TIRANA, March 30 – Grid losses in the country’s state-run electricity sector dropped to a record low of 28 percent in 2016 while all three distribution, transmission and production operators posted profits following a favourable hydro-situation and the ongoing payment of accumulated unpaid bills after a late 2014 nationwide campaign to cut off illegal connections and collect hundreds of millions of euros in electricity consumer debts.
Profits by state-run electricity distribution operator, OSHEE, slowed down in 2016 as a majority of debtor consumers have already paid off their accumulated unpaid bills making use of discounts on their late payment penalties through lump sum payments.
The OSHEE distribution operator says it posted profits of about 11.5 billion lek (€84 million) in 2016 following a record 14.9 billion lek (€109 mln) in 2015 when it returned profitable after a failed three and a half year privatization which ended in early 2013. The distribution operator registered losses of 4.5 billion lek (€33 mln) in 2014 and record high losses of 27 billion lek (€202 mln) in 2013 when the company was taken back under state administration following a failed privatization by Czech Republic’s CEZ.
Meanwhile, grid losses, whose overwhelming majority of 90 percent are incurred in the distribution grid, slightly dropped to 28 percent in 2016, down from 31.3 percent in 2015, 37.8 percent in 2014 and a record high of 45 percent in 2013.
Despite a tough nationwide campaign launched in late 2014 when electricity theft was made punishable by imprisonment, non-technical losses in the distribution grid, which involve illegal connections to the grid still account for about a third of losses at about 450 GWh.
The state-run operator says it has recovered about €92 million in debts in the past three years but still has about 105.2 billion lek (€770 million) to collect in accumulated unpaid bills. In the meantime, the OSHEE distribution operator has only slightly reduced its debts to state-run KESH power utility and OST transmission operator as well as other third parties, to about 93.6 billion lek (€685 mln).
Lower grid losses and the favourable situation in the country’s hydro-dependent domestic electricity generation also had a positive impact on public finances, with imports to cover grid losses dropping to about €61 million in 2016, down 60 percent compared to 2013 when the distribution operator was taken back under state administration after a failed privatization by CEZ.
In mid-2014, the Prime Minister Rama’s Socialist Party-led government agreed to pay back CEZ €95 million in annual installments until 2018, an amount slightly lower to its initial investment in the Albanian distribution system, but half of the €200 million CEZ had warned it would claim in international arbitration proceedings. The Supreme State Audit said the Albanian government lost about €479 million from the deal, including €352 million the CEZ unit in Albania owed to state run KESH and OST operators in electricity purchases and transmission fees.
The OSHEE distribution operator says some 332,000 debtor consumers have benefited discounts in their late payment penalties since late 2014. Another 68,000 are expected to benefit until the next June general elections, taking the total amount pardoned in late payment penalties to $230 million.
Energy Minister Damian Gjiknuri says the electricity sector reform initiated in late 2014 has freed the state budget of a huge burden that risked the collapse of public finances, saving hundreds of millions of euros through lower need for support by the central government.
However, studies have shown the rather aggressive nationwide in the electricity sector continues having a negative impact on domestic consumption as dozens of thousands of debtor households and businesses continue to pay in monthly instalments.
Although rich in hydro resources and covering about 80 percent of electricity needs through domestic hydropower plants, Albania faces one of the region’s highest electricity prices, especially for businesses.
State-run power corporation KESH which produces about three-quarters of the country’s domestic electricity also posted profits of 1.7 billion lek (€12.4 million) in 2016 thanks to favourable hydro situation allowing the utility to increase exports.
Meanwhile, OST transmission operator recorded profits of about 1 billion (€7.3 million) in 2016.
The improving financial performance has allowed the three state-run companies to invest about 45.6 billion lek (€333 million) in the past three years, mainly in the dilapidated distribution grid, but also in interconnection lines with neighboring countries.
The favourable hydro-situation and the launch of several new private and concession hydropower plants, including the Banja HPP by Norway’s Statkraft in late 2016, gave a boost to domestic electricity production last year, according to energy regulator, ERE.
The wholly hydro-dependent domestic electricity generation rose by 21 percent to 7,136 GWh in 2016, meeting the overwhelming majority of the country’s needs.
Meanwhile, private and concession hydropower plants increased their share in the domestic hydropower production by 4 percent to 28 percent with a production of 2,000 GWH in 2016.
