Legal Battle As Uganda Takes Back The Power

Umeme, an electricity distribution company, announced on 2 June that it will take its quarrel with the Ugandan government to an arbitration court in London, after weeks of unsuccessful negotiations. Umeme ran Uganda's distribution network for twenty years until its contract expired in March. The company says that it is owed 292m for the unrecovered costs of its investments. The government has already paid out 118m and says it owes nothing more, unless additional costs are revealed by an ongoing audit.

The dispute follows the government's decision to take control of electricity distribution back into state hands - the latest twist in a long-running debate about who should pay, and who should profit, in the quest to power Africa. Since the 1990s the World Bank, in particular, has been urging African governments to break up state utilities and bring in private capital. Uganda became the first country in Anglophone Africa to turn over electricity distribution to a private operator when it granted a concession to Umeme in 2005.

But the government now thinks that the best way to bring down electricity prices and widen access is to return responsibility to the Uganda Electricity Distribution Company Limited UEDCL, a state-run firm, at least for a few years until another private investor is found. The decision will be watched by other countries, including Ghana, which is preparing to invite private participation in its own distribution network.

The dominant model of electricity reforms draws inspiration from the policies adopted in the 1980s by free-market governments in Chile and the UK. National utility companies, which produced power and delivered it to households, would be unbundled. Separate firms would handle generation at power plants, transmission along high-voltage power lines and distribution from substations to users. The markets would be opened to private players.

Proponents argued that this package would enable competition, attract investment and enhance efficiency. Sceptics worried that tariffs would rise and that any gains would be captured by foreign shareholders, not by citizens.