Kyrgyzstan’s energy crisis worsens

t('articles.tweet')

* denotes required field.

• Your name *
• Email to *
• Comments *
• CAPTCHA *

Reset

BISHKEK – Kyrgyzstan might see energy prices go up again. After April’s ouster of then-president Kurmanbek Bakiyev, the new government reduced electricity rates for the population from 1.5 KGS (about 3 US cents) per KWh to last year’s level of 0.7 KGS, pledging no more cyclic power cut-offs or rate increases in the near future.

The Bakiyev government explained the 2009 rate increases as needed to cover an energy industry deficit of 1.4 billion KGS. Those price hikes caused mass protests.

The current deficit of 1.5 billion KGS will not lead to energy rate growth, energy minister Osmonbek Artykbayev assured journalists.

But the “socially beneficial” rate of 0.7 KGS is failing to cover costs, Mirgul Aydarova, head of the energy ministry’s rate department, said.

“There are no budgetary funds to subsidise energy-producing companies,” she said.

“If the 0.7 KGS rate remains, we will prevent the power companies from developing and the energy deficit will keep growing from year to year.”

“All that remains is to increase rates, but we must take into account the ability of users to pay for this, which, however, is extremely low,” Aydarova said. “The growth of energy prices was a major reason for growing dissatisfaction in the country (last spring).”

Energy rates are a sensitive matter for the Kyrgyz, analyst Albert Lee agreed.

“People’s reaction to energy rate increases is negative not only because of the accompanying growth of the prices of other goods and services but primarily because people feel they are being deceived,” he said.

The industry budget deficit has increased by 100m KGS, independent energy industry analyst Nikolai Kravtsov said.

“It is not clear why it has grown”, Kravtsov said.

“There is no transparency of figures, which used to be a problem under the previous administration and continues to be a problem today. … But [the government] is unwilling to justify the rates either socially or commercially.”

Aydarova pins the blame on technical and commercial problems.

“Technical losses are connected with power transmission technological flaws, and commercial losses stem not only from energy thefts, as most tend to think, but also from the wear and tear of the electrical grid,” she said.

“Total losses are estimated at 25% today.”

That is the equivalent of US $60m. To overcome the deficit, energy industry expert Bazarbai Mambetov said energy producers will need to reduce expenditures to the absolute minimum needed for maintenance and repairs and cut power losses that occur during transmission.

Officials already have signed contracts to export power to Kazakhstan to patch the budget shortfall, Aydarova said.

“The level of water in the Toktogul Reservoir has reached almost 18 billion cu m, enabling us to earn a profit by exporting energy to neighbouring countries”, she said.

“We have signed contracts with five or six Kazakh companies to provide 530m kWh of electricity at US $0.031 per kWh.

In addition, we have held tenders with several other Kazakh companies for exports of more than 2.33 billion kWh of electricity. In all, we expect to earn US $57m through energy exports.”

Even the World Bank has recommended that countries like Kyrgyzstan raise energy rates, but the government is reluctant to take heed.

“0.7 KGS is indeed too low a rate, but we can't raise it now considering the low incomes nationwide,” Artykbayev said.

“Our policy is to scale it up gradually, as pensions and salaries grow, and move ... very cautiously.”

But the government “is discussing the possibility of raising the rates to 1.3 KGS for those elements of the population who would like to use electric heating systems ... in wintertime,” Aydarova said, a proposal that Artykbayev reiterated July 22.

Most users of electric heating devices will be owners of private houses with three-phase metres installed. Officials switched the metres off from power supply lines in 2008 as the energy crisis worsened.

They will switch the metres on again this winter but will raise power bills for those using the metres.

Officials will have to determine per capita energy consumption norms, charging the higher rate for each surplus kilowatt-hour, but they are still working on those norms and the very mechanism of payments, Aydarova said.

Kyrgyzstan has 54,000 three-phase power subscribers.

“Those who were earlier switched off but are willing to accept the new rate policy will be reconnected at their own expense,” Artykbayev said.

“Prices for everything have gone up since the formation of the Customs Union and last spring’s revolution,” Talaigul Asanova, a resident of Osh, said.

“Now (the authorities) want to raise energy rates, too.”

Lee expressed concern that officials have not yet developed payment mechanisms, adding that nobody knows for certain how much users will have to pay, or for what.

Resolving the problem will require efficient company management and a transparent system for calculating energy rates, he said.

“To make the energy sector transparent, a supervisory board with an ‘equitable’ representation of energy company officials, NGOs, ministerial officials and industry specialists has been proposed,” Lee said.

“But with that arrangement in place, you can easily disregard the energy company officials (who report to the energy ministry) and the government officials. The remaining third of the panel won't be able to decide a thing.”