Shaping Uganda’s energy future

CHALLENGE

In 2000, Umeme Limited obtained a 25-year concession agreement from the Uganda government to operate most power distribution assets across the country and invest into expanding networks to increase access. During that time, the Electricity Regulatory Authority (ERA) successfully implemented a series of measures to incentivise cost-reflectivity, operational performance and efficiency gains.

The agreement expired in March 2025 when operational responsibilities transferred back to the state-owned Uganda Electricity Distribution Company Limited (UEDCL) utility. The main challenge was to ensure that the efficiency gains accomplished over the last two decades would persist under the new regime.

The introduction of new legislation also offered the opportunity to look forward and position Uganda for success at both national and regional levels – such as with the introduction of new power trading platforms.

APPROACH

Funded by the Norwegian Water Resources and Energy Directorate, Ricardo were asked to complete several workstreams to support Uganda through its transition:

• Develop a new economic regulatory framework – Ricardo produced a new tariff methodology for transmission and distribution power utilities (including but not limited to UEDCL), which  now forms the legal basis for price formation in Uganda.
• Undertake a detailed ‘cost of service’ study – to facilitate the implementation of the new tariff methodology, Ricardo was tasked with developing new tariff models and to calculate new electricity rates across the country. The model –  sophisticated yet user-friendly – incorporates features such as feed-in tariffs, revenue reconciliation, and quarterly indexation of tariffs.
• Design a power trading market – Ricardo designed an “over the counter” electricity market, including key trading mechanisms and defined roles and responsibilities of stakeholders involved.
• Recommend measures to accelerate electricity access and improve the affordability of electricity (ongoing) – Ricardo are reviewing and implementing recommendations to the new customer connection regulations and overarching policy framework. Our work includes surveying over 1,200 households and professional/institutional energy users, both on and off-grid.
• Prepare long-term electricity pricing forecasts (ongoing) – develop a long-term pricing forecasting model which will assist ERA in evaluating the potential impact of various energy mix and battery storage scenarios on electricity rates paid by customers across the country. This leverages our industry-leading experience in energy and price modelling.

RESULTS

Our approach helped to turn and write a new page of Uganda’s electricity sector’s history. The new tariff methodology contributed to a 15% reduction in rates in April 2025 and will, by design, achieve greater cost-reflectivity and lower year-on-year price shocks for customers. Innovative yet rigorous incentive mechanisms will be applied to help maintain and amplify the efficiency gains of the last two decades.

Going forward, the practical recommendations on electricity access and affordability made by Ricardo are set to improve the livelihoods of millions of households in Uganda. New power trading compliance mechanisms aim to stimulate private sector participation, capacity expansion and demand growth, while price forecasting tools will help to make more informed decisions on future power sector investments.