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Friday, 28 October 2016


Government changes, the price remains

2012-12-24 16:55

Government changes, the price remains. 28863.jpeg

The issue of electricity prices is one of the most acute for Georgian citizens. Few people can afford to freely pay for power. Georgian Dream's one of the main pre-election campaign promises was to reduce electricity rates. However, it turns out that the power is unlikely to become cheaper.


The question of electricity prices has long ceased to be a purely economic in nature and acquired political component. About 10 years ago the Labor Party of Georgia filed a suit to the Constitutional Court, which later prohibited the company "AS Telasi" to raise the electricity tariff. The result? American distribution companies has hastily packed up and got away from Georgia home. And power distribution in the capital was transferred to the jurisdiction of the Russian company RAO UES. This company increased the price several years later, which is now 15.5 tetri per 1 kWh averagely throughout Georgia.

One of the campaign promises of the new government was to reduce the electricity tariff. But at what expense?

"General picture on the tariff will be known next week. Negotiations are successful". This is what the Minister of Energy, formerly known footballer Kakha Kaladze, has been declaring last week. But the "next" week has not come. Numerous meetings and "round tables" in the Ministry of Energy have failed to succeed. Such consultations involving power engineers, scientists and representatives of the winning coalition Georgian Dream are usually closed to the press. Let's try to understand what are these consultations "behind closed doors" about.

For example, if we subtract the 5.5 tetri from the rate, in total we receive 330 million lari per year (6 billion kilowatt hours). But energy companies last year received approximately 100-120 million GEL as profits. Part of this amount is for capital expenditures, and part - for the payment of dividends to profit from investments. If we force companies to abandon the development and payment of dividends, after the expiration of the term of exploitation they are unable to purchase a new transformer, turbine, and so on. And in case of the increasing demand for electricity the companies cannot produce it, which could lead to a reduction or cessation of the power production. Once this tariff is approved the deficiency would amount 210 million GEL. So that such reduction is unprofitable for the companies.

Well, if this shortfall is planned to be covered from the budget, we must take into account two factors. First - it's not fair. In this case one would pay for the power spent by another. And the second. This situation is into hand of the rich people and organizations that are consuming the lion's share of the electricity. Poor people spend less than 20% of electricity. Accordingly, more than 80% of the subsidies go to the pockets of wealthy people and organizations. This would show that the government cares more about the rich people than the poor people.

The government has recognized that reduction the tariff by half was unreal. Experts in economy believe that reduction the tariff at expense of the profits of energy companies is impossible.

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