The way and speed with which the Government of the Republic reacted by subsidizing part of the price increase serves more to ease dissatisfaction than to reduce inequality. In other words, it aims to stop the reaction, not the impoverishment.
The increase in electricity prices that takes effect today, based on yesterday’s decision by the Energy Regulatory Office (ZRrE), will be a serious financial challenge for the citizens of Kosovo — especially when considering the evident and historically layered inequality, which has been further intensified as a result of the pandemic.
This decision by ZRrE presents several problems. First, it does not appear to have taken into account the affordability of electricity prices for citizens as a factor. This violates one of the most important principles that should underpin Universal Supply — access to electricity. Unaffordable prices restrict access to energy. Second, the block tariffs, being limited to only two categories (below 800 kWh and above 800 kWh), neither represent meaningful tariff bands that would improve affordability nor provide a concrete incentive to increase energy efficiency. Third, the decision made yesterday, in the absence of a clear explanation of the logic that led to this point, gives the impression of arbitrariness.
After the initial proposal of the new tariffs by the Energy Regulatory Office (ZRrE), various organizations and institutions submitted their comments. Some of them requested the addition of a third tariff block instead of maintaining only two. Others called for a reduction of the Maximum Allowed Revenues and a review of the profit margin for the Supplier, by examining whether the latter had used the Maximum Allowed Revenues to secure long-term electricity purchase contracts. There were also demands for the new tariffs to be non-discriminatory and for the necessary increase to be distributed more equally among all consumers.
So far, ZRrE has provided no explanation as to whether these recommendations have been taken into account, or why the ones that were not considered were disregarded. In fact, with the exception of the Office of the President, none of the institutions have responded to clarify whether their comments were acknowledged.
The aforementioned requests — especially those presented by the Ministry of Finance and the Ministry of Economic Development — were concrete and, we believe, well-calculated. This means they were implementable. If they were not taken into account, why not? And if they were not, why is there no response?
The way and the speed with which the Government of the Republic has reacted — by subsidizing a portion of the price increase — aims more at reducing dissatisfaction than addressing inequality. In other words, it seeks to prevent public reaction, not poverty. Because inequality remains. The block tariffs mistakenly treat energy consumption as an indicator of wealth — assuming that those who consume more have more money. This is not true. Or at least, not necessarily true. Those who have no alternative means of heating and are forced to rely on electricity are not the wealthy strata of Kosovo. Those with inefficient appliances are not the wealthy strata of Kosovo. Those who consume more are often those who are in greater need.
According to the Law on the Energy Regulatory Authority (Article 15), the Energy Regulatory Office (ZRrE) is obligated (point 1.3) “to monitor and improve the security of supply of electricity, thermal energy, and natural gas, including ensuring the maintenance and construction of necessary generation, transmission, and distribution capacities, storage capacity, and interconnection capacity.” Based on this, it has been and remains the duty of ZRrE to ensure that all links in the energy system chain are prepared to face the anticipated energy crisis. In this regard, ZRrE, the Government, and all parts of this system have failed and reacted very late. Now, the cost of their failure is being passed on to the citizens.
February 9, 2022