TIRANA, July 1 – Albania’s Energy Regulatory Entity (ERE) has lowered power prices for Czech-owned distribution operator CEZ Shperndarje by 23 percent after losing a legal battle with the company on the bad debt and continuous complaints about the unaffordable prices risking investments and CEZ’s presence in Albania. In a decision taken last weekend, ERE decided to lower power prices state-run corporation KESH charges on CEZ to 2.2 lek kWh, down from 2.84 lek kWh since Jan. 2012 when CEZ suffered a 90 percent increase in tariffs.
While CEZ Shperndarje will see its profits rise and be able to continue with its investment plans, power utility KESH, already in severe financial straits because of a sharp drop in hydroelectricity generation, will be the hardest hit from the latest decision which will have its impacts extend from Jan. 2012. KESH will be stripped of USD 33 million a year from the decision, experts estimate.
An ERE legal director said KESH will be subsidized by government in times of lack of domestic hydro-electricity production and expensive imports as happened in early 2012. Last December, government authorized KESH to borrow 4.5 billion lek (around Euro 32 mln) for electricity imports, and later awarded the company 2 billion lek (Euro 14 mln) from its contingency funds to handle imports for February and March as an emergency situation caused by heavy snowfall was created in the country’s northern and southeastern areas.
A recent Tirana District Court decision in favour of CEZ Shperndarje recognizing the company’s bad debt stands at 16.5 percent and not 14 percent as ERE claimed and a visit by Czech Prime Minister to Tirana earlier this year influenced on the decision to lower power prices for the company which has been operating in Albania since three years after taking over the majority stake of former OSSH state-owned distribution operator.
The decision is expected to considerably improve the finances of CEZ Shperndarje which had warned it could face losses of up to 10.15 billion crowns ($523 million) over the next three years because of the ERE decision on electricity tariffs.
Under the ERE decision dated Dec. 15 CEZ Shperndarje was forced to buy electricity from KESH at 2.83 lek kWh starting from Jan. 1 2012, up from 1.48 lek kWh in 2010, making it 91 percent more expensive for CEZ.
CEZ Shp쳮darje, a subsidiary of ɅZ Group since 2009, owns and operates the entire 110kV distribution network in the country for a total length of 69,000 kilometers, serving around 1.1 million customers. CEZ took over former state-owned OSSH in March 2009, when it signed a contract with the Albanian government buying the majority 76 percent stake for 102 million Euros.
Consumers not affected
Both business and household consumers are not affected by the latest ERE decision. A previous ruling by the energy decision-making body in late 2011 decided to keep power prices for business and household consumers unchanged for the 2012-2014 period turning down requests for price increase by CEZ Shperndarje.
ERE officials say they will continue applying the two-tier price level, under which Albanian households will pay 7.7 lek/kWh for a consumption of up to 300 kWh a month and 13.5 lek for each kWh they consume above the 300 kWh threshold (VAT excluded). Average tariffs for business consumers vary from 8.5 lek/ kWh to 10 lek kWh based on low or medium voltage power access. Meanwhile, state institutions pay 11.5 to 14 lek kWh.
Power prices during the past six years since the ruling Democratic Party came to power have increased by 63 percent climbing from an average of 5.71 kWh in 2005 to 9.53 lek kWh currently
The new contract obliges CEZ to provide 24/7 power supply and compensate household or business consumers and respect power quality parameters which vary from +/-5% for Tirana, +5/-15% for other urban areas and +5/-20% for rural areas.
Opposition against
Few days after the ERE decision, the opposition Socialist Party described the decision as a secret deal between government and the Czech-owned power distribution company against the interests of Albanian citizens.
“This government is continuing giving away money from Albanian taxpayers for close clientelism against the interests of the public, consumers and the state budget,” said Socialist Party MP Arben Ahmetaj. According to him, KESH will lose USD 33 million a year or USD 100 million in the next three years from the tariff cuts.
High power prices
While Albania’s purchasing power ranks the lowest in Europe, power prices, which take a considerable part of households’ monthly income, are higher than in six EU-members and aspirants, according to a report released by Eurostat, the statistical office of the European Union. Data show that at 11.6 Euro per 100 kWh in 2011, Albania’s power prices stand higher than EU members Bulgaria, Estonia and Romania, acceding Croatia as well as Turkey and Bosnia-Herzegovina whose rates vary from 7.9 Euros to 11.5 euros.
The rather higher prices Albanians pay for electricity are also confirmed in the annual report of the Energy Regulatory Entity (ERE) measuring both household and non-household power tariffs in Central and Eastern Europe.
Data from this report show Albania’s household power prices stand at 8.06 eurocent/kWh, lower than the average of 9.37 Eurocent in the region but relative higher than in six other countries. Power prices in Ukraine, Kosovo, Russia, Bosnia-Herzegovina, Macedonia, Serbia vary from Eurocent 2.64 to 6.61/kWh. Albania’s power prices for non-household consumers stand at 8.2 Eurocent, higher than the same six countries.
Hydro situation normalizes
Albania’s power corporation says water levels in the country’s major hydroelectricity plants in the northern Drin cascade ensure uninterrupted supply of power in summer. The resumption of electricity exports secured cash-strapped KESH Euro 15.5 million in May and June 2012.
In early 2012, KESH, which has to provide 70 percent of power needed for consumption to CEZ, faced major problems securing electricity imports and was awarded loans by the government.
Data show water flows have considerably increased in all major Fierza, Koman and Vau i Dejes reservoirs. All three HPPs were reaching their minimal water levels in early 2012, forcing KESH and distribution operator CEZ Shperndarje to make huge imports at very high tariffs to meet the country’s needs.
