Opinion: will electricity price increase end Abkhazia's energy crisis?
Electricity prices to rise in Abkhazia
In Abkhazia, the tariff for consumed electricity will almost double. The government says that this decision is one of the measures to “optimize the energy supply to the republic”. JAMnews editor in Abkhazia Inal Khashig talks about the reasons and possible consequences of this step.
Under the new tariffs, which will come into effect on July 1, private consumers will pay 70 kopecks [about 0.8 cents] per kilowatt hour instead of the previous 40 kopecks. For legal entities, the tariff will increase from 80 kopecks to 1.40 rubles [about 1.7 cents] per kilowatt per hour.
The current increase in tariffs for electricity consumption is by no means a surprise.
Ever since the republic faced a severe energy crisis two years ago, which resulted in rolling blackouts across Abkhazia that continue to this day, the government has regularly called for higher tariffs.
However, now that this idea has entered the implementation stage, it has been perceived extremely negatively in the Abkhaz society.
Social media is full of indignation, as the military actions in Ukraine have already dramatically raised the prices on everything – from gasoline to food, and now one will also have to pay almost twice as much for electricity, despite the fact that salaries and pensions remain the same.
“Tariff to the rescue”
Economy Minister Kristina Ozgan, presumably trying to justify herself, describes current price increase ” an attempt to save the Abkhazian energy”, and at the same time openly declares that this is not the limit yet – prices will be increased several times more in order to reach a ‘fair’ tariff by 2025.
The parameters of this ‘fair tariff’ have not yet been approved, however, it will most likely be about two or three rubles [about 25-30 cents] per kilowatt-hour.
It is clear that the existence of such low tariffs for consumed energy could not last forever. In turn, statements of officials who say that in Russia and in Georgia the consumer pays many times more, are not entirely appropriate.
For there is an important circumstance here – in the formation of the cost of electricity for Abkhaz consumers, the most expensive component that significantly affects its increase is missing – the generation costs.
That is, for those 40% of the energy generated by the Ingur hydroelectric power station (Georgia receives the remaining 60% under a gentleman’s agreement concluded immediately after the Georgian-Abkhaz war of 1992-93), which falls to the share of Abkhazia, the republic does not pay a penny.
As a result, the cost calculation includes the delivery of generated energy from the Ingur HPP, the costs of maintaining networks and energy facilities.
‘Bad’ owner
However, the problem of the Abkhaz energy industry lies not in low tariffs, but in catastrophically bad management. To be precise, the state represented by the main monopoly in the energy sector – the state-owned company Chernomorenergo – turned out to be a ‘bad’ owner.
The current annual electricity consumption of small Abkhazia with a population of 250,000 people, where there are no large energy-intensive industries, is approximately 2,500 million kilowatt-hours. Approximately the same amount is consumed by Tbilisi with a population of one and a half million.
That is, the quota that Abkhazia receives from the Ingur HPP is not enough for the republic, and the resulting deficit is covered by the flow from Russia. Moreover, the conditions that ensure this import are a mystery.
Based on the figures, it can be concluded that control over how and for what electricity is consumed is at an extremely low level.
Considering that over the past two years (during one and a half of which cryptocurrency mining was officially prohibited), consumption has grown by almost 600 million kilowatt-hours, there is no accounting for the consumption of electricity as such.
“I used to pay, but now I won’t”
In this regard, the actions of the government look very strange, especially since last year the parliament allocated 100 million rubles as a separate line in the budget for the installation of energy metering devices throughout the republic, but the government itself decided to use this money for other purposes.
The same is the case with the collection of payment for electricity. Now it does not exceed 35%, and with the new tariffs, without establishing a system of effective control over energy consumption, the collection rate threatens to fall altogether.
Thus, according to a survey conducted by the Respublika Telegram channel, almost half of the respondents said that they used to pay for electricity but would not anymore.
I am sure that the government has no particular illusions about the ability of the new tariffs to improve the situation in the energy sector. Even if you raise it to Russian parameters, and, at the same time, leave the system of administration and accounting in the economy at the same level, the situation in the Abkhaz energy industry can only worsen, but not improve in any way.
So… why increase prices?
Then the question arises: what is the logic of the government’s actions?
In my humble opinion, the logic is extremely simple. Of course, not a single responsible official will tell you aloud about it now, but…
When you have a shortage of electricity, and you suddenly legalize the mining of cryptocurrencies, the budget does not receive a penny of income for this, and at the same time, the Abkhazian energy sector completely collapses very quickly. Then you ban it again, but the crypto farms continue to work as usual and the energy sector is shattering. At the same time, the shortage of electricity is compensated for on unclear terms by the flow from Russia. Now we are raising tariffs, but again without any hope of seeing the light at the end of the tunnel …
At the right moment, the government will shrug and say that the state is not able to solve the problem on its own.
Such a “meaningful” strategy of behavior, in my opinion, can only lead to the bankruptcy of the industry and not to its prosperity.
This so-called “reform of the energy industry” is carried out by means of artificial bankruptcy of “Chernomorenergo” followed by denationalization of the energy sector and transfer of its assets to foreign companies. Naturally, these new owners will not disregard their Abkhaz partners either.
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