IMF clueless about thermal power distribution in Romania

The thermal power distribution system in Romania needs an improvement of the fiscal discipline in the sector, speeding up the installation of meters in individual households and firmer steps taken against those failing to pay in time, a report of the International Monetary Fund titled “The enigma of the thermal power distribution in Romania” shows.

“The system suffers from a lack of discipline in payments on all levels. The overall bill collection rate for all the thermal power producers has remained disappointingly low, that is less than 80%. The losses totalled 0.25% of GDP in 2002 as a result,” IMF’s experts say.

According to IMF’s estimates in the latest agreement concluded with the Romanian authorities, the losses and the subsidies in the energy system amounted to $1.1bn in 2002, that is 2.5% of GDP. Projects for this year point to an increase to 2.9% of GDP, namely to $1.56bn.

Thermal power producer Termoelectrica, the main company in the thermal power sector anticipates overall losses for the sector to reach $45 million this year compared to $84 million in 2002.

The thermal power distribution system (which includes the local regies autonomes or any other operator in this business) is most inefficient and costly, due to the technical losses and to the weak incentives of the market, a recent survey by World Bank’s experts shows.

The centralised thermal power distribution system in Romania is the most common type of heating distribution in urban areas.

The heat is generated by stations running on coal, natural gases or diesel oil and is distributed through pipes to the blocks of flats, the IMF representatives say.

In addition, the prices are regulated by the Government, which grants subsidies worth 0.66% of GDP to the producers in the sector and to the households using the centralised system and spending more than 10% of their net income on heating bills.

The household consumers have no way of choosing how much heat to get because of the lack of flow regulation systems and meters.

At the same time, the distribution of heat among flats is uneven and entails substantial losses and little incentives for saving power. IMF’s experts also warn that subsidising producers discourages cost-cutting measures and efficiency improvement investments.
adrian.mirsnau@zf.ro