Privatization is supposed to be the magic wand for improving services and quality, but is the price too high when it comes to power distribution?
Tirana Times Editorial
TIRANA, Dec 8 – Albania’s Energy Regulatory Entity is still pondering whether to raise electricity prices for the next three years. A final decision is expected this week. The ERE board of commissioners is under pressure from two state owned companies, power utility KESH and transmission operator OST, but it is the privately-owned CEZ Shperndarje distributor that has been pushing pretty hard for the increase, and doing so in a public campaign.
CEZ wants a 4.5 percent increase in electricity prices for next year citing high inflation rates, increased price of imported electricity and rising power meter costs. The problem is CEZ has sought too many increases in the past and already received several hikes and perks. Asking for anything more for the next three years is unjustified.
Power prices since 2005 have increased by 63 percent climbing from an average of 5.71 kWh in 2005 to 9.53 lek kWh today. Yet every year, CEZ and others want increases that end up making Albania’s families a little poorer and businesses’ life a bit harder. CEZ demanded a 24 percent increase in 2009. It got 12 percent. Last year, ERE even gave it a large discount in how much it has to pay KESH for the electricity produced in Albania – another huge perk.
Yet, as analyst Lutfi Dervishi points out in a recent opinion piece, CEZ is now simply being too greedy and careless with its approach. Its chairman told the Albanian media another large reason they want more money is because too many customers still don’t pay their bills and there is still a lot of power lost en route to the customers. By that logic the paying customer has to pay for the ones who don’t and for the company’s inability to fix its power leaks, which means about 40 percent of the power it pays for is never actually sold to a customer.
Dervishi also points out CEZ officials are shameless in saying they would not ask for an increase if the government pays what they say are overdue debts owed by state institutions. Again, what do Albania’s families and businesses have to with the disagreement between a private company and state institutions, and why are they supposed to foot the bill?
The ERE board exists specifically to protect Albanian customers from this type of abuse, but it is also there to make sure distribution operators like CEZ play by the rules.
Starting Jan. 1, 2012, Albanian household and business power consumers will sign a new contract with CEZ which forces the company to provide 24/7 power supply and compensate household or business consumers under the regulation on “quality of distribution service and sale of electricity” unless the power is cut because of force majeure, safety conditions, planned repairs, and cuts originating from the transmission system. Many areas of the country still complain of power issues, however.
To be fair, CEZ has worked in improving power distribution in Albania and the country is a lot better off today than just a few years ago when it faced constant blackouts. And that’s the point of privatization, improving the quality of services and increasing efficiencies. But if the price is too high, and services are not kept up, the whole idea might collapse. We need to look no further than the mid-1990s when the privatization of distributors in several Albanian cities was reversed specifically because it proved that it did not work, Dervishi points out.
Privatization is supposed to be the magic wand for improving services and quality, but what happens if the price get to be too high?
