Why is the tariff adjusted for movement in the foreign exchange rate?
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The electricity tariff has a local currency component as well as a foreign currency component. The electricity tariff is meant to recover costs of investment as well as costs of operation and maintenance (O&M). Most of the investment costs and a portion of the O&M costs of electricity service are denominated in United States Dollars. By implication, most loan repayments and recovery of invested equity are made in United States Dollars to foreign financiers while a proportion of operation and maintenance inputs are also imported. Therefore, in times when the exchange rate is changing, the Uganda Shilling amount to be collected from customers for purposes of meeting investment and O&M-related obligations need to change to realize the target United States Dollar amount, hence the foreign exchange adjustment.