Executive summary—Poverty Poverty and social impact assessment of Kyrgyzstan’s energy sector •
Kyrgyzstan since 2007 has experienced significant increases in energy prices and reductions in energy production and consumption. Electricity lectricity generation and consumption (generation less net exports and losses) dropped by some 25 and 13 percent, respectively, during 2007 2007-2010. Gas consumption fell by almostt two thirds, as prices of gas imported from Uzbekistan rose from $100 to $240 per 1000 cubic meters during 2007-2009. 2009. Faced with growing shortages of electricity and unaffordable gas, many households, businesses, and public institutions have switched to coal oal-fired boilers. Domestic coal production rose some 41 percent during 2007 2007-2010; 2010; apparent consumption (production less net exports) rose 57 percent. Meanwhile,, household energy prices during 2007-2010 2010 rose by 81 percent, compared to a 44 percent increase in the consumer price index during this time. This combination of sharply higher prices and declining consumption necessarily raises concerns about deterioration in household access to reliable, affordable energy services.
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Despite these inflation rates, energy tariffs and prices in Kyrgyzstan generally seem low, relative to other transition economies and to cost cost-recovery recovery levels. This reflects strong socio-political political opposition to raising tariffs tariffs, which inter alia contributed to the April 2010 unrest that unseated President Kurmanbek Bakiyev.. Household energy consumption is currently being subsidized, from the state budget (which provides up to 75 percent of the revenues received by the Kyrgyzzhilkommunsoyuz national thermal power producer), ), from municipal budgets, via cross-subsidies subsidies from electricity exports, and from future generations, who will ultimately have to cover the differences between revenues and costs in the energy sector today today—in in the form of higher tariffs, higher taxes, or poorer services. Since ce most of these subsidi subsidies es increase with the quantities of energy consumed, which in turn are linked to income, they are not likely to help protect Kyrgyzstan’s most vulnerable households.
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Kyrgyzstan’s energy sector seems likely to remain dominated by state-owned sta monopolies that generally report negative profitability, high technical and commercial losses, and (with the exception of the gas sector), high or growing depreciation rates (reaching 60 percent for fixed assets in the thermal power sector) for the th foreseeable future.. Many of these sectors report large accounts receivable, payable, or both. Outside of the coal sector, private capital and foreign investment are almost completely absent. Progress towards the creation of a regional electricity market, which could help attract foreign investment into Kyrgyzstan’s electricity generation and transmission sectors, remains halting at best.
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Strategies based on tariff rebalancing, unbundling, and privatization via sales to strategic (often foreign) investors that have underpinned energy sector reforms in many transition economies have run aground in Kyrgyzstan. Privatization measures introduced or attempted during the Bakiyev period have been repealed, and electricity 2