Uganda's power tariffs are to increase this year following the effect of the country's inflation on the cost of power components being imported by electricity generators, an official has said.

Frank Sebowa, the executive director of the country's electricity regulatory authority (ERA), was quoted by local press as saying on Tuesday that all indications are that power tariffs would go up this year as the economy fights inflation, which affects prices of power components being imported by the electricity generators and distributors.

"In October last year, we allowed Umeme to make a minor tariff adjustment in order to meet the increase in operational costs as a result of fluctuation in foreign exchange rate and inflation. Since then, the inflation has not improved, we expect them to make another request for a tariff change any time," Sebowa said.

Umeme is the company responsible for the power network in Uganda.

In October 2005, Umeme increased the power rates by a moderate 3 shillings (0.17 U.S. cents) after a request with ERA.

Earlier, ERA announced a new tariff structure, which saw domestic consumers paying 212.5 shillings (11.81 U.S. cents) per kilowatt hour (kwh), up from 171.4 shillings (9.52 U.S. cents).

Commercial establishments were required to pay 204.4 shillings (11.36 U.S. cents) per kwh from 164 shillings (9.11 U.S. cents).

According to a 20-year concession the firm signed with the government to run Uganda's power distribution network, Umeme is supposed to be compensated if there is a rise in their dollar costs and inflation, which is done through a moderate increase in power tariffs.

Sebowa said recent trends in the world economy, which have seen prices of diesel shoot up, do not help the situation.

"Uganda also depends on thermal energy, which is produced using heavy-duty diesel. Aggreko Investments Plc, the thermal energy producers, will also need to offset their costs," he said.

He said the persistent increase in load shedding was one of the indicators that there is a bigger need for investment into the power sector.

"People should expect such changes in the tariff structure as our investors try to offset the heavy capital investment put into the electricity grid," Sebowa said.

Economic analysts say that the inadequate power supply and the increasing power tariffs continue to stall the country's economic development.

Source: Xinhua