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Assistance to Albania Energy Sector

CORE International has played an integral part in the energy sector development and reform process that Albania embarked on through the beginning years of the 21 st century. CORE's work in Albania under the U.S. Agency for International Development (USAID) funded project -- Support for Commercialization, Training and Utility Advisor Services for Albania -- has addressed the factors limiting the process of the reform of the sector and transformation of Albania toward a market-based economy such as:

• Under-Developed Energy Sector Legal, Regulatory and Development Agencies
• Poorly Managed and Maintained Power Infrastructure
• Lack of Adequate Investments for Maintenance
• Over-Reliance on Hydropower as the Almost Sole Source of Power Generation
• Financial Distress of the National Power Utility Company, and the Subsequent Need for Significant Government Subsidies
• Vertically-Integrated Structure of KESH, the State Utility, and the Resulting Lack of Transparency and Efficiency of Its Operations
• High Transmission, Distribution, and Non-Technical Losses
• Low Bill Collection Levels
• Below-Cost Tariffs

During the period 2000 - 2004, CORE addressed the above issues by providing assistance to the Ministry of Industry and Energy (MI&E) and the Albanian national electricity utility, KESH. Specifically, CORE's activities included coordinating support with other donor agencies; providing targeted training programs, workshops, roundtables, invitational travel, and regulatory-consumer interface; assisting with the development of the Power Sector Policy Statement (PSPS); and advising the Government of Albania on the Athens Memorandum of Understanding (MoU) compliance. The following summary provides a "then-versus-now" comparison of the reform process in the country during the period CORE supported the Ministry on Industry and Energy, the national regulator, ERE, and the national utility, KESH.

CORE, with the cooperation of the Italian utility, ENEL, worked to structure a plan to develop and implement measures to reduce losses and increase collections. Today the collections are over 87% and losses are 12.5% CORE developed Terms of Reference (TOR) for a high priority investment project in regional interconnection upgrades. The U.S. Trade and Development Agency (USTDA) financed the feasibility study, and The World Bank provided a loan for $30 million to invest in systems to make interconnections with Macedonia and Montenegro making more power available to Albania .

CORE developed a supply diversification strategy and assisted the Ministry in presenting the strategy to the Cabinet and the parliament where it was approved. CORE developed Terms of Reference (TORs) for the feasibility of a 100 MW thermal power plant at Vlora Port , USTDA financed the feasibility study, and The World Bank, the European Bank for Reconstruction and Development (EBRD), and the European Investment Bank (EIB) provided a loan signed in April 2004 for $100 million for the project .

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Energy Sector Setting in 2000, when CORE Began its Work in Albania		Policy, Regulatory and Institutional Reform Activities Conducted by CORE and Results Achieved by the Albanian Government - May 2004
No Ministry of Energy		Energy affairs were buried in a department within the Ministry of Public Economy and Privatization. A new MI&E was established by the Parliament in 2001 to focus on policy and strategy in the energy sector.
No independent regulatory authority		An independent regulator was established by an Act of Parliament in 2002 to address regulatory requirements of the energy sector.
No Power Sector Policy		CORE participated in the development of the Power Sector Policy Statement (PSPS) which was formally approved and disseminated by the Prime Minister in late 2002 .
No National Energy Strategy		CORE worked with the National Agency of Energy in Albania and developed a National Energy Strategy. This strategy was formally approved and announced by the Prime Minister in 2003 .
No Energy Law		An Energy Law was primarily written by Pierce Atwood with support from CORE and was passed in 2003.
No Legal provision for private sector participation in power		CORE's facilitation including training the regulators and testifying in the Parliament along side the regulators to pass another law to permit small scale Independent Power Producers (IPPs) with less than 5 MW cogeneration and hydropower facilities to enter the energy market.
A vertically integrated inefficient and near bankrupt utility with over 40% losses and 30% collections Excessive Dependence of Hydropower (98% of the system is based on hydro with the three largest plants on a single cascade on the Drini River )		A utility restructuring and unbundling plan was developed in 2002.
		CORE, with the cooperation of the Italian utility, ENEL, worked to structure a plan to develop and implement measures to reduce losses and increase collections. Today the collections are over 87% and losses are 12.5% .
		CORE developed Terms of Reference (TOR) for a high priority investment project in regional interconnection upgrades. The U.S. Trade and Development Agency (USTDA) financed the feasibility study, and The World Bank provided a loan for $30 million to invest in systems to make interconnections with Macedonia and Montenegro making more power available to Albania .
		CORE developed a supply diversification strategy and assisted the Ministry in presenting the strategy to the Cabinet and the parliament where it was approved. CORE developed Terms of Reference (TORs) for the feasibility of a 100 MW thermal power plant at Vlora Port , USTDA financed the feasibility study, and The World Bank, the European Bank for Reconstruction and Development (EBRD), and the European Investment Bank (EIB) provided a loan signed in April 2004 for $100 million for the project .
No regional approach to the development and management of the power sector and a lack of participation in the regional strategy something wrong or missing		Over a two-year period, CORE worked closely with the Ministry of Industry and Energy and regional institutions in the South Eastern Europe (SEE) Region to give a more regional approach to Albania 's power sector development. As a result, Albania is now an active member of the SEE Stability Pact, a member of the planning group for the design of the Regional Electricity Market (REM) in SEE, and a signatory of the Athens Memorandum I and the Athens Memorandum II. In June 2004, Albania chaired the meeting of the Athens MoU Process.
Poor financial management at the national utility, KESH		CORE provided a lead financial advisor to the CEO of KESH to develop and implement an internationally recognized financial management system.
Inadequate institutional structure within the Government		Designed and established an Inter-Ministerial Task Force on Power Sector Reform .
		Designed and established a Secretariat for Power Sector Policy Statement implementation monitoring within the Ministry of Industry and Energy with an action plan including milestones and schedule .
		Designed and established a Secretariat for Power Sector Policy Statement implementation within KESH and the regulatory entity, ERE, with individual action plans for each of them including specific milestones and schedule
		Restructured the virtually dormant and politicized National Agency of Energy as an independent think tank type institution in charge of long-term national energy planning.
		Introduced the climate for ERE for holding public hearings and the government and industry representatives testifying in the Parliament for public debate on legislative reform in the energy sector.
		Strengthened and formalized Human Resource functions within the Ministry and the utility through a series of capacity building activities based on best practices in HR in other countries.
		Training courses, workshops, roundtables, role-playing exercises, retreats, and other activities to enhance the capacity of the energy sector workforce and professionals in all of the above areas

Further details about CORE's involvement in the Albania Energy Sector can be found in CORE's Report on USAID Support for Commercialization, Training and Utility Advisor for Albania.(PDF)

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