Xavier Radio Ug News 24 7
An inquiry into the cost of electricity from the 250MW Bujagali Hydropower Dam has revealed that government has over the past seven years paid USD 213.1 million (about UGX 775 billion) in deemed energy, money paid to Bujagali Energy Limited (BEL) for power generated but not taken by the national grid.
The investigation, whose findings have been shared across government agencies, shows that between January 2018 and April 2025, BEL continued to invoice Uganda Electricity Transmission Company Ltd (UETCL) for energy that could not be evacuated due to low national demand and excess generation from several hydropower plants on the River Nile.
Between January and April 2025 alone, BEL billed UETCL USD 7 million (approximately UGX 24.8 billion) in deemed energy.“The model under the Power Purchase Agreement requires us to pay for capacity whether it is used or not,” a senior official at the Ministry of Energy and Mineral Development told URN on condition of anonymity. “Uganda’s grid simply cannot absorb all the energy installed across the Nile cascade, especially during off-peak hours and rainy seasons.”
In effect therefore, construction of any power generating station since BEL came into existence and before ALL its power is consumed constitutes automatically generates financial losses and drives up the country’s debt until all power from Bujagali can be sold by the underdeveloped grid.
In January 2024 Dr. Ruth Nankabirwa, Minister of Energy and Mineral Development disclosed that government had stopped payments for deemed power as the Achwa and Karuma Hydroelectric power stations were expected to commence operations. The Minister said the Government had been paying about US $24 million ( UGX 84.96 billion) annually for deemed power since 2019.
Deemed energy, often unused electricity available from independent power producers (IPPs) due to non-existent or weak grid infrastructure, thus remains a financial burden.
While government has long promised to push Bujagali’s tariff down to US₵5 per kWh. BEL’s last-point tariff for April 2025 stood at US₵8.11 per kWh, up from US₵7.29 per kWh in March. The inquiry notes that the tariff would have dropped to US₵6.3 in April and US₵5.8 in March if UETCL had off-taken the plant’s full generation capacity.
Over the past decade, BEL’s average dispatch has stayed at roughly 68 percent, well below the contracted 250MW capacity. In 2024, Bujagali dispatched at 64.2 percent; in 2023 at 68.2 percent; and in 2022 at 68.5 percent.
The underutilisation persists even as Uganda maintains more than 1,365MW of installed hydropower against a peak demand of only about 1,000MW, dropping to approximately 600MW at night.
“With five major hydropower dams and more than 15 mini-hydros feeding the grid, it is technically impossible to dispatch all plants at maximum,” the Ministry source explained. “When mini-hydros generate heavily during rainy months, bigger plants like Bujagali must reduce output to stabilise the system.”
The report points to refinancing decisions taken in 2018 as a major driver of today’s high tariff. Government had hoped the refinancing would reduce BEL’s debt and lower the tariff; instead, the debt stock rose from USD 423 million to USD 678 million, a 37 percent increase.
“It created a net loss of USD 255 million that Ugandans must pay until 2032 instead of the original debt-free target of 2023,” the investigation found. The refinancing process attracted an unusually high loan issuance fee of USD 38 million, nine times the global average of 1 percent. “If that money had gone to offset the loan principal, we would be paying significantly lower tariffs today,” the report states.
Following recommendations of Parliament’s 2022 ad-hoc committee, Uganda Revenue Authority – URA assessed BEL a principal tax liability of Shs108.5 billion. BEL protested and the matter is now before the Tax Appeals Tribunal.
“We cannot see the logic,” said BEL General Manager Alaister McDougall. “URA went back more than 15 years, which is outside what the law permits. Any revenues or accrued interest were already incorporated into the tariff model approved by the regulator.”
He added: “URA is time-barred from reassessing corporate income tax beyond three years unless there is fraud, which is not the case.”
A 2024 special audit of BEL by the Auditor General confirmed that the plant has an average availability of 99 percent but operates at an average plant factor of only 68 percent, meaning the plant is heavily underutilised.
“If BEL were fully dispatched according to its availability, the generation tariff would fall from US₵7.57 per kWh to about US₵5.06,” the Auditor General reported.
The audit also contradicted Parliament’s earlier claim of irregular capacity payments, confirming that UETCL’s payments were consistent with BEL’s invoices and aligned with the PPA. “All reconciling items between invoices and payments were appropriate,” the report stated.
The investigation also revisits Uganda’s equity stake in BEL. When the government invested USD 20 million for Class C shares in 2007, the agreement denied it voting rights or entitlement to dividends until tariff debt was fully repaid, pushing its influence to near zero.
“Government was desperate; it lacked the money and feared delays in the project,” a former negotiator said. “This left Uganda in a weak bargaining position.”
BEL argues that the tariff structure is unavoidable given the financing model. “You cannot compare Bujagali with Isimba or Nalubale,” said McDougall. “Those dams have their debt absorbed into sovereign debt, meaning they don’t repay loans through the tariff. BEL is the only plant whose debt is directly recovered through the tariff.”
He projected that Bujagali’s tariff could fall to 3–4 cents per kWh after its loans are cleared in about seven years. The crux of Uganda’s Bujagali dilemma lies in a mismatch between installed capacity and national consumption.
Under the PPA, government must pay BEL for the full 250MW whether it is dispatched or not. But with peak demand still below 1,000MW, and excess output from Isimba and Karuma flowing into the grid, BEL routinely generates below its capacity.
The Auditor General warns that unless Uganda increases demand or renegotiates the PPA, consumers will continue paying premium tariffs far above the regional average.
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