Albanian PM pledges to clear power sector debts

By bne IntelliNews November 4, 2014

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Albanian Prime Minister Edi Rama said on November 3 that the government is working to reform the power sector, and aims to wipe out its outstanding debts during his current term in office. The World Bank estimated in September that Albania’s power sector has a deficit of around $550mn.

Rama said that his government had managed to avert a crisis in the sector during his first year in office, according to the Albanian government website. He blamed many of the problems the sector is facing on the previous governments for delaying reforms. “Certainly a delayed reform is a painful reform and the more delayed, the greater the pain,” Rama told officials at the signing ceremony for a $150mn World Bank loan for the sector.

The government has wide-reaching plans to reform the sector, including reducing dependence on hydropower generation, cutting losses and introducing new legislation in line with the EU’s Third Energy Package.

“Our plan is very clear,” Rama said. “The long term objective is that in five years, we will turn our energy [sector] from a major embarrassment into a bonanza ... to heal the entire chain of companies within the system, causing the energy to be a real source of economic growth for our country.”

Currently, the sector is “facing serious financial and operational challenges”, according to the World Bank. At around 42%, technical and commercial losses are the highest in the region because of a combination of non-payment of electricity bills and poor collection rates. With the Vlora thermal power plant currently out of action, almost all Albania’s electricity is supplied by hydropower plants, which forces the country to rely on emergency imports during dry seasons.

The electricity market is highly monopolised, according to a report from the EU Energy Community. State-owned Korporata Elektroenergjitike Shquiptare has a monopoly position in the wholesale market, while the Operatori i Shperndarjes se Energjise Elektrike (previously CEZ Shperndarje), is the dominant player in the retail market. A third state-owned company, Operatori i Sistemit te Transmetimit, operates the country’s transmission system. Under current legislation, just seven major power consumers have the right to choose their own supplier.

Albania’s “largely non-compliant legal framework, the unsustainable volumes of unpaid electricity as well as the critical financial situation of the power companies remain problems of serious concern", the Energy Community says.

The government’s reform programme for the sector includes plans to adopt a new Power Sector Law to replace the current law adopted back in 2003. The legislation, which is expected to bring Albanian legislation into line with the EU acquis and transpose the EU’s Third Energy Package, is under discussion within the energy ministry.

The World Bank announced on September 29 that it had approved $150mn funding for the Power Recovery Project in Albania, which will support power sector reforms in the country, with a focus on improving the reliability of the electricity supply and increasing the sector’s financial viability. World Bank senior energy specialist Salvador Rivera said when the loan was announced that the project “is a first, necessary step to support sector reforms, leading to improved quality of service and reliability".

The settlement of Albania’s long-standing dispute with Czech power utility CEZ also helped to pave the way for energy sector reforms as well as removing one of the main obstacles to Albania gaining EU candidate status. Tirana agreed in June to pay back €100m to CEZ to compensate the Czech company for its investment into CEZ Shperndarje.

Rama’s current focus is on prosecuting electricity thieves in an attempt to reduce network losses. To reduce this chronic problem, Tirana has set prison sentences of up to three years for anyone found guilty of stealing electricity.

On October 2, he used his Facebook page to commend the courts for jailing those responsible for siphoning off electricity, but called for efforts to target large-scale wealthy users, rather than the poor. “The poor are not the cause of the destruction that has given energy theft a place in our society, [it is] those who steal power even though they have the money to pay - primarily those who have large businesses and commercial units,” Rama wrote.

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