Regulator examines requests for electricity price hike

The electricity distribution operator has applied for 60 percent increase in electricity prices for household consumers, proposing the lift of the 300 kWh threshold and the application of a unified tariff of 12.32 lek/kWh (Euro 0.086).
TIRANA, Nov. 18 – All three state-run energy operators have applied for higher electricity prices with the Albanian energy regulator which is expected to approve a hike for both household and business consumers in 2015.
The electricity distribution operator, rebranded OSHEE after a deal with the Czechs, has applied for 60 percent increase in electricity prices for household consumers, proposing the lift of the 300 kWh threshold and the application of a unified tariff of 12.32 lek/ kWh (Euro 0.086).
The KESH power corporation has also applied for a 50 percent price increase in the electricity it sells to OSSHE, proposing 3.34 lek/kWh (Euro 0.023 ) tariff, up from 2.2 lek/KWh currently.
Meanwhile, the Transmission System Operator (OST) has requested a 10 percent increase to 0.73 lek/kWh (Euro 0.005) from 0.65 lek/kWh currently.
In its 2015 budget, government says it has allocated 1.6 billion lek (Euro 11.3 million) in compensation to people in need for the expected increase in electricity prices in 2015 but has not announced the new unified rate yet after confirming it will lift the 300 kWh threshold charging lower tariffs.
Power prices for both household and business consumers are set to undergo an unavoidable increase next year as part of a reform in the country’s electricity sector which causes the state budget around $200 million in losses.
“We will set an average price which will no way affect Albanian households,” Finance Minister Shkelqim Cani has said.
However, the reform would affect around three-quarters of Albanian households with a monthly consumption of 300 kWh. Estimates show that a household with 300 kWh monthly consumption will pay an extra of around 1,000 lek (Euro 7) under the new average tariffs expected at a unified 9.53 lek kWh.
An annual report by energy regulator ERE shows the number of Albanian households with a monthly consumption of 300 kWh rose to 76.3 percent in 2013, up 1 percent compared to 2012. Household electricity consumption accounted for 57.6 percent of the total in 2013.
The increase in electricity prices has also been recommended by the IMF and the World Bank which are assisting the Albanian government bring back the economy to sustainable growth after moderate growth of around 2.6 percent annually during the 2009-2013 crisis years compared to a pre-crisis decade of an average 6 percent, when it was one of the best performers in the region, according to INSTAT.
Currently, Albanian households pay electricity bills under a two-tier price level which charges them 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 have increased by 63 percent climbing from an average of 5.71 kWh in 2005 to 9.53 lek kWh currently.
In Albania power prices, which take a considerable part of households’ monthly income, have remained unchanged since the end of 2009 when the Energy Regulatory Entity (ERE) approved the latest increase in electricity tariffs. Yet, the electricity prices in Albania are relatively high considering that Albania has the lowest GDP per capita expressed in purchasing power standards.
Albania’s household electricity prices are higher than in six European countries, although the country’s GDP per capita, an indicator of the standard of living, is among the lowest in Europe, according to data by Eurostat, the statistical office of the European Union. At Euro 11.5 per 100 kWh, Albania’s household electricity prices including VAT at 20 percent, are higher than in Serbia at Euro 6.1, Macedonia at Euro 7.8, Bosnia and Herzegovina at Euro 8, Bulgaria at 8.8 Euros, Montenegro at 10.5 Euros and Iceland at 10.9 Euros.
The Albanian hydro-dependent electricity system is now wholly state run after a deal settling the dispute with Czech giant CEZ group which will be paid back Euro 95 million for 76 percent of the shares it bought in the Albanian electricity distribution operator in 2009 for Euro 102 million.
INSTAT data shows grid losses, the overwhelming majority of which belong to distribution network losses, dropped by 7.3 percent to 1.546 GWh in the first half of this year, accounting for 38.4 percent of total electricity available for consumption. Technical losses due to the dilapidated grid remained almost unchanged at 37 percent of distribution network losses while non-technical losses (thefts) were down by 8 percent accounting for around two-thirds of distribution losses.