Albania in Grip of Energy Crisis

Friday, 25 January, 2002

The link has been copied

Mariana Çano

Albania's economy is grinding to a halt as the country confronts its most disastrous energy crisis in decades. The public was alerted to the scale of the catastrophe on January 10, when the government announced daily power cuts lasting up to 18 hours.

The country's first ever energy minister, Dritan Prifti, heightened the panic the next day by saying energy reserves would only last another week.

Although he allayed fears two days later, announcing new import deals with Romania, Yugoslavia and Greece that will tide Albania over for a month, the public is resigned to the imminent collapse of the power system.

The unpredictability of the cuts has increased the mood of anxiety and made it impossible for firms to plan any activity. Some factories have stopped work entirely. Others, including vegetable oil and brick producers and bakeries, have warned of price rises.

Government sources have leaked reports that the authorities advised big firms to suspend activity until the end of January. The Kurum iron plant, a Turkish ferro-chromium plant in Elbasan, and the Albpetrol oil corporation have all ceased activity.

In mid-January, other light industry factories warned the state power corporation, KESH, that they were on the brink of shutting down. "All my

factory products are rotting because of the lack of power. We cannot support production solely with generators," one sausage factory manager said.

"The energy crisis may have grave consequences for the whole country's economy," the IMF representative Volker Treichel warned on television, blaming the crisis in part on poor management of the power supply.

The head of KESH, Petrit Ahmeti, wants a compromise so that power reserves do not hit danger levels and businesses remain open. He aims to achieve this by getting firms to reduce production. "It would mean we produce less but will not close down, " explained Luan Bregasi, head of the chamber of commerce and industry.

Meanwhile, the power cuts are also driving away much-needed foreign investors, who have been few in number since Albania experienced a period of street anarchy in 1997.

The trade unions are also angry. One union held a protest rally in Tirana's main Skenderbeg Square, demanding the government's resignation, shouting "We want lights" and banging saucepan lids.

The roots of the crisis date back to the early 1990s but were never tackled as the politicians haggled over who should run the country. A few months back, Prime Minister Ilir Meta said the crisis would be solved by 2003. A few days ago, Prifti conceded it might take until 2004.

Energy experts doubt much will be achieved even by then. They are sceptical about the government's strategy, based on increasing energy imports and building a new hydro-electric power station at Bushati, on the river Drini.

In the meantime, the authorities have urged neighbouring Macedonia to let more water flow into the Drini from Lake Ohrid to increase the level of domestic hydro-electric power production.

The experts say Albania's poverty means it cannot afford to increase imports of energy. Tirana already purchases massive quantities from Croatia, Bulgaria and Greece, at a high price of 3 to 4.3 cents per kilowatt-hour.

Ecologists are also worried by the government's energy plans. They fear the Bushati power station plan will cause long-term damage to the environment.

Altogether, the projected 160 million dollar cost of the plant is seen as a high-risk investment.

None of the government plans addresses the two major problems bedevilling the existing energy network. These are systemic failures that lead to the loss of 40 per cent of product through leakages in the distribution system and the chronic non-payment of bills by consumers.

The government says it has increased the rate of bill collection from 50 per cent a year ago to 80 per cent today. However, the World Bank head for south-east Europe, Christian Poortman, warned that the government needed to wage a continual battle to increase collection of money from consumers.

Poortman said the collection of unpaid bills, alongside a promised 60 million dollars from the Bank, would enable the government to pay for the

construction of another major power station.

He also urged the government to continue the policy of price liberalisation, which the government endorsed several months ago under pressure from the IMF. "The energy price should always be in proportion with the cost of its production," Poortman said.

Families spending up to 300 kilowatts a month will still pay the old price of four leks per kilowatt but over that - the price is double.

The new price has angered many Albanians. "With all these power cuts, how is it possible that I have to pay three times the money compared to before," is a common reaction.

In the meantime, with several weeks of winter weather still ahead, the population is preparing for seemingly endless shortages.

Mariana Çano is reporter with Albanian Observer magazine in Tirana.