While hundreds of citizens ended up behind bars for “energy theft”, the public companies of the energy sector, KESH, OSHEE and OST, have been stuck in a spiral of debts between themselves and third parties. Data from the Ministry of Finance
show that at the end of June this stock reached the historical record of 156 billion ALL.
Author: Esmeralda Topi
In 2015, Muharrem Bajrami from the village of Dragostunjë in Librazhd, ended up behind bars for illegal energy connections. Unemployed and unable to pay for the energy spent, he had accumulated a mountain of debt.
“I owed 42,000 ALL to OSHEE and they cut off my electricity. I reconnected the power and for that reason I spent 9 days in prison”, says Muharremi, who adds that he quickly left the cell with the help of the lawyer.
Muharrem Bajrami, November 2022
As soon as he got out of prison, the first thing he did was pay off his debts to OSHEE by borrowing money from relatives.
“I stayed without electricity for another month, until I found money to pay off the debt, but I don’t dare put my hands on the electricity poles anymore”, he tells INA MEDIA.
In 2014, as part of an Energy Sector Recovery Plan, the government launched an “uncompromising” campaign, as they would call it at the time, against energy theft. As a result, thousands of illegal connections in the distribution network were cut off, but, on the other hand, hundreds of citizens ended up behind bars.
Qamil Zela was arrested at the height of the campaign, on October 28, 2014. Two months later, on December 28, 2014, Zela ended his own life in the Rrogozhina prison in a grave psychological state.
Qamil Zela in Rrogozhina prison, November 2014
“Dad was waiting for the prosecutor’s case, but the latter, Skënder Mestani, postponed three hearings without reason. Dad was upset, plus the stress in there and the ego. Imagine in prison, a 52-year-old man who has worked all his life with his own sweat and has never had any problems with the police”, – the son of Qamil Zela, Besmir Zela, tells INA MEDIA full of sadness, on the eve of 8- the anniversary of the loss of his father.
of the arrest in flagrancy noted that the two shops of the deceased, which were on the first floor of his apartment in the neighborhood “Skënder Libohova”, Lushnje, were supplied with energy through the contract connected to the house, that is, as a family consumer and not as a business and were not equipped with special gauges.
The family members deny that they stole the electricity. They claim that the energy passed by the clock and was paid for every kilowatt spent, but the impasse was created due to special procedures for buildings in the process of legalization.
“Dad had asked to set a separate meter for the shops at the OSHEE in Lushnja, but they had not brought the meter; this is due to the fact that the object was still in the legalization process and some additional documents were needed, but we had paid the energy, all the bills. We had not stolen anything”, Besmir continued.
The relatives of the deceased sued OSHEE, the Directorate of Prisons and the Prosecutor’s Office, alleging that their actions and inactions caused the death of the 52-year-old.
“From the criminal point of view, they rejected everything, at every court level. Now we only have the issue of compensation for the damage in the Administrative Court”, – affirms Besmir Zela.
The data examined by INA MEDIA show that from 2015 to October of this year, the State Police has arrested 1,489 people due to illegal electricity connections.
Also, the General Directorate of the State Police informs that from 2015 to October 2022, 6,556 cases of electricity theft were recorded, with 6,665 suspected perpetrators.
The other side of the coin
In parallel with the action against ordinary people, the government, through the New Energy Sector Replacement Plan, decided to discipline other debtors, budgetary and non-budgetary institutions, which inherited a mountain of debt, not only towards OSHEE, but also between them. In 2013, the socialists found almost 9 billion ALL in unpaid invoices from public institutions and other state entities to the OSHEE. The left party used this chain of debts as a symbol of the mismanagement of the sector during the previous democrat government.
Closing the financial gap that the electricity sector produces every year within the next 5 years and transforming the energy system from a debt generating system to a self-sustainable and liquidating system, was the first specific objective in the Energy Recovery Plan.
In the first years of application, this plan was successful and at the end of 2014, the debt of non-budgetary enterprises fell to 3 billion ALL, while that of budgetary entities fell to 2.7 billion ALL. In an effort to establish financial discipline even among the debtor institutions, the Ministry of Finance dictated through an order to the latter, not to pay the salaries of the employees without first paying the electricity bill. For one year, the order worked, since at the end of 2015 the debt of budgetary and non-budgetary entities to OSHEE fell to 5 billion ALL, from 8.9 billion ALL, at the end of 2013.
However, the reform not only stopped in its tracks, but it created in the following years a debt almost 3 times higher. Since that time, the budgetary and non-budgetary sectors have returned to the practice of non-payments.
The data provided by INA MEDIA until the end of June of this year, show that the debt that the budgetary and non-budgetary institutions have towards OSHEE has reached 29.75 billion ALL, three times higher than the debt that the socialists found in the year 2013.
Facsimile of mutual obligations between energy sector enterprises, June 2022
For experts, the creation of debts is a repeated story, which comes to the fore in crisis situations, such as the current situation. According to them, this problem has never found a final solution, since no importance has been paid to financial discipline, which is vital for a sector like energy.
“When this discipline is not achieved, the reasons for support should be based on development strategies that break the vicious behavior and don’t make these behaviors more complicated. For example, water does not justify the costs and the government has a legal obligation to provide it. This cannot happen a priori, without a strategy “,
Enton Duro, an expert on finance and economy, tells INA MEDIA.
But, on the other hand, it turns out that KESH, OST and OSHEE themselves are in debt. 40 billion ALL are the debts that these institutions have to the Ministry of Finance, as they have failed to repay the obligations on the debts and the guarantees issued for them by the state budget. Ironically, during 2022 and the previous year, the government has given KESH budgetary support in the amount of 40 billion ALL.
“This situation is unacceptable, especially in this period, when citizens are told about the crisis. If the companies were financially sound, without these mutual debts, the government could distribute this money to the needy, helping them cope with the crisis of crazy prices. In this way, they would not feel the cost of the energy crisis, in a country that has no connection with Russian gas”, – argues Azmer Duleviç, an expert on energy issues, for INA MEDIA.
“With this data, investments in the improvement of the energy sector will be absent from year to year. Those who are affected are the citizens, who, if they don’t pay the energy bill, incur criminal prosecution, while the state institutions abuse the funds and the electricity”, says Duleviç.
Water companies, the biggest debtors
The Water Supply and Sewage Enterprises are officially the main “debtors” of the Energy Distribution Operator. The latest reports of the energy distribution company, provided to INA MEDIA, show that the company’s liabilities amount to ALL 24.47 billion, of which half are interest arrears.
The water companies of Durres, Vlora, Patos, Fier and Kavaja hold 60% of the total amount. In the conditions when the obligations of these enterprises to OSHEE only increased, the government undertook another plan of measures to put an end to this phenomenon. In December 2020, a joint order was approved between the Ministry of Finance and the Ministry of Energy, aimed at reducing arrears in the energy sector.
Durrës, UK Sh.a.
8.28 billion ALL
Vlora, UK Sh.a.
2.60 billion ALL
Patos, UK Sh.a.
1.79 billion ALL
Fier, UK Sh.a.
1.42 billion ALL
Kavaja, UK Sh.a.
1.15 billion ALL
Debts of Waterworks to OSHEE
About two years after this plan, the stock of obligations, not only has not decreased, but has increased significantly, and the waterworks are a typical case of its failure. The government had planned to reduce their debt to OSHEE to 15 billion ALL, while these obligations today amount to 24.47 billion ALL.
“A part of these companies are connected to medium voltage or 35 kW, which are in the free market and there is a change in the price of energy; it is higher than in 2021. This makes the liquidation part a little more difficult”, – the director of the National Agency of Water Supply, Sewerage and Waste Infrastructure (AKUM), Klevis Jahaj, says to INA MEDIA.
However, the obligations of water utilities have not started in 2021. The accumulation of arrears has continued the upward trend from year to year, mainly due to the low performance of most companies, so in the face of plans that failed, in May of this year the government started the so-called process of reforming and reorganizing the sector.
The head of the National Water and Sewerage Agency emphasizes that they have drawn up a risk plan, through which they aim for the new companies to be able to cover a part of the administrative costs, which are problematic for the existing water supply companies.
“We anticipate that by the end of the year we will have a schedule of old obligations and full payment of the invoices that will be issued for these companies. We have started this process, based on increasing the performance of the water supply and the sector itself. We are convinced that we will also schedule the old debt, but also not to create a new one, that is, by paying the bills”, – the head of AKUM, Jahaj, further asserts.
The Durrës water company accepts the large avalanche of debts, but attributes it to the high cost of pumping drinking water and dirty waters 24 hours a day. The company clarifies that it has started for several years to liquidate a part of the invoices, but the generated income does not leave many possibilities for paying off the entire debt. However, they hope that with the new reform, where this company has become 51% owned by the Ministry of Infrastructure, they will have facilities in electricity payments.
“It is necessary for the water supply companies to be billed at a more affordable price by the [electric] company, given that water is vital. On the other hand, it is impossible for the company to double the fees for subscribers, to cover the costs”, – explains the administrator of UKD, Kasem Bejko. Despite this gloomy situation, Bejko is optimistic, because the implementation of the agreement with the French government of 61 million euros is expected to start soon, which will reduce the losses in the network.
Even the municipalities do not pay their energy
Most of the municipalities in our country are in debt, and some of them are even at risk of bankruptcy. A large part of the debts is occupied by unpaid electricity bills.
Lights on in the morning of November 5, 2022 at the “Naim Frashëri” school, in Tirana
This photo was taken on November 5, 2022, in Tirana, near the “Naim Frashëri” school. Although it is a holiday, the school lights are on, while the Municipality of Tirana is one of the four largest debtors of OSHEE.
The data provided by INA MEDIA show that until the month of June ,the unpaid obligations of 61 municipalities to the Electricity Distribution Operator have reached 4.6 billion ALL, of which 2 billions are interest arrears.
Obligations of municipalities, 2007-2022 (June)
Referring to the figures, Kavaja, Tirana, Durrës and Dibra are the four municipalities with the highest debt to OSHEE. Meanwhile, the Municipality of Has and the Municipality of Dimal occupy the smallest share in the total debt. But what stands out is that these two last local government units have started to fail in the payment of their energy bills in the last two years.
Obligations of municipalities to OSHEE
Municipality of Kavaja 948,338,257 ALL
Municipality of Tirana 909,879,615 ALL
Durrës Municipality 839,835,155 ALL
Municipality of Dibra 379,464,049 ALL
The President of the Association of Municipalities of Albania, Agron Haxhimali, lists some reasons for the debts created by the local government. At the top of the list, according to him, is the lack of financial discipline on the part of the central government, which has allowed the accumulation of such a large debt.
“Above all, there is a fundamental lack of financial discipline on the part of the municipalities, intermediate monitoring institutions that depend on the government, such as the Treasury and its branches in the districts, which have allowed spending without having a secure monetary source and in banks. Also, lack of discipline from the responsible ministry and the central government”, says Haxhimali.
Among the reasons, which according to him have led to this negative balance, is the entire financing formula for municipalities, which has made the latter financially unstable, due to weak governance, weak institutional capacity, financial management weakness, corruption and political instability. However, according to him, even the municipalities themselves have preferred to act as if they do not recognize this obligation.
“I am convinced that this situation mainly came from the low interest of the local units to pay for the energy, which they saw as a state commodity and sea water”, Haxhimali emphasizes.
The solution, according to him, is the purchase of this debt by the government, which would make the local units financially healthier.
“8 years after the territorial reform, we are faced with the fact that the reform did not consolidate the municipalities as financially stable institutions, so the ideal solution would be to have the debt bought by the government, and the local government units to start their activity without this burden”, – he emphasizes for INA MEDIA – the proposal was made since 2015.
The spiral of mutual debts
Public companies in the energy sector have a mountain of debt between themselves and third parties. Data from the Ministry of Finance shows that at the end of June this stock reached the historical record of 156 billion ALL.
The Energy Distribution Operator owes the Albanian Electro-Energy Corporation 59 billion ALL, to which the Transmission System Operator owes another 7.5 billion ALL.
On the other hand, KESH, OSHEE and OST have another 40 billion ALL in debt to the Ministry of Finance and Economy, due to non-payment of debts and guarantees that the state budget has issued over the years, while KESH, OSHEE and the water companies owe 7.4 billion lek to the General Directorate of Taxes.
But the official financial figures do not seem to be the same as the energy figures. In a reaction to INA MEDIA, the Deputy Minister of Energy, Ilir Bejtja, said that the mutual debt of the sector’s companies to each other and to third parties is not that much.
“OSHEE’s debt to KESH is not more than 50 billion ALL and is scheduled in the form of a loan, which is paid in annual installments of 2.4 billion ALL per year. OSHEE’s debt to OST is around 8 billion ALL and is paid in installments of 0.5 billion ALL per year, in the form of a loan as well. The current mutual debts between the three public enterprises are no more than 6 billion ALL and must be liquidated within the year”, explains Deputy Minister Bejtja.
Meanwhile, in 2015, faced with a similar situation of inherited debts in the energy sector, prime minister, Edi Rama, quoted Richard Fuller.
“There is no energy crisis, there is only a crisis of ignorance. Political ignorance, governance ignorance, administrative ignorance, human resources ignorance and social ignorance in the end as a result of being in an environment without rules, without governance and without political responsibility and accountability”.
Eight years after the energy reform, discipline has been imposed only on the weakest member of the system, the family consumer, who is expected to pay more for electricity. Since September of this year, he is again “threatened” with the next Task Force against illegal use of energy.
Ky shkrim është pjesë e projektit që mbështetet financiarisht nga Zyra e Mardhënieve me Publikun e Ambasadës së SH.B.A. në Tiranë. Opinionet, gjetjet, konkluzionet dhe rekomandimet e shprehura janë te autor-it/ve dhe nuk përfaqesojnë domosdoshmërisht ato të Departamentit të Shtetit. / This article is part of a project that is financially supported by the Public Relations Office of the US Embassy in Tirana. The opinions, findings, conclusions, and recommendations expressed are those of the author(s) and do not necessarily represent those of the Department of State.