Electricity Generation: Are Uganda’s Electricity Generating Firms Efficient?

Abstract

High tariffs and low access to electricity in Uganda remains a challenge despite surplus generation capacity. The excess generation is suggests inefficiencies in power generation. Most research has focused on demand side efficiency and limited attention is accorded to supply side technical efficiency, especially using Data Envelopment Analysis (DEA) and Tobit models. Therefore, the study extends DEA and Tobit model to evaluated technical efficiency and examine its drives of efficiency of generation companies in Uganda. Secondary data from Electricity Regulatory Authority (ERA) of Uganda from 2016 to 2023, for 36 generating firms, were analyses using an input-oriented Data Envelopment Analysis (DEA) and Tobit regression to examine the drivers of efficiency.Findings indicate that 22% of the firms are technically efficient while 67% are operating below 50% technical efficiency. This was attributed to aged technologies, high administrative or operation costs, and regulatory challenges.Plant size, workforce size, operations and maintenance costs, and energy source were found to be the major drivers of efficiency at generation level. The study extends the application of DEA approaches and Tobit model to firm-level generation side context. This shows that electricity is not efficiently generated in Uganda. Therefore, the responsible line ministry should put in place better rulesand regulations that are performance based, adopt modern technology, and better management of workforce.Keywords: Technical Efficiency, Tobit Regression, & Data Envelopment Analysis (DEA)