Albania: Gov changes power purchase formula for private electricity producers

, SEE Energy News

According to the government, the high price at which Power utility KESH is forced to purchase electricity from private energy producers is one of the main causes of the financial crisis in energy corporation and the energy sector as a whole.

In 2007 to stimulate private investment, the previous government, adopted a formula which calculated the fee that KESH pays for power purchased from private producers which was at the level of imported price of the previous year, plus ten percent.

Currently, according to this formula private producers sell their electricity to 0.06Eurcent/kwh. In parallel, in the last 5 years, due to the construction of dozens of new hydropower plants production is growing.

The law obliges KESH to purchase all this energy.Combined with the price, which according to the government is high, this has led to strong growth in costs for KESH, which can not feed them the final price consumers, deepening its financial crisis and all sector.

To remedy this, the government proposes a new tariff formula, which is based on the annual average price of electricity in the Hungarian stock exchange, converted to Albanian lek in line with official exchange rate.

In cases where hydropower plants is connected to the distribution network, 10% bonus should also be applied.

According to estimates, by this measure, next year the total cost which KESH pays for electricity from private producers will decrease by 23 million dollars and the effect increases in the coming years. This, according to the Ministry of Energy, except that facilitates the Corporation finances ruined, goes directly to the consumers, because it influences the final price they pay for energy.

The government says this is the first step to stabilize the energy sector, which for years is in a deep financial crisis, with a total debt of 1.1 billion.According to the Ministry of Energy, price change has no legal risks, as there is a change of unilateral contract, the state has with concessionaires.However, it remains to be seen is how this measure will be received from private investors and what financial effects will be created.