by high power losses estimated at 40%, low collection rates with Accounts Receivable standing at well over shs 60 billion and poor quality service. The current observed power shortage of about 40 MW is more a result of high energy losses than inadequate power production.

AES/NIP also wish to divert peoples attention form the controversial Bujagali power project by ighlighting the shortfalls witnessed in the Owen Falls Extension Power Project. It should be noted that the two projects are handled by the same Ministry. It should be emphasized that government is poised to lose more money under the AES/NIP project. US $ 80 million is likely to be spent on purchasing power which shall not be utilized for over 10 years. Government will also lose over US $ 60 million from Tourism annually that can be generated from Bujagali falls.

PRIVATISATION OF UEB

Mr. Wright has also asserted that the Bujagali project will enhance the privatization of UEB. This is false. It has been properly stated in the background to the Budget 1998/99 page 112, that one of the major impediments to have a significant impact on the privatization of power distribution is the size of the liabilities associated with the distribution business e.g. costly power agreements the new owner will bear or pass on to governments. What is certain is that restructuring and privatization of UEB and putting in place a good policy and institutional frame work on the power industry will definitely attract more investors in the power industry, like it has done in other sectors.

The future of UEB should therefore be resolved before government concludes a power purchase agreement with AES, and any other investors.

Since the Hon. minister Kaijuka has assured the nation that harmonization of the draft Electricity Bill with the multi-sectoral law is soon too be concluded, let us wait and have the electricity bill passed bv parliament before the AES Nile power project is approved. We strongly believe that with a good power management law and institutional framework in place, government may not need to guarantee power purchase. Uganda needs more expertise in power distribution and management.

ENVIRONMENT IMPACT ASSESSNENT

On the environment impact of the Dam, the assessment study should be carried out by   Independent consultants. In the Bujagali Project, AES the beneficiary, has contacted a firm to carry out environment impact assessment study single handedly. They have the capacity to influence the nature of the report.

Save Bujagali Crusade is opposed to the decision by NEMA to let the contractor (AES) to carry  out their own environmental impact assessment. NEMA should also review and approve the report basing on the experience of other dams elsewhere to ensure that the environment impact are catered for- the project before Parliament approves the project. This means therefore that signing a power purchase Agreement with AES/Nile power ensures that the power distribution will not be privatized, contrary to government policy.

This is the fourth in a series of papers the Save Bujagali crusade is writing to sensitize political leaders. Civil Society, NGOs and the entire public on the negative effects of destroying Bujagali Falls.

Anyone interested in the cause is requested to send us an e-mail on bujagali@infocom.co.ug or on telephone:
256-41 250274 and Fax: 256-41 250274

MARTIN M. MUSUMBA
COORDINATOR - Save Bujagali Crusade.

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