This content is from: Local Insights

Albania: Salvaging the power sector

Besnik Duraj
For more than two decades, the Albanian electricity power sector has been facing critical financial and operational problems, as a result of a number of issues and ensuing chain reactions. The most characteristic example is end consumers who do not pay the power distributors, who in turn do not pay the transmission operators, and so forth up to the power producing companies. With the entire electricity power system in a debt downward spiral, a major objective of the Albanian Government for 2015 is the reformation of the power sector by drafting a new bill. The new draft bill was approved during the Council of Ministers meeting on January 14 2015 and sent to the Parliament for debate and approval.

Apart from financial goals, the said bill aims at fulfilling Albania's obligations in the context of the Energy Community Treaty. It seeks to harmonise the local power sector legislation with EU directives and rules, with a particular focus on the Third Energy Package for gas and electricity markets.

The reformation seeks not only to settle financial problems and issues between market players, but also to enable the fast growth of an effective, reliable and stable market, vital for the Albanian economy and its citizens' wellbeing.

The new bill has been drafted with the intention of avoiding future deadlock situations with private operators, as was the case with CEZ (the Czech distribution company). Following the revocation of its distribution licence, what was left of the local distribution company faced a complex and difficult situation that affected all operators, leaving the electricity market even more vulnerable.

The most important changes of the new bill are briefly presented below.

One significant change introduced by the bill is the opportunity given to more entities to operate as distribution companies, in comparison to what is stipulated in the current law, which provides only for a single operator. The liberalisation of this segment of the market will be feasible as long as it proves to be efficient and cost-oriented.

Article 72 of the bill entitles both the transmission operator and the distributor, upon approval by the Energy Regulator Entity, to engage independent operators to carry out the measurement of electricity consumption. In addition, the bill envisages the implementation of a smart metre system that will enable end consumers to take advantage of its potential benefits and proactively participate in the power supply market.

The supply of end consumers with electricity may be performed by any duly licensed entity based on electricity prices set by the Energy Regulator Entity for the universal service obligation, and on freely agreed-upon prices between parties in other circumstances. Consumers are granted the right to request a change of supplier (local or foreign) without any additional cost. Medium and high voltage non-family consumers are entitled to use more than one supplier at the same time. The regulatory body will initially settle any disputes that may arise regarding the change of supplier.

In order to provide additional safeguards to guarantee the payment for electricity consumption by the end consumer (alongside the already existing legal means) the bill entitles operators to mortgage the real estate that is being supplied with energy under the conditions set out by the law. The following conditions should also be met: (i) the debt of the family consumer should exceed L150,000 ($1200); and, (ii) the debt of the non-family consumer should exceed L2,000,000. Since the sale of real estate is prohibited when there is a mortgage on it, this measure should discourage debtors to avoid paying debts by selling the respective real estate, and protect new owners from costly proceedings.

The new bill emphasises the importance of an electricity power market where traders and suppliers may freely and directly engage in the sale and purchase of energy. The market rules will be approved by the Energy Regulator Entity within one year of entry of the bill into full force and effect.

The new bill sets high goals in an attempt to finally salvage the electricity power sector in Albania, as well as to modernise the entire market. However, its hopefully positive effects in the market will not be felt purely in the immediate, but rather in the medium term future.

Besnik Duraj

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