ACS12511 ADAPTING TO HIGHER ENERGY COSTS: FINDINGS FROM QUALITATIVE STUDIES IN EUROPE AND CENTRAL ASIA THE WORLD BANK | 2015 © 2015 The World Bank Group 1818 H Street, NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. This paper has not undergone the review accorded to official World Bank publications. The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the International Bank for Reconstruction and Development / The World Bank and its affiliated organizations, or those of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank Group encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone 978-750-8400; fax 978-750-4470; Internet: www.copyright.com. Cover photo: Tomislav Georgiev / World Bank TABLE OF CONTENTS Acknowledgements......................................................................................................................... 1 Abbreviations.................................................................................................................................. 2 I. Introduction................................................................................................................................. 3 Purpose of the report................................................................................................................ 5 Evidence.................................................................................................................................... 7 Structure of the report.............................................................................................................. 7 II. Household vulnerability to energy tariff increases.................................................................. 9 Energy affordability and income security ............................................................................... 12 III. Coping with energy payments.................................................................................................. 19 Nonpayment and payment delays........................................................................................... 23 IV. Energy efficiency and energy-saving behavior........................................................................ 29 V. Social assistance and protecting energy affordability............................................................. 31 Perceptions of social assistance acessibility and effectiveness .......................................... 32 Perceptions of social assistance institutions’ accountability .............................................. 35 VI. Governance and accountability of energy institutions........................................................... 37 Energy sector governance and communications regarding reforms.................................... 38 Interaction with energy providers............................................................................................ 39 Recommendations to government for protecting energy affordability ................................ 44 VI. Conclusions and recommendations........................................................................................ 44 Recommendations to government and national energy sector institutions regarding communications.......................................................... 46 Recommendations to social assistance institutions............................................................. 47 iii Recommendations to energy providers.................................................................................. 48 Recommendations to researchers.......................................................................................... 48 VI. References................................................................................................................................. 50 Annex 1. Qualitative assessment summaries............................................................................... 52 Armenia .................................................................................................................................... 52 Section I: Armenia Country Context.................................................................................. 53 Section II: Findings............................................................................................................. 57 Energy use and spending patterns............................................................................. 57 Coping Strategies ........................................................................................................ 61 Social Assistance: The Family Benefit Program........................................................ 64 Relationship with energy sector providers................................................................. 66 Acceptability of energy reforms.................................................................................. 66 Section III: Recommendations.......................................................................................... 67 Belarus ..................................................................................................................................... 68 Section I: Belarus Country Context................................................................................... 69 Section II: Findings............................................................................................................. 70 Energy use and spending patterns............................................................................. 70 Coping strategies......................................................................................................... 71 Social assistance......................................................................................................... 72 Acceptability of energy reforms.................................................................................. 73 Relationship with energy sector providers................................................................. 73 Section III: Recommendations .......................................................................................... 74 Section IV: Ethnographic Interviews.................................................................................. 75 Ethnographic interview: single mother....................................................................... 75 Ethnographic interview: retired woman living alone.................................................. 76 Ethnographic interview: a family with six children..................................................... 77 Bulgaria .................................................................................................................................... 78 Section I: Findings.............................................................................................................. 78 Section II: Policy Implications and Conclusions.............................................................. 85 Section III: Ethnographic Interviews.................................................................................. 86 Sofia city, urban area, apartment in a concrete building .......................................... 86 Botevgrad, urban area, apartment in a brick building ............................................... 87 Village of skravena, rural area, two-story house........................................................ 88 iv Croatia ...................................................................................................................................... 89 Section I: Croatia Country Context.................................................................................... 90 Section II: Findings............................................................................................................. 91 Energy use and spending patterns............................................................................. 91 Coping strategies ........................................................................................................ 93 Social assistance......................................................................................................... 95 Relationship with energy sector providers................................................................. 97 Section III: Policy Implications and Conclusions ............................................................ 98 Section IV: Ethnographic Interviews.................................................................................. 99 Čakovec, house............................................................................................................ 99 Split Apartment ........................................................................................................... 101 Romania ................................................................................................................................... 102 Section I: Findings ............................................................................................................. 103 Section II: Policy Implications and Conclusions.............................................................. 108 Section III: Ethnographic Interviews.................................................................................. 109 Craiova, urban area, apartment................................................................................... 109 Galda de jos, rural area, private house........................................................................ 110 Piteşti, urban area, apartment..................................................................................... 112 Găvăneşti, rural area, private house............................................................................ 113 Kyrgyz Republic ....................................................................................................................... 114 Section I: The Kyrgyz Republic Country Context.............................................................. 116 Section II: Findings............................................................................................................. 117 Energy Use and Spending Patterns ........................................................................... 117 Relationship with Energy Providers............................................................................ 127 Acceptibility of Energy Reforms.................................................................................. 128 Section III: Recommendations.......................................................................................... 129 Annex 2. Research sample............................................................................................................ 132 BOXES Box 1. Why use mixed methods to assess impacts of energy reforms? .................................. 6 Box 2. Variations in energy sources used by country................................................................ 11 v Box 3. The importance of remittances for energy affordability in Tajikistan: Examples from ethnographic interviews .................................................................................................. 13 Box 4. The 1988 earthquake zone in Armenia ........................................................................... 14 Box 5. Most vulnerable population groups in Tajikistan............................................................ 15 Box 6. The Roma population in Bulgaria, Romania, and Croatia............................................... 16 Box 7. Nonpayment in southeastern Turkey............................................................................... 24 Box 8. Nonpayment in Albania ................................................................................................... 26 Box 9. Nonpayment in Serbia...................................................................................................... 27 Box 10. Using Manure as Energy.................................................................................................. 60 Box 11. ........................................................................................................................................... 61 Box 12. Beneficiaries of Social Assistance Prefer Cash.............................................................. 73 Box 13. Interactions Between Citizens and Energy Providers..................................................... 74 FIGURES Figure 1. Tajikistan: Proportion of total household consumption spent on energy per season and by location .............................................................. 10 Figure 2. Rural versus urban patterns of procuring wood for heating in Romania (RON/month)................................................................................ 34 Figure 3. Access to gas, percent of households by category, 2012........................................... 54 Figure 4. Main types of energy used by households in Armenia for heating purposes (by income and settlements)........................................................................................ 55 Figure 5. Share of households using gas as main heating source, 2004–2012 ...................... 56 Figure 6. Availability of energy sources (by type of residence).................................................. 58 Figure 7. Pattern of energy consumption throughout the year (by source)............................... 58 Figure 8. Consumption patterns throughout the year in urban and rural settlements............. 59 Figure 9. Consumption pattern during the day (by source)........................................................ 59 Figure 10. Energy consumption (by energy source and purpose)................................................ 60 Figure 11. Energy consumption pattern (by gender and purpose)............................................... 61 Figure 12. Evaluation of energy service providers (5-excellent, 1-poor)..................................... 66 Figure 13. Coping mechanisms ..................................................................................................... 71 Figure 14. Annual expenses by district heating users.................................................................. 81 Figure 15. Annual expenses by solid fuel users ........................................................................... 81 Figure 16. Energy expenses by income......................................................................................... 90 Figure 17. Average energy expenditure per season...................................................................... 92 Figure 18. Awareness and usage of social assistance................................................................. 95 vi Figure 19. Electricity tariffs for households (tyins for 1 kilowatt-hour)....................................... 117 Figure 20. Percent of monthly income spent on energy bills, % (N=200).................................... 121 Figure 21. Measures used by respondents to improve insulation and energy efficiency (N=204)............................................................................................. 124 TABLES Table 1. Main types of energy used by households in Armenia for heating purposes (by settlements)*........................................................................... 55 Table 2. Coping measures reported by respondents.................................................................... 123 Table 3. Items/activities reduced to cover energy bills................................................................ 124 vii ACKNOWLEDGEMENTS This report was written by a team consisting of Michelle Rebosio (Task Team Leader), Sophia Georgieva (lead author), Ekaterina Romanova, Nicolas Perrin, Zeynep Darendeliler, Ezgi Canpolat, Ecaterina Canter, Klavdiya Maksymenko, and Izabela Leao. Data gathering and initial analysis was carried out by multiple firms, including Ameria CJSC (Armenia), M-Vector (Kyrgyz Republic), Center of System Business Technologies SATIO (Belarus), Metro Media Transilvania (Romania), Vitosha Research (Bulgaria), GfK (Croatia), Center of Sociological Research “Zerkalo” (Tajikistan), and e.Gen Consultants Ltd (Turkey). Ekaterina Romanova supervised the work on the Kyrgyz Republic and Armenia. Nicolas Perrin supervised the work on Belarus. Sophia Georgieva supervised the work on Bulgaria, Croatia, and Romania, and contributed to the work on Belarus. Izabela Leao contributed to the work on Belarus. Zeynep Darendeliler led the work in Turkey. Rob Swinkels and Sophia Georgieva led the work in Tajikistan. Ezgi Canpolat provided first drafts of sections in the final report. The report was edited by Lauri Scherer and designed by Danielle Christophe. Victoria Bruce-Goga provided administrative support and Ewa Sobczynska worked with the team on completing and disseminating the report. The team would like to thank all of those who have contributed to the thinking that led to this report, including the firms cited above and our peer reviewers. We are especially grateful to Ani Balabanyan, Caterina Ruggeri Laderchi, Nistha Sinha, Matteo Morgandi, Heather Worley, Vanessa Lopes Janik, Maria Beatriz Orlando, Rebecca Lacroix, Niki Angelou, and Rob Swinkels for their input and advice. The team would also like to thank Elisabeth Huybens and Maninder Gill for their leadership as well as Ranjit Lamech, Carolina Sanchez, and Andrew Mason for their support for this work. We would also like to thank the hundreds of individuals, including government officials, who participated in the focus groups and interviews that led to this report. This work would not have been possible without funding from the Umbrella Facility for Gender Equality and the Poverty and Social Impact Assessment Multi- Donor Trust Fund. 1 ABBREVIATIONS BGN Bulgarian Leva CIS Commonwealth of Independent States CSO civil society organization EBRD European Bank for Reconstruction and Development EC European Commission ECA Eastern Europe and Central Asia EI ethnographic interview ESW economic sector work EU European Union FBP Family Benefit Program FG focus group FGD focus group discussion GAP Southeastern Anatolia Project GDP gross domestic product GMS guaranteed minimal support GoA government of Armenia GoB government of Belarus HB heating benefit HEP Group Hrvatska Elektroprivreda HERA Croatian Energy Regulatory Agency IDI in-depth interview ILCS Integrated Living Conditions Survey of Households IOM International Organization for Migration NGO nongovernmental organization PEA political economy analysis PSIA Poverty and Social Impact Assessment PSRC Public Services Regulation Commission PVC polyvinyl chloride RoA Republic of Armenia RON Romanian Leu TRY Turkish lira (approximately equal to 0.44 USD) UNDP United Nations Development Programme 2 I. INTRODUCTION 1. This report presents findings from 208 focus down, governments subsidized or cross- group discussions (FGDs) held across eight subsidized energy producers. With the rise of countries1 in Eastern Europe and Central Asia international energy prices, the growing need (ECA) between 2013 and 2014 that examined for investment in the domestic energy networks, households’ experiences with and attitudes to and the fact that ECA economies are very energy energy tariff reforms. Over the past five years, intensive, subsidizing energy at this rate has the World Bank has provided guidance to more become unsustainable. Faced with domestic than 14 countries in the region on implementing fiscal pressures and international requirements energy subsidy reforms. This work complements to liberalize their energy markets, many ECA a large body of research on the poverty impacts states have embarked on energy reforms aimed of these reforms. Specifically, it gives voice to at introducing greater competition in the sector, poor and middle-income citizens, and presents removing subsidies, and allowing tariffs to rise their perspectives and concerns with regard to to cost-recovery levels. rising tariffs and reforms in the energy sector 3. There are three main factors that drive the overall. The report argues that by gaining a need to reduce subsidies and increase tariffs deeper understanding of the narratives that in the ECA region.2 First, pressure to increase people attach to energy issues, governments can tariffs comes from increasing international design better mitigation policies to address the prices for imported energy, such as gas and reforms’ adverse impacts; better communication electricity. Only five ECA countries have naturally campaigns to convey the rationale of reforms to abundant energy resources; the other states in the public; and institute stronger accountability the region are dependent on imports.3 Second, measures to help citizens protect their rights as countries in the region subscribe to international consumers. agreements and institutions that mandate 2. Countries in ECA have undertaken a wide institutional and regulatory change. Because of range of energy sector reforms since the these agreements, by 2010, all but five countries 1990s. For most of the twentieth century, ECA 2 For a detailed discussion on pressures for subsidy states ensured access to energy for residential removal and tariff increase in ECA, see Ruggeri Laderchi et al. (2013). consumers at little or no cost. To keep prices 3 The five states are Russia, Uzbekistan, Azerbaijan, Kazakhstan, and Turkmenistan. By contrast, Moldova 1 In Armenia, Belarus, Bulgaria, Croatia, the Kyrgyz depends on imports for over 90 percent of its energy Republic, Romania, Tajikistan, and Turkey. consumption (Ruggeri Laderchi et al., 2013). 3 had established an energy regulator; many had GDP between 2010 and 2030. Without this level unbundled domestic generation, transmission, of investment, the report states, countries are and distribution networks; and some had allowed likely to experience costly energy shortages. private providers on the domestic market. Finally, The 2010 World Bank report “Crisis Within a it is necessary to raise tariffs in order to cover Crisis?” examines the impact of the 2008 global generation, transmission, and distribution costs, financial crisis on the power sector in five ECA and to enable sector institutions to invest in the countries.4 It shows that while the crisis served maintenance and expansion of transmission and to slow domestic energy demand and thus delay distribution networks. an imminent shortage, it also further decreased available funding for investments in the sector, 4. Reform progress across the region has been making subsidies harder to sustain. slow and uneven. Countries now face multiple pressures to speed up reforms. For example, 6. Removing subsidies and consequently new and candidate European Union (EU) raising energy tariffs can have a considerable member states need to meet obligations for poverty and social impact. Most countries in EU accession and EU targets related to energy ECA have long, cold winters, and saving energy efficiency and renewable energy use, among is difficult for certain populations, especially others. Countries that rely heavily on imported those that live in poorly insulated housing. This natural gas and electricity (for example, Belarus, is why tariff increases over the past decade Moldova) face pressures to reduce subsidies so have not led to a significant decline in energy as to avoid accumulating high debts to foreign consumption, but have instead resulted in suppliers. Other states, such as Tajikistan, need an increased financial burden on household to increase tariffs in order to mobilize resources budgets, with potentially adverse impacts on for network maintenance and to develop more other areas of well-being. Ruggeri Laderchi et energy sources to address domestic shortages. al. (2013) present a regional assessment of the However, due to the social sensitivity of reforms distributional impacts of raising energy tariffs and a variety of domestic stakeholder interests, to cost-recovery tariffs, based on a database these governments have struggled to remove of standardized household surveys. This report subsidies and complete the implementation of estimates that increasing electricity and gas legal and institutional reforms. tariffs to cost-recovery levels can raise poverty levels by 5–30 percent, depending on the 5. A lot of research has already been carried out country.5 It states that countries should consider in the ECA region to help governments address a mix of mitigation measures, including social the complexities of energy subsidy reforms. assistance and energy efficiency, in order to The 2010 World Bank report “Lights Out: The support continued affordability. Outlook for Energy in Eastern Europe and Central Asia,” highlights the significant investments the 4 Armenia, the Kyrgyz Republic, Romania, Serbia, and energy sector needs to avoid supply difficulties. Ukraine. 5 In EU member states the range of poverty impacts is The report emphasizes that the required actions, wide (5–30 percent), estimated to be the largest for both on the demand and supply side, would Bulgaria and Romania. In Eastern Partnership and other CIS countries, poverty rates could rise by 4–8 cost approximately 3 percent of cumulative percent; in EU candidate and potential candidate countries they could rise by 3–10 percent. 4 7. Various other studies have estimated PURPOSE OF THE REPORT how removing energy subsidies would impact 9. This report examines poverty and social consumers, and how such impacts can be impacts of energy tariff reforms in the ECA mitigated. A study done by the European Bank region from citizens’ perspectives. It aims to for Reconstruction and Development (EBRD) complement previously collected quantitative (Frankhauser and Tepic, 2005) concludes that data on distributional impacts of reforms, and whether tariff reforms are affordable depends contribute to the design of socially sustainable on the speed of tariff adjustments relative to energy policies and effective mitigation the growth of household income, the level of measures. It presents qualitative research tariffs needed for cost recovery, and the demand findings that highlight: response to tariff increase. This study highlights the risks of delaying tariff reforms as a way to (i) factors affecting household vulnerability mitigate social impacts. A 2003 EBRD report to energy tariff increases; focusing on electricity affordability in eight (ii) insights into how households cope with southeast European states found that power increasing energy prices; affordability is a problem for many consumer groups (such as pensioners, unemployed, and (iii) experiences with and perceptions of low-income households), and that countries energy sector institutions and, more had not developed adequate social safety net specifically, interactions with energy mechanisms to address the potential impacts service providers; of power tariff reforms. Some studies argue (iv) experiences with social assistance for developing a more precise mechanism for programs and overall attitudes toward measuring energy poverty, and to address it measures that make energy more through a comprehensive set of policy tools (see affordable; and Buzar, 2007; Nussbaumer et al., 2011; Gazizullin et al., 2013). (v) consumer attitudes toward energy sector reforms overall. 8. The current report complements prior research on energy affordability through a set of qualitative 10. Incorporating qualitative evidence in the findings that reveal households’ experiences and study of poverty and social impact of energy perspectives in coping with rising costs of energy; reforms is essential to better understand both factors that influence their vulnerability; and impacts and attitudes to reforms. First, by relying their opinion of policies and programs that can on open-ended questions and being exploratory support energy affordability through the course in nature, qualitative research is well suited to of reforms. This research also examines the level examining a wide range of impacts beyond of understanding that different household groups monetary ones, and to illustrate what it means have of energy sector reforms, and reasons why for a household to cope with higher energy they accept or oppose the reforms. As such, the prices. It explores how households prioritize their report aims to help practitioners design energy spending, how they have experienced prior tariff sector policies that are socially sustainable and increases, what parts of their budget are most more acceptable to the public. affected, and how they perceive the impact on 5 their well-being. By collecting perspectives from out the financial burden on households. different households and contexts, this research helps to identify a wider range of factors that 11. Second, because qualitative research affect household vulnerability, as well as social is perception based, it is well positioned to groups whose ability to afford energy for basic capture attitudes regarding both the reforms needs may be at higher risk. Since household and mitigation policies put in place to offset energy expenses do not always follow a regular negative poverty and social impacts. Lack of monthly pattern, qualitative research also public acceptance, as well as fear of social helps to identify times of higher stress to the mobilization against reforms, have been some household budget and to suggest improvements of the key obstacles to their implementation. in data collection and mitigation measures that In addition to affordability concerns, citizens’ consider such seasonal discrepancies and level opposition to the reforms may be rooted in BOX 1. WHY USE MIXED METHODS TO ASSESS IMPACTS OF ENERGY REFORMS? Combining qualitative and quantitative research to examine the impacts of energy tariff reforms in ECA has heralded various benefits. In some cases, qualitative research generated knowledge that can be used to improve the relevance of quantitative research. For example, it confirmed that the energy expense burden for a large number of households is concentrated in the 3–6 coldest months of the year. Collecting expenditure data separately for the heating and nonheating seasons can paint a more accurate picture of the challenges presented by growing energy tariffs to the household budget, compared to average annual spending. FGDs also add depth to findings, revealed through quantitative data, and are useful when considering appropriate policy solutions. In Serbia, where utilities struggled with low collection rates for services in certain communities, FGDs showed that many households were unable to cope with high interest rate payments, which perpetuated a cycle of debt and nonpayment. Similarly, in Turkey’s southeastern region, where payment rates for energy were disproportionately low, qualitative research revealed a range of political and socioeconomic factors that augmented mistrust towards energy providers, and affected households’ willingness to pay. A ‘social compact’ approach was piloted in this region to improve trust as well as collection rates. Qualitative and quantitative information can sometimes lead to controversial findings. Exploring these contradictions provides insight into people’s perceptions that drive their attitudes to the reforms. For example, many FG respondents in this research have provided consistently inflated estimates of the share of their income spent on energy sources. This could partly be attributed to their desire to emphasize that energy expenses present a serious burden to the household. However, researchers also observed that respondents tend to consider only their sources of steady formal income (salary, pension) when estimating the share of energy expenses, not informal or seasonal work, self-produced food, and so on. Their anxiety over the prospect of rising tariffs was strongly tied to unpredictable incomes, as many households have begun to rely increasingly on incomes form migration and informal work, which may fluctuate over time. 6 lack of awareness about the reforms’ rationale; key informant and ethnographic interviews. legacy of a former social contract in which low- A total of 208 FGs (with approximately 1,650 cost energy was seen as an entitlement; as well citizens), and 118 in-depth interviews (with an array of concerns about transparency and energy, civil society, and social protection accountability of state institutions and energy experts, and ethnographic interviews in providers. Qualitative methods help identify these households) were conducted across the eight constraints and suggest ways in which policy countries. Samples of FGDs conducted in and communication efforts can be channeled each country are presented in Annex II. Where to generate wider acceptance of reforms. Box 1 relevant, the report also presents recent data highlights some examples of the ways in which from household surveys to validate and/or mixed methods have helped improve knowledge complement qualitative evidence. of energy tariff reform impacts in ECA. 14. To obtain the data presented in this report, 12. This report distills crosscutting messages local firms were hired to conduct FGs and from the eight ECA countries where qualitative interviews in each respective country. FGs research was carried out in 2013–2014, and were designed to obtain the perspectives of includes some information from prior qualitative individuals who use different energy sources, research on the same topic conducted in Serbia who live in different location types (cities, and Albania. The findings represent perspectives small towns, and rural areas), and in different of low- and middle-income groups, where low- geographic parts of a country. Separate groups income respondents represent roughly the were also included with representatives of poorest 40 percent in each country, and middle- ethnic minorities. Some groups included only income groups represent the third wealth individuals who benefit from social assistance. quintile. Despite differences in context, as well as In the majority of countries, separate FGs were across groups (for example, consumers who use held with men and with women. different energy sources, live in different locations, 15. The research included approximately 14 and so on), there are strong similarities in interviews with key informants in each country. perspectives regarding household vulnerabilities, These interviews were designed to complement coping measures, and attitudes toward sector and balance views expressed by households. reforms and mitigation policies. This report Representatives of energy companies, civil presents findings that are comparable across the society representatives, social assistance states in the region, as well as some contextual employees, and local or community leaders nuances that reflect the unique country context were interviewed as part of this work. In addition, and stage of reform. The report therefore 3–4 ethnographic interviews per country were presents regionwide recommendations, while conducted in some of the countries to illustrate summaries of country reports with more specific how households cope with tariff increases. recommendations are presented as an annex. EVIDENCE STRUCTURE OF THE REPORT 13. The findings are based primarily on 16. This report presents findings in three qualitative research—focus groups (FGs) and main areas: household vulnerability, coping 7 mechanisms, and drivers of acceptability of and comprehensive mitigation measures. Chapter opposition to reforms. Chapter II presents some VI describes governance and accountability factors that make certain households more concerns regarding energy providers, and in the vulnerable to reforms. Chapter III discusses how energy sector overall, that influence whether households cope with energy price increases. people accept or oppose the reforms. Chapter Chapter IV discusses experience with and VII summarizes policy implications that arise attitudes toward energy-efficiency measures from the qualitative research for improving the and energy-saving behaviors. Chapter V presents affordability, acceptability, and communications respondents’ experience with social assistance about the reforms. and describes the need to design more 8 II. HOUSEHOLD VULNERABILITY TO ENERGY TARIFF INCREASES The impacts of rising energy tariffs on households depend on a variety of factors. These include household income and income security, the type of energy source used, the household’s location and ability to substitute energy sources, the type of housing, and the availability and cost of energy-efficiency measures. Urban households are often more directly affected by the elimination of subsidies for gas and district heating, since they use these sources more often. At the same time, poor rural households also face an overall high energy burden. Although they are not affected by district heating tariff increases, rural and semiurban households are often hit harder by increased electricity prices, as they may use electricity more intensively to heat water, for house plot irrigation, and as a supplementary heating source. In all countries, certain social groups, such as elderly, single-parent households, and ethnic minorities, seem to be more vulnerable to energy tariff increases than others. 17. In Europe and Central Asia, heating often 18. Households use a variety of energy sources represents the highest household energy for heating. Urban and semiurban households expense, and consequently, the winter season are more likely to rely on utility services such as is the most stressful period in terms of energy gas and electricity for their energy needs, and expenses. People spend more on energy in the are also more likely to have access to district winter than during other times of the year, and heating.7 Rural households, on the other hand, expenses can vary depending on if it is a colder reporting instead annual averages. In Tajikistan winter than usual, as well as the type of fuel a special energy module was commissioned in 2013, which separated questions on “heating” and used. Figure 1 illustrates differences in spending “nonheating” season energy consumption, which during the heating and nonheating season in made it possible to see the variation. This survey also took collected fuels (brushwood, manure, Tajikistan. FGDs in all sample countries confirm cotton stalks) into account when calculating energy consumption, which made it possible to acknowledge that the winter months (December–February) rural households’ high burden to procure energy pose the greatest burden on the household sources. budget in terms of energy expenses.6 7 District heating is a central heating network that supplies heat and hot water to a dwelling, usually apartment buildings in large urban centers. District 6 Note that household budget surveys do not always heating is produced using gas or coal so its cost can capture these seasonal differences in spending, be directly influenced by the price of these fuels. 9 more frequently rely on wood, coal, and biomass a result of reforms.8 However, the impacts on fuels for heating as well as a wide range of rural households that use wood and coal are not household activities such as cooking and heating negligible. These sources of energy are often water. Rural populations may experience greater traded and their price fluctuates together with difficulties with electricity supply, including electricity and gas tariff increases, as reported power cuts, more often than those living in in FGDs in Armenia. urban areas. Box 2 summarizes some important 20. The impacts of electricity tariff increases cross-country variations in the energy sources are broad and are not always related to heating. available to households across the region. Rural and small-town households use electricity 19. The type of energy sources used for heat intensely for heating homes and water. For largely determines the impact of a specific these households, electric boilers are often the tariff increase on a household. Abolishing only source of hot water through the year, and gas and electricity subsidies affects urban 8 This is because district heating tariffs are some of the and semiurban households that use gas- and most heavily subsidized, so the increase means that electricity-based heating more than rural tariffs will be very high when subsidies are removed. Of course, this can vary significantly from one country households. District heating users in particular to the next; the degree of tariff increase may also vary are likely to face a steep increase in costs as substantially across cities in the same country. FIGURE 1. TAJIKISTAN: PROPORTION OF TOTAL HOUSEHOLD CONSUMPTION SPENT ON ENERGY PER SEASON AND BY LOCATION 20   PERCENTAGE OF TOTAL EXPENDITURES 18   16   14   12   10   8   6   4   2   0   Non He Non Hea Non Hea Non Hea Non Hea hea ating hea ting hea ting hea ting hea ting ting sea ting sea ting sea ting sea ting sea sea son sea son sea son sea son sea son son son son son son Dushanbe Other Urban Rural GBAO Urban GBAO Rural Central  Hea0ng   Electricity   LPG     Firewood   Coal     Liq  Fuels   Agro  fuels   Brushwood   Source: World Bank staff, based on data from the Central Asia Longitudinal Inclusive Society Survey (CALISS), 2013; from World Bank. 2014. “Assessment of Household Energy Deprivation in Tajikistan” World Bank, Washington DC 10 BOX 2. VARIATIONS IN ENERGY SOURCES USED BY COUNTRY The energy use patterns described above are true for most countries in the region—urban households use gas or district heating for heat, networked or bottled gas and electricity for cooking, and electricity for lighting and powering appliances; small-town and rural households use either electricity, or wood, coal, and biomass fuels for heating and cooking and electricity for lighting and appliances. Infrastructure developments and resource availability, both domestic and imported, account for some differences across countries or regions. In Kyrgyzstan and northern Tajikistan, the wider availability of coal makes it a preferred heating and cooking source in rural areas; in most of the region’s other countries, however, wood is the primary fuel in rural and semiurban locations. In Tajikistan, due to political tensions with Uzbekistan, networked gas is no longer used for heating or cooking; with the exception of a small minority of apartments in the capital, the district heating network has stopped operating in most areas due to unavailability of gas and the resources needed to maintain the network. As a result, urban Tajik households rely almost exclusively on electricity for all household needs. Similarly, the southern region of Croatia has relied primarily on electricity for heating and cooling, as the gas network does not cover this region extensively, and firewood is not as readily available in this part of the country. In Bulgaria, networked gas covers a minority of household consumers, and is therefore rarely used as a heating source. these account for a large portion of electricity self-produced food.9 Rural households in consumption. Moreover, poorer households Armenia, Bulgaria, the Kyrgyz Republic, and often use older and inefficient appliances, which Romania mention that relying on self-produced consume more electricity. Electricity is also food allows them to save cash income earned in commonly used as a supplementary heating the summer for buying wood or coal for heating source. Even households connected to central in the winter. In Armenia, households state that heating networks report using electricity during they cut down on this type of food production cold days before and after the heating season. when electricity prices rise, as they can no 21. Electricity is also essential for livelihood 9 Quantitative data for Bulgaria also show that the poorest quintiles spend the highest proportion of their activities such as irrigation and refrigerating income on electricity. 11 longer afford to preserve food for winter. In 24. Households that rely exclusively on Turkey’s southeastern region, where agriculture remittances can easily lose their income when is the main source of income in rural areas, the migrant in their household faces difficulties electricity-powered water pumps are commonly or decides to permanently cut connections with used for irrigation, so increases in the price of their family. For example, in Tajikistan, where electricity affect agricultural incomes and ability remittances comprise a significant share of to pay bills during irrigation season. cash incomes in rural and small urban areas (see Boxes 3 and 5), a household’s ability to 22. Within each country, certain groups were make energy payments is largely determined found to be especially vulnerable to energy by whether someone in the household has price increases due to their socioeconomic migrated and is sending back remittances. status and/or inferior living conditions. In Households with no migrants (for example, Armenia, low-income residents of the 1988 elderly persons who have no sons of working earthquake zone are among the hardest age), ones in which migrants have been injured hit by price increases (see Box 4), while in and returned home, or households that have Tajikistan, single mothers without remittances been “abandoned” by migrants10—mostly were reported to be an especially vulnerable female-headed households—are at a greater population group (see Box 5). In Bulgaria, risk of falling behind on energy payments or Romania, and Croatia, the Roma population is being unable to procure fuels for the winter. generally highly vulnerable to price increases due to the higher prevalence of informal 25. Roma households across different and insecure income among Roma, and a countries are more likely than non-Roma more widespread perception among Roma households to have insecure incomes, making respondents of experiencing discrimination this group particularly vulnerable to energy in accessing social assistance (see Box 6). In increases. Roma often obtain jobs as seasonal Turkey, farmers, nonsalaried urban workers, or informal workers. Partly because of this they and small-scale businesses were most are also more likely to purchase fuel in small impacted by electricity price increases. quantities throughout the year; because buying in bulk saves money, buying in small quantities increases the overall price they pay. Many Roma ENERGY AFFORDABILITY AND INCOME SECURITY respondents in Bulgaria, Romania, and Croatia 23. Households without stable incomes have also note that they face difficulties accessing more difficulty coping with rising energy prices. social assistance because those reviewing Households in which the main breadwinner is unemployed, works seasonally, or has migrated 10 About 95 percent of Tajik labor migrants are men and find it harder to cope with increasing tariffs. almost 80 percent of them are married with children (Khakimov and Mahmadbekov, 2009). An International Income insecurity directly affects the ability to Organization for Migration (IOM) (Khakimov and pay for energy; it also influences households’ Mahmadbekov, 2009) study estimates that up to one- third of labor migrants may settle permanently in the ability to access social assistance and plays a host country and gradually stop sending remittances home. The majority of FG respondents in Tajikistan role in citizens’ attitudes toward and acceptance mentioned the “abandoned” families of migrants as of reforms. one of the most vulnerable categories of households. 12 BOX 3. THE IMPORTANCE OF REMITTANCES FOR ENERGY AFFORDABILITY IN TAJIKISTAN: EXAMPLES FROM ETHNOGRAPHIC INTERVIEWS Sarband. Sarband is a small urban area in Khatlon province of Tajikistan. The income of this four-member household (which includes a husband, a wife, a two-year-old daughter, and a grandfather) consists of the wife’s salary as a janitor at the local school and the grandfather’s pension. The husband, an accountant by training, was the family’s main earner until 2012, when he was laid off due to budget cuts. He borrowed money from friends and relatives and went to Moscow to work in a beer factory. In his first 10 days on the job he hurt his arm and was unable to continue working. He returned to Tajikistan, working occasional jobs. He is unwilling to return to Russia, as this would require significant investment in travel costs with no guarantee that he can earn more. With the loss of his salary and no remittances, the family’s expenses for energy and other utilities (water, garbage collection) now reach 43 percent of their income in the summer months and 96 percent of their income in the winter months. To cope with this burden, the family borrows food from a local shop, negotiates with electricity controllers to delay payments, and has sold valuables such as the wife’s gold jewelry. Dushanbe. The family lives in an apartment in Dushanbe, the capital city of Tajikistan. The household consists of an elderly couple, their two sons, two daughters-in-law, and grandchildren (other sons and daughters live in separate households). The household relies primarily on remittances from the two sons, who work in Moscow (approximately 1,944 Tajik Somoni/month), and on the disability pension of the father (400 Tajik Somoni/month). In 2012 the father underwent foot surgery, which significantly strained the family budget. The sons returned to Dushanbe to take care of their father and stayed for four months, foregoing their earnings in Russia. Due to their location and the fact that they live in an apartment building, electricity is the household’s only source of energy. Usually electricity bills comprise 2 and 7 percent of their monthly budget in summer and winter, respectively. However, due to medical expenses and loss of remittances this past winter, they have exceeded the family’s capacity to pay on time. The household has had to negotiate with controllers to delay payments in order to avoid disconnection. The family has also significantly reduced food expenses, mainly on meat, to be able to pay their electricity bills. 13 applications assume that these applicants receiving benefits—or because their earnings have undeclared incomes. In Romania, Roma fluctuate frequently. Roma households across women report that the success of their social the sample face the same challenge, as assistance application may hinge on whether they are more likely than non-Roma to hold they are able to persuade the social assistance seasonal or informal jobs. Households across officer that they do not have other sources of the sample that have experienced a job loss or income. report a reduction in hours and salary in recent years (possibly due to the financial crisis) find 26. Relying on seasonal and insecure it increasingly difficult to cope with energy employment is another factor that affects expenses. vulnerability to energy price increases. In Bulgaria, all male respondents from a rural 27. Lastly, income security matters, because— settlement in the sample reported relying on as FGDs reveal—consumers tend to judge their seasonal income from construction. All of ability to cope with energy price increases these households report difficulties maintaining based mainly on stable sources of income. eligibility for social assistance because they When asked to estimate the share of their are not consistently registered with the state income spent on energy, FG respondents tend to employment agency—which is a requirement for provide estimates that are notably higher than BOX 4. THE 1988 EARTHQUAKE ZONE IN ARMENIA In Armenia, low-income residents of the 1988 earthquake zone are among the most vulnerable consumers. This group faces high levels of overall poverty and income insecurity. Many men from the area have migrated to find work, resulting in a large number of female-headed households with scarce employment opportunities and access to land. The condition of some of the dwellings makes it difficult to apply effective energy- efficiency measures. Respondents from Shirak and Lori, the two regions most affected by the earthquake, still live in temporary housing that was constructed by the government following the earthquake. These houses are poorly insulated and residents commonly use basic but inefficient insulation methods, such as taping off windows, vents, and doors, and placing extra rugs on the floor and walls. As a female respondent from Lori states, “It seems we live outdoors; wind is in the house, rain is in the house.” Moreover, residents in these settlements almost exclusively rely on electricity, as their houses are not connected to the gas network and poor ventilation and degraded building structure make it dangerous to use stoves to burn wood and manure. Thus, while many groups in the country would be strongly affected by rising energy costs, these households are expected to be exceptionally vulnerable due to their already challenging socioeconomic status and living conditions. 14 the average provided in the country’s household observe that these estimates may be inflated budget surveys. In Tajikistan, Armenia, Bulgaria, because the respondents tend to consider and Romania, FG respondents estimate spending where district heating tariffs are among the highest in between 30 and 90 percent of their income the country, respondents report spending half of their on energy in the winter season.11 Moderators incomes on district heating and electricity; the relative share of district heating and electricity expenses reported in other towns outside the capital (Pernik, 11 These differ according to the region, dwelling, size of Plovdiv) is also high (12–15 percent) compared to household, and so on. For example in Vratsa, Bulgaria, those reported in Sofia and Pleven (3–6 percent). BOX 5. MOST VULNERABLE POPULATION GROUPS IN TAJIKISTAN In Tajikistan, some population groups are especially vulnerable to high energy expenses due to their level of income. These groups include single mothers (especially those without remittance income), large families, pensioners who live alone without family support, people with disabilities, and doctors and teachers in rural areas. The majority of FG respondents mention that urban and rural single mothers are the most vulnerable groups. The number of female-headed households has increased due to growing numbers of men who migrate to Russia (and Kazakhstan) for work and abandon their families at home. Female heads of household often have little education, few marketable skills, and several children to support. Female- headed households live in poor conditions and do not receive extended family support. Respondents also mention that large families are vulnerable to high energy costs. Traditional Tajik families usually have more than three children, which increases household expenses and makes it more difficult to afford energy. Elderly men and women who are no longer employed, or men and women with disabilities, are also vulnerable to high energy costs. Pensions are not enough to cover all basic needs. According to Tajik social norms, after marriage, women live with their in-laws and contribute to their husbands’ extended families; they are rarely allowed to help their own elderly or sick parents. Therefore, respondents frequently note that pensioners and people with disabilities who have only daughters, or no children, face more difficulties meeting daily needs. In rural areas, doctors and teachers, despite their professional credentials, are also among the most vulnerable population groups. These groups receive very low salaries, lack farming income, and have few opportunities to earn extra income sources in rural areas. As a result, they have difficulty paying for energy. 15 BOX 6. THE ROMA POPULATION IN BULGARIA, ROMANIA, AND CROATIA In Bulgaria, Romania, and Croatia, marginalized Roma report greater difficulties in coping with energy expenses. Roma respondents in Bulgaria estimate that they spend between 50 and 70 percent of their income on energy expenses—much more than non-Roma respondents. Marginalized Roma across the sample state they often purchase firewood in small quantities through the winter, which results in a higher price overall. They also tend to purchase or collect lower quality fuels; buy cheaper wood scraps instead of higher-quality wood; collect wood pallets from construction sites and old furniture from dumpsters; or regularly burn used diapers and other waste materials that do not provide adequate heating but generate harmful fumes in the house. Marginalized Roma often live in dwellings that are poorly insulated, which further prevents them from adequately heating their homes. The Roma also consider themselves particularly vulnerable to tariff increases in part due to ethnic discrimination they experience from social assistance offices and in the labor market. In Croatia, Roma claim that they experience discrimination when applying for social assistance. They find themselves visiting social care centers several times and filing additional forms, yet are still ultimately rejected for assistance. Roma also often work seasonally, which limits their access to social assistance. Roma women also state that their vulnerability comes partly from the fact that their families are larger than non-Roma families. only their stable sources of income (salaries, 28. Households that are not easily able to switch pensions) and do not factor in the value of self- between energy sources for heating are more produced food or seasonal work. Those who vulnerable when tariffs rise. Urban apartment primarily rely on seasonal work or other less dwellers are often most constrained in switching stable sources of income are constantly aware to cheaper sources, either because they are of the fact that they may not be able to afford unable to unsubscribe from district heating their next energy bill, and hence feel less secure services; because they lack the ability to access at the prospect of rising tariffs. or store solid fuels; or for structural and safety 16 district heating has reflected the scale of tariff increase in district heating in the respective region. In Reșița, where district heating tariffs increased by 100 percent between 2010 and 2013, over half (58 percent) of district heating subscribers have opted to disconnect; the rate of disconnection has been lower in other locations where tariffs have not grown at such a high rate.12 However, switching away from district heating entails a large up-front cost, which makes the switch difficult for the poor. Household storing wood on apartment balcony, Armenia. Moreover, as more households choose to disconnect, the cost of district heating for those reasons, such as living in an apartment that lacks that remain connected grows and increases the chimneys. pressure for them to switch. 29. Most respondents state that they have 31. Rural households report a long-term trend considered or started using cheaper sources of switching from heating with gas or electricity of energy. Those who have substituted district to wood or coal. In the past two decades, with heating for gas or electricity do not enjoy much the gradual rise of gas and electricity tariffs, savings, because the cost of these sources is rural households have increasingly switched to also growing. For example, apartment residents heating and, when possible, cooking with solid in Bulgaria report that they have tried to turn fuels, such as wood and coal. Solid fuels are down the level of central heating and use more affordable though less convenient due electric heaters to reduce their district heating to the need to transport, chop, and store them. bill, but have found this results in high electricity They are also more harmful to human health bills and only small reductions in district heating (because of the indoor smoke they generate), and bills. Other respondents in Bulgaria described necessitate more frequent household repairs to collectively deciding to disconnect from district address damage to walls from smoke, chimney heating and installing independent gas heating repairs, and so on. Poor rural households have in their buildings, but are now uncertain whether increased their reliance on collected sources they will recover the cost of their investment, such as brushwood, manure, and agricultural since gas prices are also increasing. byproducts. Many such sources do not have a cash value but require time and effort to collect. 30. High up-front expenses make switching between energy sources unaffordable for some 32. To conclude, household vulnerability groups. In Romania, legal changes and the to energy subsidy removal is affected by a availability of networked gas infrastructure have range of factors. Urban residents are often made it possible for customers to disconnect more vulnerable due to their inability to from district heating and install independently 12 According to Metro Media Transilvania, based on metered gas heating. Utility data in Romania data provided by the National Regulatory Authority for suggest that the rate of disconnection from Local Public Services. 17 switch to cheaper sources of heating such Due to low or insecure incomes, energy as wood, coal, and biofuels. Switching to affordability may be more challenging for cheaper or independent heating sources, poor rural households, minorities, and the for which they can more easily regulate elderly, among others. The complexity of consumption, may also be unaffordable for channels through which different household the urban poor. At the same time, rural and groups are affected by the elimination semiurban residents are vulnerable due to of subsidies calls for broader and more their more intensive use of electricity for flexible mitigation measures and support heating, hot water, and livelihood activities. for positive coping strategies. 18 III. COPING WITH ENERGY PAYMENTS Due to limited ability to change energy sources and consumption patterns, energy tariff increases affect basic aspects of well-being such as nutrition, health, and comfort. Both low- and middle-income groups experience these impacts, with outcomes being starker for the poor. Poor and rural residents have a more limited range of coping strategies and are more constrained in their ability to employ energy-efficiency measures due to a lack of information and financial barriers. Their ability to save energy without encroaching on basic necessities— especially for the poor—is limited. 33. Households consider energy to be one of 34. When energy prices rise, more than 90 their most basic expenses, and use various percent of respondents mention cutting spending coping strategies to afford rising costs. These on food as a primary coping strategy. This was coping mechanisms are used by a wide variety the case across countries and across social of social groups, including the poor and the groups within each country. For the poorest middle classes.13 Respondents in this research groups, cutting food spending means reducing most often mentioned reducing spending on the number of meals consumed and consuming food and delaying bill payment as ways to cope less meat and other proteins. Middle-income with increasing energy prices. Other strategies, households, on the other hand, buy lower quality such as not buying clothing and electrical foods and cut down on nonessential food and household appliances, reducing travel, and drink. Rural households mention that they not attending social gatherings and traditional often rely on self-produced food to save cash celebrations were also frequently mentioned, for energy expenses. Households with children and impact well-being. Certain social groups in report it is more difficult for them to cut food some countries also borrow money from friends, expenses, since they prioritize providing warm relatives, or financial institutions. meals for their children. Such households may resort more often to delaying energy payments 13 Note that in this research, “low-income” groups were and borrowing money. Reducing food expenses recruited to represent the bottom two quintiles and is seen as a direct consequence of higher energy “middle-income” groups were recruited to represent the third quintile. costs. 19 “I spend my pension on 35. Poor households (and to some extent middle- three things: the water bill, income ones) reduce the amount of energy used in the household to be able to afford energy the electricity bill, and food. bills. A common winter method for reducing If the electricity bill goes up, energy use is to heat just one room in the house. I have less for food.” This is most common for people who live alone, but has been cited as a strategy for families and —LOW-INCOME WOMAN RURAL AREA, BULGARIA extended families in Tajikistan and Armenia, and for low-income households in Kyrgyzstan. In Armenia, 40 percent of respondents report “We want to eat meat at least changing their sleeping and bathing patterns once a week, but we cannot. during the winter. Respondents in these Even if I starve I have to countries also state that they avoid spending pay for gas and power.” time at home to save on heating expenses. Using fewer appliances is another method for —LOW-INCOME WOMAN RURAL AREA, ARMENIA saving; in Romania, one-third of urban middle- income respondents report using a broom instead of a vacuum cleaner, washing clothes by “I would rather starve than hand, and reducing the use of coffee machines, live in a cold house; heating microwaves, and other small appliances. About is very important. The 7 percent of all FG respondents in Romania dwelling must be warm all also mention unplugging the refrigerator during the time, hence the bills must the winter and keeping food outside. Energy always be paid on time.” use is monitored carefully and wasting energy contributes to household conflicts. —LOW-INCOME MAN URBAN/MOUNTAINOUS AREA, KYRGYZSTAN “Every day we quarrel about electricity: ‘ “We eat less to pay the bills.” What did you switch on, why, what did you do?’” —LOW-INCOME WOMAN URBAN, TURKEY —LOW-INCOME WOMAN URBAN AREA, BULGARIA “Our electricity bill is 20–30 “Maybe we don’t heat for TRY [Turkish lira] but we us, but we should heat for cannot pay on time. By guests, because they don’t saving on food expenditures I come frequently.” pay the bills when I can.” —LOW-INCOME WOMAN —LOW-INCOME WOMAN, SOCIAL ASSISTANCE RURAL AREA, ARMENIA RECIPIENT, URBAN, TURKEY 20 “All the time low by having others call them. In Armenia, rural we have to wear wool and urban respondents report that they cut spending on children’s education and daycare. slippers, vests, sometimes I even put on a hat.” “See how old —MIDDLE-INCOME WOMAN my clothes are, URBAN AREA, BULGARIA we don’t even remember when we bought new clothes.” 36. Households also reduce spending on health care by avoiding doctor visits and practicing —LOW-INCOME MAN self-treatment. In Armenia, rural FG participants RURAL AREA, ARMENIA state that they reduced medical expenses by not 38. Social isolation is cited as a particularly going to hospitals, and even avoided calling an negative result of increasing energy prices, ambulance when one was needed. Respondents as respondents state that they cannot afford mention that spending on health become less to attend social gatherings and traditional of a priority because of economic hardship. In celebrations. In Eastern European countries Bulgaria, some elderly people reported skipping (Bulgaria, Romania, Croatia, Armenia) this is nonessential medicines and dental work due to mostly expressed as an inability to meet friends the high cost. In Romania, some households out, invite guests over, or to be a guest. Younger mentioned avoiding doctor visits in the winter respondents also mention that weddings (which and postponing necessary medical tests to the are common among friends and peers at this summer months, when the expense will not stage in their lives) are an unexpected expense compete with high heating bills. that puts pressure on their finances. In Central 37. Respondents also report trying to save on Asia (Tajikistan, Kyrgyzstan) respondents refer expenses such as clothing, travel, transportation, more frequently to cultural traditions such as child care, and telephone use, although these tois in Kyrgyzstan.14 In Tajikistan, most groups measures are not always taken as a response (low and middle-income) reported selling or to energy prices. For example, most low-income not buying gold jewelry (a traditional gift given participants in the study share that they had to daughters for their weddings) as a coping stopped buying new clothes for themselves strategy to meet energy expenses. However, a long time ago, and only buy clothes for their in some groups these topics sparked heated children, often from secondhand stores. In discussions because some respondents Croatia, urban respondents mention not using maintained that if one has a daughter, expenses personal cars or even public transportation, but such as weddings cannot be avoided. Keeping walking and biking instead to save on gas and such traditions and having social interactions transport fares. They relate these measures are important for building and maintaining to the overall increase in prices related to social capital. EU accession. Urban residents in Tajikistan frequently mention keeping mobile phone bills 14 A toi is a traditional celebration for various occasions, such as a wedding or the birth of a child. 21 “I think that, at our age, range of coping mechanisms, and men and women unexpected expenses occur. reporting different coping mechanisms. Urban dwellers more often mention cutting back on mobile Even the price of the bus phone communications, using bicycles instead of pass increased. Just not to cars or public transport, finding additional jobs, mention a month we have to and negotiating gas or electricity payments with attend 2–3 weddings.” the utility company; rural households, meanwhile, report a more limited set of coping measures. —MIDDLE-INCOME MAN URBAN AREA, ROMANIA Gender differences are often found in the perceived ability to increase one’s income in order to cope with larger expenses for basic needs such as “Once, we sent money energy. Men believe they are capable of finding as a present for the toi, additional and part-time employment to offset but did not go there to additional energy costs. Women are less likely save travel costs.” to mention finding additional work as a coping strategy, and more likely to proactively seek social —LOW-INCOME WOMAN assistance. Some women, however, do mention URBAN AREA, KYRGYZSTAN seeking part-time jobs as caretakers, taking up knitting projects, selling crafts or other products at 39. Borrowing money is generally a last- the market, and so on. resort coping strategy that is employed to a 41. The level of impact of these strategies on varying degree across countries. In Belarus well-being also differs across income groups and and Armenia less than a tenth of respondents gender. As mentioned above, the poorest groups mention borrowing money as a coping strategy. reduce food spending, which directly affects their Borrowing money is least common in Tajikistan, basic nutrition needs, though for middle-income although extended families there are more households the impacts can be more marginal. likely to live together and thus save or share Similarly, for the lower-income households, saving energy expenses. In Albania, borrowing is so energy may result in inadequate heating, or heating widespread that it is a way of life for many, and small spaces during the winter and being forced particularly for social assistance beneficiaries to share crowded conditions with extended family. who feel trapped in a never-ending spiral of debt. Women’s coping strategies are often more of an In Bulgaria, Romania, and Croatia, respondents imposition on their daily lives. Women who stay stated that they borrow both from friends and at home are more affected by reduced heat during financial institutions such as credit unions. the day. As women are more often responsible for Some rural households and Roma in Romania household chores such as cleaning, washing, and and Bulgaria report buying food on credit at cooking, they also are more impacted by using local stores as a regular monthly strategy. household appliances more sparingly. In countries 40. The scope of available strategies may such as Croatia and Bulgaria, a common energy- vary across locations and genders, with urban saving strategy is to use energy at night when the respondents reporting that they employ a wider rate is lower. Women are more likely to report being 22 impacted by this strategy, as they have to stay up 43. Nevertheless, a high proportion of low- and late to do more energy-intensive housework. middle-income groups in the sample note that they have no choice but to delay payments. In Bulgaria, one in five respondents in the study, NONPAYMENT AND PAYMENT DELAYS of all group categories, noted that they must 42. Payment delays are the second-most regularly delay bill payments. In Romania, about widespread coping strategy mentioned by study 40 percent of FG respondents need to delay respondents. However, payment delays are also payments at some point during the year. This is reported as a strategy of last resort, one that most common in the heating season when bills causes stress and imposes a further financial are significantly higher. It is also more common cost (in penalty fees). As mentioned above, among district heating users, who cannot be energy services—for heating but also for lighting, easily disconnected from the network. In Bulgaria, cooking, heating water, and other household poor urban households often pay off their winter needs—are seen as essential. Being disconnected district heating bills throughout the summer. from electricity or gas is considered a household Even though they face penalty fees for this, they crisis. Therefore, most households avoid being prefer this option to having the energy company disconnected from energy utilities or being left send them equalized bills throughout the entire without solid fuels for heating at all costs. year, because they feel there is less opportunity “I’d rather face hunger than for their bill to be manipulated and because not pay the bills. I’m afraid they would rather face the stress of receiving high bills only half of the year. In southeastern they will disconnect me.… Turkey, respondents who delay their payments It’s very expensive to be complain about high interest charges that they reconnected. Also, it’s much do not fully understand. The thought of paying more difficult to have to pay interest charges further angers them, considering two bills in one month. I’d that most of the households in the region use rather go buy bread and sugar electricity illegally and do not pay bills at all. on debt.” 44. Households that are more reliant on gas —LOW-INCOME WOMAN and electricity are less able to delay payments RURAL AREA, ROMANIA as a coping strategy. Their service may get disconnected within a short period after “I was once disconnected. nonpayment, and reconnecting may be costly They got the house wiredup and time consuming. Those households more again all right after I paid often report waiting until the last possible day them. But I slaved on an entire to pay the bill, or negotiating with controllers month just to pay the bill and to pay the bill in parts. The latter is common the reconnection charges.” in rural areas and some urban areas (such as in Tajikistan) where bill collection is done —LOW-INCOME MAN, in person by controllers who go house-to- RURAL AREA, ROMANIA house. In Bulgaria, the fact that district heating 23 households can delay payment longer than 45. For the reasons mentioned above, those that heat with gas is perceived as unjust. nonpayment is uncharacteristic of most households. When nonpayment occurs on a “We are discriminated larger scale, it is generally caused by specific here because we are regional characteristics. For example, ethnic and immediately cut off, and you political tensions in the predominantly Kurdish in Sofia could not pay for populated southeastern region of Turkey have years. This is why the price contributed to more widespread nonpayment behavior that reflects not only poverty but of gas is high: you in Sofia do also a set of accumulated grievances against not pay for district heating, the government and electricity providers (see district heating companies Box 7). Prior qualitative research conducted in have debts to Bulgargaz and Albania and Serbia also reveals some cases in they increase the prices to which nonpayment has become widespread in cover losses.” some communities (see Boxes 8 and 9). —MIDDLE-INCOME MAN SMALL TOWN, BULGARIA BOX 7. NONPAYMENT IN SOUTHEASTERN TURKEY Conflict and tension in southeastern Turkey, where the majority of population is Kurdish, caused citizens to not pay electricity bills and the government to not invest in electricity infrastructure in the region prior to privatization. At 70 percent, southeastern Turkey had the highest electricity nonpayment and loss rates in the country at the time of privatization. Reasons for such rates are inadequate and inefficient infrastructure; inability to pay; outstanding debts; dissatisfaction with the electricity service; weak relations between the citizens and the state; and learned behaviors. The distribution company does not calculate payment and loss rates separately however; they both fall under the category of “unaccounted electricity.” Key informants argue that because of the region’s inefficient infrastructure, some of the losses are caused by system deficiencies, and consumers alone should not be held responsible for high loss rates. Nevertheless, in the consumer satisfaction survey, 30 percent of respondents indicated that they know someone in their close environment who does not pay their electricity bills regularly or who uses electricity illegally. Illegal electricity use includes various illicit actions. Low-income households use techniques 24 such as placing the meter inside homes where distribution company staff cannot read it. Industries and small-scale businesses use more sophisticated methods such as stopping or slowing down electronic meters and installing software to manipulate meter readings. FGDs and key informant interviews reveal that the industrial sector and regional small businesses are the most prominent users of unpaid electricity. Respondents mention that business owners bribe energy company employees to avoid fines for illegally using electricity and nonpayment. A respondent working in the industrial sector points out that “when an employee from the service provider comes to read the meter, he gets a bribe from my boss.” According to the consumer survey results, learned behaviors and the idea of not being obliged to pay are also important reasons for nonpayment in commercial communities. Many households in the southeastern region use electricity as a primary or a supplementary source of heating. Electricity is also used throughout the year to heat water. Poor households use electricity for cooking and switch to portable gas only when electricity is not available. More than half of the respondents report that the inability to pay is the primary reason for nonpayment. As a respondent from Sanliurfa states, “The problem is lack of economic means and low income. How can somebody working for a minimum wage pay for high electricity bills?” In rural areas, 92 percent of respondents believe that people do not have the financial resources to pay for energy expenses. Rural residents often use electricity for agricultural irrigation, which is highly expensive. For that reason, most of the farmers use electricity illegally and the number of unsubscribed irrigation wells in the region is high. According to the electricity distribution company, 95 percent of farmers in the southeastern region use electricity they do not pay for; 49 percent of the population works in agriculture, making it the main source of income in the region. The Southeastern Anatolia Project (GAP in its Turkish acronym), a regional development project comprised of irrigation and energy projects, has mainly benefited large landowners who were able to increase their yield with irrigation opportunities heralded by GAP. However, more than half of the irrigation projects were not realized, and farmers without a formal system of irrigation were left with the option of using electricity for pumped water irrigation. As a farmer from Sanliurfa states, “A farmer receives electricity bills of 50 thousand TRY more or less for a well. If he manages to harvest 50–60 tons of cotton, he can only earn 25–30 thousand TRY for this. How could he pay the bill?” During FGDs, rural respondents emphasized that they are unable to pay for electricity due to high bills that result from the accumulation of debts. As a respondent from Mardin said, “I would be ready to be imprisoned for ten months only if I knew that my debt was going to be cleared.” Eighty-eight percent of rural respondents indicate that restructuring the debt payments and installment plans would prevent illegal use. Rural respondents also suggest establishing fixed prices per irrigation well according to the size of the irrigated area and power of transformers. In the consumer survey, 64 percent of rural households and 26 percent of urban households indicate that dissatisfaction with the electricity service is the second most important reason for nonpayment. During FGDs, respondents complain about voltage fluctuations and unexpected power outages. The region’s political context has also contributed to nonpayment. Southeastern Anatolia has suffered from a protracted conflict situation, which has resulted in a lack of trust between citizens and the government and low levels of infrastructure investment. Key informants suggest that there are politicized neighborhoods in the region, where citizens kept the distribution company staff away and fought against forced connections. 25 Residents of these areas argue that they have been treated as “second class citizens” by the state, and have received low-quality services for many decades. Residents believe they are entitled to free electricity. FGDs also revealed growing conflicts between the groups that pay for electricity and those that do not. Resentment toward nonpayers is particularly common in new urban communities built next to or within existing pockets of poverty. Payers state they carry the burden of nonpayers. BOX 8. NONPAYMENT IN ALBANIA In Albania, the electricity provider identified low collection rates as an important problem and stated it is committed to fighting against nonpayment “without any tolerance.” Consumers who do not pay their bills risk being disconnected. However, according to qualitative research findings, the electricity company struggles to enforce payments due to the dire situation of poor households. As a female nonpayer from Milot puts it, “[The electricity company] knows that we don’t even have money to buy bread.” The primary reported reason for nonpayment in Albania is the inability to pay. During FGDs, respondents stated that they cannot afford to pay for electricity due to unemployment and the inability to cope with basic needs such as buying clothing and school supplies for their children. As a female nonpayer from Rrashbull put it, “Whoever is concerned about being able or not to produce daily bread doesn’t care about paying for electricity.” Beneficiaries of social assistance point out that their monthly electricity bills and spending on wood and gas exceed the monthly cash assistance they receive. Respondents suggest that increasing cash assistance, even in small amounts, would help poor families pay their electricity bills. A female nonpayer from Milot said, “I would only start paying for the electricity if the government gave my family US$300 per month as cash assistance.” The belief that electricity should be free to poor people is common among nonpayers, who argue that the state has failed to help poor households and that social assistance mechanisms are insufficient to cover essential expenses. Respondents also mention the sector’s accountability failures as a reason for nonpayment. The prevailing feeling among nonpayers is that they are “being cheated” by the electricity company. Nonpayers argue they are charged more than the actual quantity of electricity they consume. As most of the respondents have limited access to their meters, they believe their meters are not accurately read. A female payer from Milot stated, “The electricity company employees come whenever they want to check the meters and write as much as they want in the bill.” In some neighborhoods, nonpayers claim that their meters are intentionally altered to run faster and record higher-than-actual electricity consumption levels. In places with historically inadequate collection rates, the main reason behind nonpayment is related to the extent to which the nonpayment phenomenon is spread in the community. Respondents state that they stopped paying their bills because they did not trust that other citizens would pay their share. They felt it was unfair and pointless to do so, especially when people of higher socioeconomic status did not pay 26 their bills. During FGDs, respondents stated that people with acquaintances and money are able to obtain electricity supplies illegally. A female respondent from Rrashbull claimed that “families that live in very good conditions and even have air conditioning in their houses pay as much as me who uses electricity only for lighting and uses gas to cook.” Furthermore, a male nonpayer from Bicaj stated, “If hotels with 15 floors do not pay their bills, why would I pay?” Respondents in the Bicaj and Kukes regions associate their nonpayment with the construction of the Fierza Hydroelectric Power Station that was completed in 1979 in arable lands that used to belong to communities. The population of Kukes was displaced to a new location, and nearby villages lost significant amounts of arable land for which they were not compensated. This is why a majority of the population has not paid for electricity in the past two decades. BOX 9. NONPAYMENT IN SERBIA In Serbia, FG respondents state that nonpayment is related to poverty and debt accumulation. The most vulnerable households illegally connect to power systems or they illegally collect wood from forests by the river. People do this despite knowing they may be fined or face prison sentences. Similar to Turkey and Albania, where nonpayment is a problem, in Serbia poor households do not consider using electricity illegally as stealing, and believe they are entitled to free electricity. Respondents blame the state for failing to help poor households and for the constant price increases and exorbitant interest rates. Poor households justify illegal use with the mantra, “Stealing from thieves is not stealing.” Poor residents of Belgrade who live in urban town settlements mention that although they do not use illegal electricity due to a lack of technical possibilities, they would if they could. As a poor respondent from Belgrade put it, “We’ve reached such a point that I would be prepared to steal electricity. I’m honest, but I’m forced to. If the state is not ashamed, why would I be. Is the state ashamed of its citizens living the way we do? There are much greater thieves in this state than I would be if I stole electricity.” Collecting wood is risky and includes the problem of transportation. Most poor households lack vehicles and use either a bike or a wheelbarrow to transport wood, which requires help from their acquaintances and is very difficult and tiring. Moreover, people also quarrel and physically fight with each other over the distribution of found wood. Most of the FG participants, particularly the vulnerable and households with school-aged children or younger, are forced to postpone electricity bill payment. In rural areas, not paying for electricity is described as the most efficient measure, since using electricity is not as necessary because wood is used to heat the home and prepare food. In urban areas, there are two approaches to not paying electricity bills. Citizens with a lot of debt do not make minimum payments, because the interest on the debt exceeds the minimum monthly payment amounts. The amount of debt related to interest is one of the most frequently registered 27 complaints. Respondents say it is impossible for them to settle their debt since after a month or two of nonpayment in winter, they enter the vicious circle of earning “interest on interest.” Respondents whose debt is below 30,000 dinars try to pay at least something to prevent disconnection. As one recipient of social assistance stated, “I pay at least a little bit every month, so although my debt is more than 24,000 dinars, they do not touch me and I didn’t receive a warning note.” If respondents in debt are disconnected, they try to reconnect to the power network on their own. Respondents mention two ways of reconnecting: using wires from the electricity pole and unsealing the electricity meter that was previously sealed by the power company. In such cases, respondents worry about the illegal connection starting a fire, and of being arrested and sent to prison. 28 IV. ENERGY EFFICIENCY AND ENERGY-SAVING BEHAVIOR Households take active measures to minimize their energy consumption in order to save money. Low-income households do this by reducing the amount of space they heat, using energy sparingly, and adopting basic low-cost insulation measures. These measures impact their quality of life, but result in marginal savings. Middle-income households are more proactive about making more advanced energy-efficiency improvements and switching to new energy- efficient appliances. They note that their energy bills more substantially reflect these measures. 46. Households consistently adopt energy- eschewing the use of household appliances saving behaviors as a way to cope with energy and frequently do work manually, such as payments. As a result, most respondents do using a broom instead of a vacuum cleaner, not think they have much opportunity to further washing clothes by hand, and reducing the reduce their energy use without encroaching on use of coffee machines, microwaves, and other their basic needs. In low-income households small appliances. In Croatia, middle-income these behaviors consist of long-term habits households report they have stopped using such as switching off lights in unused spaces, their cars and some even avoid using public and also more severe measures such as keeping transportation; instead they walk or bike more the home inadequately heated, keeping only one often. Most middle-income respondents, and room heated in the winter, or moving in with especially those in new EU member states, have extended family for the winter. made some energy-efficiency improvements to their house or apartment, such as replacing 47. Middle-income households have more windows, doors, or insulating the walls. recently begun to adopt these tactics in direct response to a rise in energy prices; energy- 48. Most households in the region tend to be saving behavior in middle-income households highly motivated to invest in energy efficiency so is also more likely to feature the reduced use as to reduce their consumption in ways that do of household appliances. As mentioned above, not affect their needs. In Bulgaria and Romania, middle-income households in Romania report the vast majority of middle-income respondents 29 and about a third of low-income ones have partly due to their invested in some form of thermo-insulation such more distinct as new window frames and inside or outside living conditions. wall insulation. These measures are most often Rural houses undertaken by individual households (using their are larger and own savings or loans) and less often collectively more difficult by residents of a building. In Tajikistan, Croatia, to insulate; in Kyrgyzstan, and Armenia, FG respondents are rural areas in largely aware of more advanced home insulation Tajikistan many methods, but few have invested in such measures, households mostly due to their cost. report they prefer Covering windows with plastic sheets as an to build separate insulation measure, Tajikistan. 49. Better-off households have predominantly small quarters reaped the savings from energy-efficiency for winter living than to invest in insulating their measures. Lower-income households in all current house. For marginalized Roma groups— countries make efforts to insulate through both urban and rural—who have insecure tenancy, cheaper means such as putting cushions on and whose dwellings are in squalid condition windows, taping plastic sheets on windows, and often have broken windows/doors, energy- placing carpets on the wall, or using double efficiency improvements are not a priority. In carpets on the floor. These measures help earthquake-affected zones in Armenia, people improve the quality of insulation in the house, who live in low-quality social housing, which but have no or marginal effect on energy they do not own, face similar constraints and savings. Poor rural and small-town residents disincentives. Financial constraints also play often use old electric boilers to heat water and a role in these groups’ lower participation in have inefficient refrigerators in which to store energy-efficiency activities—rural and minority food for the winter. Moreover, poor people tend groups are at higher risk of poverty and generally to occupy less energy-efficient dwellings— have less to invest in insulation. older houses and apartment buildings where greater investment is needed for proper thermo- 51. There are also informational constraints insulation. In Belarus, respondents say that utility to investing in energy efficiency. Rural and bills in new buildings are at least twice as low as minority groups are less familiar with the in older buildings. At the same time, households benefits of such investments when fewer that have invested in new appliances, better people in their communities have undertaken insulation, or newer dwellings report significant them. In addition, beliefs about some harmful savings. In Romania, FG participants who have effects of insulation materials may prevent invested in insulation report savings of 40–50 households from investing in them; for example, percent in their monthly bills. there is a belief in Tajikistan, Kyrgyzstan, and Armenia that plastic windows are harmful for 50. Rural households across the region, and Roma health, possibly due to the fact that they allow in the new EU member states, are least active in less ventilation when burning wood and solid making energy-efficiency improvements. This is materials indoors. 30 V. SOCIAL ASSISTANCE AND PROTECTING ENERGY AFFORDABILITY Social assistance is an essential mechanism through which governments can mitigate negative impacts on rising energy costs for the poor. Findings from this research confirm that cash benefits are an important form of support for households that receive them. This study highlights areas where existing social assistance programs can be strengthened to facilitate access for vulnerable groups, based on respondents’ observations. The research notes that variations in the degree to which social benefits cover energy expenses across different groups, due to local circumstances, influences citizens’ trust in social assistance as a support measure in the face of rising tariffs. Lastly, this research affirms findings from previous studies that mitigation policies to offset the negative impacts of tariff reforms extend beyond those covered by last-resort assistance programs and include a large share of poor households. Support for pro-poor energy-efficiency programs, job creation, and income growth are all considered essential mitigation policies by respondents in this research. 52. All countries in this study have mechanisms local needs, but also constrains their ability to in place to protect the poor. In all of these mobilize sufficient funding to cover all eligible states, governments have also established households, and to ensure that the same programs to help low-income households with criteria for access are applied nationwide. In energy payments—either through housing and other countries, such as Romania and Bulgaria, utility support benefits or cash transfers for the governments have guaranteed funding for purchase of wood or coal. These programs have heating allowance programs from the central varied in their incidence and coverage, as well budget. as in their ability to enforce equal standards of selection of beneficiaries across regions. For 53. Benefits that aim to support energy example, in Tajikistan, Armenia, and Croatia, payments can reach a limited proportion of the funding and distribution of gas and electricity poorest two quintiles of the population. In some benefits is administered by local governments, countries, such as Belarus, these benefits are which allows programs to better respond to targeted at certain categories of citizens (such 31 as war veterans or single mothers) that may energy affordability would require a broad set of not necessarily represent the poorest; in others, mitigation measures, including social protection such as Bulgaria and Romania, governments and energy-efficiency support, to reach a wider have improved targeting by adopting income population group in each country. and asset tests to select beneficiaries below 54. This chapter presents some of the a certain wealth threshold. Yet in other cases, prevalent views among FG participants on the such as Tajikistan, discretion is given to local accessibility of social benefits and the extent councils to determine beneficiaries for gas and to which social benefits are able to support electricity support in their location. Data show their energy payments. These findings echo that current measures still fail to reach a large some of the known constraints about social number of the poor. This is due to a number assistance programs, noted above. Citizens’ of reasons, including low funding allocations perceptions should be interpreted in the context to social assistance programs, and different of intentional eligibility restrictions; funding and inclusion and exclusion errors. In Bulgaria, 88 capacity constraints; and the fact that countries percent of the poorest quintile did not receive included in this study are at different stages of the heating benefit (HB) (World Bank, 2013b). In reforming their social protection systems. At the Romania, prior to 2013, about 38 percent of the same time, these findings showcase important poor were excluded from the HB, prompting the concerns regarding the ability of some of Ministry of Labor, Family, and Social Protection the most vulnerable groups to access social to expand eligibility by removing some asset assistance programs. They reveal challenges filters and putting in place stricter fraud control such as social stigma, discrimination, and mechanisms to prevent better-off households potentially high variations in the effectiveness from receiving the benefit (World Bank, 2013c). of heating benefits across groups, all of which Most countries in the region are taking steps to affect the likelihood that households may seek modernize their social protection systems and this type of support. In addition, FGDs help consolidate assistance programs to more fully assess low- and middle-income respondents’ serve the needs of the poorest.15 Improvements overall attitudes toward social assistance as in targeting, generosity, preventing fraud, a mitigation measure for energy tariff reforms, and inclusion and exclusion errors can make and help gauge their expectations of what social assistance benefits a more reliable the government should do to protect energy form of support for the poorest. At the same affordability. time, these programs would be an insufficient protection mechanism for low- and middle- income households that are also likely to have PERCEPTIONS OF SOCIAL ASSISTANCE serious trouble affording their basic energy ACESSIBILITY AND EFFECTIVENESS needs but are ineligible for assistance. For this 55. Participants in the study do not believe reason, prior research (see Ruggeri Laderchi that social assistance can alleviate high energy et al., 2013) has suggested that protecting costs because eligibility criteria for benefits are  restrictive, and many households that 15 See Tesliuc et al. (2014) for a detailed review on the respondents consider to be vulnerable are left progress of last-resort social assistance programs in ECA. out. These opinions are especially prevalent in 32 Armenia and Bulgaria. Respondents think it is factors such as the household’s location, types unfair that owning land or real estate—which of energy sources, whether it is possible to are often nonproductive assets—may disqualify switch sources, and so on. Regional differences them from receiving the benefit. Respondents in in tariffs for electricity, gas, and district heating Bulgaria are concerned that disability benefits further affect vulnerability. Given these diverse are considered part of household income and factors that determine a household’s overall sometimes render a family ineligible for heating energy expenses and vulnerability to rising benefits. tariffs, heating benefits also ranges in how effectively it may help households meet basic 56. A number of low-income FG participants energy expenses. note that seasonal work and informal sources 58. In Bulgaria and Romania, variations in of income make it difficult to access social heating benefits’ efficacy are observed across assistance. Eligibility requirements may groups using different energy sources. Social include long-term unemployment or consistent assistance workers in Romania and Bulgaria registration with an unemployment bureau, similarly estimate that the extent to which heating which informal or migrant workers are unable benefits covers a household’s energy expenses to maintain. In the new EU member states, may vary substantially across households. In this is particularly problematic for the Roma, Bulgaria, households that receive the allowance who often engage in seasonal work; yet this and use wood for heating report that the benefit is also the case for many poor households in covers a much higher proportion of their winter all countries in the sample, especially in rural heating expenses than households that use locations where there are limited opportunities district heating. A social assistance worker for formal employment. In Bulgaria, residents of in a remote mountainous location in Bulgaria a remote rural area who rely heavily on seasonal where the heating season is longer and wood construction work expressed the same concern. costs more estimates that the benefit covers no Some respondents also expressed the opposite more than 10 percent of a household’s heating concern—that households that rely on informal expenses. In other rural and small-town areas, sources of income or on remittances receive social assistance workers estimate that the social assistance despite having income that benefit is enough to fully cover the heating should make them ineligible. For instance, in expenses of a person who lives alone, or to heat Croatia and Tajikistan, the high prevalence one room through the winter. The same level of of informal incomes and remittances is very assistance may therefore cover a wide range of high, which fuels perceptions that benefits are expenses depending on a household’s location unfairly distributed. and the source of energy used. In Romania, 57. Perceptions of the effectiveness of heating respondents who use district heating report benefits are influenced by the degree to which that a greater portion of their heating expenses they cover energy costs, which may vary widely are covered by social assistance than those across groups within a given country. As who heat with gas, wood, or coal. The degree discussed in Chapter I, household vulnerability to of the benefit’s effectiveness is also influenced energy tariff increases is influenced by multiple by regional variations in tariffs. For example, in 33 some of the sample regions in Romania, district bulk purchase of wood in the fall. Roma minority heating tariffs have grown by more than 100 groups in Romania were the most likely to buy percent, whereas in other regions they have wood in smaller quantities throughout the year. stayed constant. The size of a household and 60. Because of these seasonal patterns of the availability of additional local government spending, the majority of respondents using subsidies, among other factors, may also wood in all countries in the study would prefer to affect the way citizens perceive a benefit’s receive heat benefits in consolidated amounts effectiveness. rather than in a monthly sum. Buying in bulk is not 59. A majority of households that use solid only more economical but is sometimes the only fuels for heating believe that heating benefits option, as many wood suppliers refuse to deliver should be aligned with the seasonal demands wood in smaller quantities. Thus households for purchasing these fuels. Across the region, often need to borrow money or save funds to households that use wood and coal for heating cover fuel expenses up front, and consequently purchase these fuels in bulk in the late summer use the wood benefit for other needs—for food, or early fall, when they are cheaper. Buying covering debt, and so on. Heating allowance these fuels in small quantities through the year beneficiaries who use wood in Bulgaria note increases their overall cost. As an example, that the benefit is often not used directly to Figure 2 shows distribution of spending on wood cover the cost of wood for heating (they need through the year as reported by FG participants to mobilize funds for it earlier in the year), but in Romania. In this case, rural respondents are rather serves as additional monthly cash during more likely to consolidate wood purchases—they the winter. In Croatia, respondents who receive report greater capacity to store larger quantities this benefit complain that it comes in November of bulk-purchased fuel, as well as saving from when wood prices are significantly higher. In purchasing food through the summer to afford a both Croatia and Armenia, FG participants note FIGURE 2. RURAL VERSUS URBAN PATTERNS OF PROCURING WOOD FOR HEATING IN ROMANIA (RON/MONTH) Source: FGD in Romania, from Metro Media Transilvania. 2014. “Romania: Qualitative Assessment of Poverty and Social Impacts of Energy Reforms.” Report, Metro Media Transilvania, Cluj, Romania. 34 that the amount of the benefit for wood should as the best long-term strategy for lowering take into account increases in wood prices. expenses. Job creation is also frequently mentioned as a way to help households manage 61. In several countries, it is considered energy payments. shameful to receive social assistance. Because of this, households that do not currently benefit PERCEPTIONS OF SOCIAL ASSISTANCE from social assistance are unwilling to view it INSTITUTIONS’ ACCOUNTABILITY as an acceptable way to cope with high bills. 63. Many respondents’ concerns involve the In Belarus, income-based social assistance is lack of transparency surrounding eligibility stigmatized (as being received by “drug addicts” criteria and social assistance programs’ very or “alcoholics”) and is thus not readily perceived complex application process. In Tajikistan, as a mechanism for helping with energy low-income respondents in both urban and expenses. Instead, households look to their rural areas stated they are unaware of eligibility primary energy service providers or multiservice criteria and that they would need legal help to utilities (zhekhs) for help. In Bulgaria, discussions access the social assistance to which they are about whether the social assistance system is entitled. In Bulgaria, most respondents stated an appropriate way to channel resources for that one needs specialized help to understand mitigating impacts of growing tariffs sparked the eligibility and application process for social some ethnic hostility toward Roma, who are assistance. Roma, and especially Roma women, perceived to overwhelmingly benefit from social some of whom are uneducated or illiterate, assistance programs. In Kyrgyzstan, low- often note they are discriminated against during income men feel ashamed to ask for help or the application process, in that the application seek social assistance, as it clashes with gender procedure is not properly explained to them. norms and cultural expectations, which hold that men are providers and cannot depend on 64. Personal interaction with social assistance anyone or anything, particularly the government. workers—and such workers’ attitude toward In Armenia, it is considered shameful to be applicants—are considered an essential part dependent on government support. of accessing benefits. Not only are these interactions necessary to formally submit an 62. Regardless of the limited coverage of social application, but they are also viewed as essential assistance and the negative associations with for obtaining the information and assistance social assistance, households that rely on these to successfully apply. The majority of poor benefits consider them an essential form of respondents in the study acknowledge that it is support. This is especially true for households difficult to understand eligibility requirements that can cover most of their heating bills with and the application process. They view the this assistance. Other households, however, support of social assistance officials as crucial strongly prefer support to investments in energy- to one’s chances of submitting a successful efficiency measures: In a context in which application. Respondents’ grievances are also households are already actively reducing their mostly related to complex regulations and spending on energy, the prospect of investing insufficient help in understanding rules and in more advanced home insulation is regarded requirements. 35 “Ninety percent of procedures and eligibility criteria is needed so citizens can easily understand and access the receiving benefits or support they are entitled to. Some of the most being rejected depends on informed participants in FGDs were family the social worker you’ve members of persons with a disability. They contacted, because they have been forced to read all relevant legislation may not give you sufficient to exercise their rights, as there is no simple information for everything, or user-friendly way of learning about their entitlements. The complex procedure and time and you get in a never ending required to submit an application discourages cycle of going back to get some potential beneficiaries (usually urban, more documents. If they male) from seeking heating benefits altogether. decide to put up Some Roma respondents in Bulgaria also obstacles, they will.” mention that obstacles in applying arise from the fact that social workers are less familiar with —LOW-INCOME MAN their family situation. SMALL TOWN, BULGARIA “In the village we know each 65. In Bulgaria, participants from different other, we know who has settlements suggest that social assistance offices purposefully sabotage applications what, but the social service because they lack funding to distribute benefits officers, they don’t know us. to all eligible households. People in Tajikistan We apply and match their have similar suspicions. Respondents stated requirements, but they have that the lack of clear information about eligibility no idea about how we live.” allows the local government great discretion in distributing benefits, which may be leaked to —ROMA WOMAN better-off and better-connected households. RURAL AREA, BULGARIA In Armenia, some respondents believe that eligibility scores are calculated at social workers’ discretion, and do not trust that being accepted 67. Claiming benefits is even more complex for benefits is based on objective criteria. since the eligibility criteria for these programs are not always clear. As a result, citizens lack “Everything is done information about them or are skeptical of their so that you chance of receiving assistance. For example, give up applying.” in Tajikistan, local government officials select electricity and gas benefit recipients —LOW-INCOME MAN using unclear criteria, which led most poor SMALL TOWN, BULGARIA respondents in the sample to conclude that 66. Both beneficiaries and non-beneficiaries the benefit does not reach the most vulnerable say simplified information about application households. 36 VI. GOVERNANCE AND ACCOUNTABILITY OF ENERGY INSTITUTIONS Public opposition to reforms is equally rooted in concerns for affordability, as it is in ones regarding governance and accountability. Governance and accountability concerns relate to the direct interaction with energy providers, e.g. quality of service, billing transparency, resolving grievances, citizens’ ability to express themselves as consumers, and seek their rights. They also relate to concerns about overall management of the sector, and their trust in the government’s ability to put in place reforms that benefit all. Public opposition to reforms also stems from deficiencies in information, mostly related to misunderstanding the justifications for reform. 68. Qualitative data provide some insight into 69. Energy affordability is a main concern for the factors that shape public attitudes toward consumers across the region. The fact that wages energy reforms, and in some cases, drive and pensions have not grown proportionately to strong public opposition to reforms. Consumer tariff increases is perceived as unfair in most acceptance of price increases is often related countries.16 In fact, many respondents mention to energy affordability, but it is also related to that their incomes have been stagnant or have the overall quality of the relationship between been reduced, or that they have lost their jobs due to economic crises. Many respondents also citizens and their state, and perceptions of the feel that energy prices should be linked to income energy sector. Understanding these factors is levels in the country. For example, citizens of important given that social mobilization against new EU member states—Romania, Bulgaria, and energy tariff increases has been a key political Croatia—object to the idea of paying the same constraint to implementing these reforms. In market level of energy tariffs as those in Western the Kyrgyz Republic (in 2010) and in Bulgaria Europe, given the disparity in their incomes. (in 2013), electricity tariff increases led to public protests and, ultimately, to changes in 70. Governance and accountability concerns, government. In Bulgaria and Romania, as described in more detail below, also underlie well as other countries in the region, political 16 These sentiments are not expressed in Belarus, where candidates have often made keeping energy the president has explicitly said that price increases will not exceed US$5 a year and will be related to prices low a feature of their election campaigns. income increases. 37 opposition to reforms. On the one hand, these Older and rural respondents tend to attribute concerns emerge from citizens’ overall lack of tariff increases to private providers entering trust in the state, and the state’s role in energy the market; whereas others, usually younger sector governance in particular. On the other and urban participants, relate tariff increases to hand, they are rooted in low understanding state monopolies and the lack of competition. of the rationale for reforms. Governance Both these groups, however, express common and accountability concerns also arise from frustration with the lack of transparency and citizens’ routine interaction with energy controls in the management of the sector. providers, and a feeling of powerlessness in seeking their consumer rights vis-à-vis “Let me tell you something: energy institutions. Together these factors I’m afraid when I even only suggest that efforts to improve governance, hear of ‘reforms,’ because accountability, and communications of reforms for more than 20 years now, are needed, both by the state as well as by since 1990 I keep hearing providers, in order to raise awareness and work the word ‘reform’ and it has towards reshaping the social contract with always dragged us a little regard to energy provision. further down into hardship: draw the belt a little bit ENERGY SECTOR GOVERNANCE AND COMMUNICATIONS REGARDING tighter.… So, I don’t know, REFORMS really, in principle … a reform 71. Citizens’ ideas about the state’s role in should be … something more service provision affect perceptions of energy efficient … and for people to sector reforms. The strong legacy of a social have easier access … contract from the Communist era, when to stuff … but reforms have affordable energy provision was seen as the always brought only steep state’s responsibility, is observed to a different prices and hardship.… I don’t degree across countries. The belief that citizens are entitled to low-cost energy services is know what it involves, but especially prevalent in Belarus and Central Asian believe me, I can’t expect it countries, in which utility services are still owned to bring anything good, and and/or controlled by the state. Older and rural that’s the truth of it.” participants in new EU member states also share this belief. For example, in Romania, some older —LOW-INCOME MAN PENSIONER, RURAL AREA, ROMANIA participants question the logic of paying a utility company to maintain a network that was “built by [their] fathers.” Additionally, groups that do 72. These views are also often rooted in a sense not pay for services in Turkey, Albania, and Serbia of common ownership of natural resources, argue that they are entitled to free electricity combined with scarce information about how because the state fails to help poor households. much it costs to produce energy. Respondents 38 in southeastern Turkey think it is unfair that to support energy affordability in vulnerable the government charges them more for households. Most governments have not made energy, considering that the government uses clear commitments to mobilize the revenues hydro-resources that come from their region. from subsidy elimination to support energy In Bulgaria and Tajikistan, citizens and civil affordability programs. Where such schemes society organizations (CSOs), respectively, are have been discussed by the government, they resentful of the fact that energy produced with have not been widely communicated.18 In other national resources that “belong to the people” cases, such as Croatia, a national working group can be exported at a lower price than it is sold has been established to discuss a model and domestically. financing to protect vulnerable customers, yet has had no conclusive results to date. 73. The rising cost of energy is often perceived as “artificial,” related to corruption, monopolies, INTERACTION WITH and/or the profit-seeking behavior of private ENERGY PROVIDERS companies. Citizens do not believe that 75. Opposition to reforms also stems revenues generated by higher tariffs will be from a feeling of powerlessness in seeking spent to their benefit (such as on improving the accountability from service providers. network, quality of service, and so on) but rather Respondents do not see tangible improvements think it will be used to enrich utilities, energy in services, complain of unclear or inconsistent traders, and/or energy company employees. In billing, and find it difficult to resolve their Romania, FG participants mention the “smart grievances with providers. This is especially guys”17 as part of the reason for unwarranted difficult for women, ethnic minorities, and rural tariff increases. In Bulgaria, some attribute the residents, due to social norms, discrimination, higher electricity prices directly to investments or physical distance from the provider. in renewable energy, and believe that higher cost only results in profits for solar field investors. In 76. There is little communication between Tajikistan, Bulgaria, and Croatia, respondents citizens and energy service providers across the noted that energy company employees receive region. Most households have been connected higher wages than other public employees; to basic utilities for decades and have paid low many relate higher tariffs directly to enrichment tariffs, and there has been little to no incentive of energy company employees. In southeastern or mechanisms to provide feedback or demand Turkey, several FG respondents said that service improvements. In turn, service providers company employees accept bribes from illegal have not developed strong capacity for outreach, electricity users who want to avoid fines. In grievance resolution, and customer service. This Belarus, respondents think that price increases was observed most clearly in countries such as will only benefit businesses. Belarus, where tariffs had not risen noticeably at 74. In addition, FGDs indicate that citizens do not the time of research, and providers’ institutional see gains from subsidy removal being reallocated structure was mostly unchanged. 17 Energy traders who have purchased energy at preferential prices from state-owned enterprises and 18 For example, the windfall tax scheme in Romania that sold them at a higher price on the free market. was discussed but not implemented (PEA report). 39 77. In countries where more changes in the “Our white appliances sector have been felt by consumers—such were destroyed due to high as tariff increases or privatization of energy voltage. The customer providers—consumers express greater dissatisfaction with services and are more service [of the appliance likely to voice their expectations of better producer] provided us with service quality. Higher energy bills increase a document stating that citizens’ attention to the sector, and increase the appliances were burnt their demand for improvements. Changes in out due to a voltage surge. billing, metering, and tariff calculation methods Yet the electricity service also result in greater consumer interest in the provider did not accept process and in billing fairness. Most consumers state that the energy sector’s technical details responsibility.” are difficult to understand and therefore have no —LOW-INCOME WOMAN comment on them, but many complain about the URBAN AREA, TURKEY quality of service, the lack of clarity of metering and billing, the difficulties in interacting with “My television providers, and the overall price in relation to the quality of service received. burnt out due to voltage fluctuations.” 78. The most common concern cited by respondents relates to service reliability and —LOW-INCOME MAN URBAN AREA, TURKEY the quality of electricity, gas, or district heating. Commonly noted problems include fluctuations in electricity voltage (which damages household 79. Another set of issues involves billing appliances); frequent and long-lasting power clarity and consistency. Electricity consumers outages; low quality of gas (gas mixed with air); in both Romania and Bulgaria note they do network damages that interrupt service; and not understand the way in which their bill is low levels of heating and hot water. In new EU calculated, and are especially resentful of the member states these issues are noted more inclusion of a “green tax” for renewable energy rarely, while in Central Asian states, Armenia, and a “TV and radio tax” (in the case of Romania). and Turkey they are reported more frequently. In Bulgaria, consumers also think their bills rise Low-quality energy is inconvenient but also independent of the tariff increases or decreases imposes additional costs. Consumers have to announced in the media. Each year they try pay for appliances to be repaired or replaced, to further reduce their spending, but say the collect money for rapid network repairs (reported connection between their consumption and their in Tajikistan), purchase power generators, use bills is not consistent. Similarly, many do not supplementary heating sources such as electric believe that the overnight energy rates (which are heaters when the level of central heating is too supposed to be cheaper) are calculated properly low, or pay more to run the hot water tap longer on their bill. In Croatia, some FG participants to reach the desired temperature (Romania). also complain about unclear bills. 40 “We are no longer which results in the need to pay more at one impressed when they time. Some FG respondents also contend that their meters are misread. announce cuts in the energy prices, because we “Once I received an cannot feel the effect of electricity bill of 250 TRY. these cuts.” They misread the electricity “Since when is meter. I went to the service this decrease? provider to solve the problem, I don’t understand. but they told me that even We pay a lot. A lot!”19 if it was misread, I had to pay the bill as it was already “Yeah, half of us issued. I paid it.” use electricity at nights; —LOW-INCOME MAN and we, the other half, URBAN AREA, TURKEY do not, because we know this is useless.” 81. District heating users tend to be least informed about the composition of their bill. They —LOW-INCOME WOMEN are also most likely to believe there is an unclear URBAN AREA, BULGARIA connection between their heating bills and actual 80. Some consumers also complain that they heat/hot water consumed. Mostly they believe do not receive any invoices, and/or have no that bills are manipulated to cover network losses way to check whether their bill corresponds and nonpaying customers. This perception is to the amount of energy they consumed. reinforced by the fact that heating bills received in Many respondents in Bulgaria stated that the beginning of the season are prognostic (based when payments are made online or in person, on the previous year’s bills), and reconciliation customers are only told the total amount owed. bills, reflecting real consumption, are only received In Belarus, apartment residents served by at the end of the season; in this way, consumers multiservice utility companies pay a common have no way to monitor their monthly bills based bill for multiple services (electricity, water, on the real amount of energy consumed. All heating, garbage collection, and so on) and do district heating FGs in Croatia noted unusually not closely monitor their bill for how much each high bills in January 2014, for which the heating service costs. Roma respondents in segregated company had no explanation. In Bulgaria, district settlements in Romania and Bulgaria report that heating users are dissatisfied with the fact that their meters are intentionally placed high up, they may be overcharged throughout the heating out of residents’ reach. In Turkey, respondents season and that reconciliation bills do not include say they receive their electricity bills irregularly, compensation for overpayment; meanwhile, if they delay payment to the company, they are 19 A 5 percent average decrease in electricity tariffs was charged penalty fees. In Romania, district heating announced as of July 2013; respondents are aware of the decrease but do not see it reflected on their bills. users more frequently associate unfair billing with 41 nonpaying customers and neighbors who steal “They say I have to heat by installing additional undeclared radiators. read the law. But if I have to “You suspect that read this law, that law, they manipulate the bills? – I have to become a lawyer. We don’t suspect, I haven’t studied that.” we are sure.” —LOW-INCOME MAN SMALL TOWN, BULGARIA —LOW-INCOME WOMAN SOFIA, BULGARIA “The problem is that people have no time and no “Taxes, green certificates, nerves and no competence. pluses and minuses all over To fight against such the bill.… They calculate the an institution one must bills in such a manner that have a lawyer and the we won’t understand.” money to pay to somebody to defend your interest.… —LOW-INCOME WOMAN URBAN AREA, ROMANIA People do not have the strength to fight this thing at all.” 82. Customers’ experiences in attempting to exercise their rights—such as efforts to get —LOW-INCOME WOMAN SOFIA, BULGARIA information from energy providers or resolve their grievances—play a strong role in shaping their attitudes toward the sector. Contacting providers “If those people who are to clarify billing questions or grievances takes up supposed to provide a a lot of citizens’ personal time, yet rarely results service and help you in a resolution. In Romania, electricity and gas don’t want to help, consumers frequently demand that well-staffed how could you look for help? local customer service offices be reestablished so they do not have to travel far to see a customer It’s like hitting the wall.” service official or wait in long lines. In Bulgaria, —LOW-INCOME MAN respondents note that their questions are either SMALL TOWN, BULGARIA dismissed by company officials or met with the direction to read a lot of laws and regulations. “I ask them to tell me In Tajikistan and Armenia, consumers are more how they compute the likely to contact local controllers to discuss billing or service issues, and rarely contact the company district heating, they say offices directly. Overall, respondents in all states it is very complicated you think contacting providers is not worth the effort. will not understand it. 42 I say, I am an engineer, “Everything in our life I will understand.” depends on electricity. You are completely —LOW-INCOME WOMAN SOFIA, BULGARIA dependent on one monopolist, which is the “We’re all dissatisfied electrical company. with ENEL here.… I don’t say that we don’t But we don’t know who have to pay but what to complain to. They’re choice do we really have? in Bucharest, that’s why. That monopolist believes I would need to dial a that no one can win against Bucharest number.” them and they can do whatever they want.” —LOW-INCOME MAN RURAL AREA, ROMANIA —LOW-INCOME MAN SMALL TOWN, BULGARIA 83. Consumer attitudes are also influenced by 84. Despite the problems interacting with the fact that companies are mostly active in providers, the large majority of respondents in consumer outreach when it comes to payment the study prioritize affordability over quality. collection, but not in responding to inquiries Because of concerns over the affordability or resolving grievances. In Bulgaria, a district of services, they state that improvements in heating company representative notes that quality and customer service would not make there is no capacity or obligation to answer all tariff increases more acceptable. Exceptions queries and grievances; hence ones that are to this are groups with higher means, such considered irrelevant are ignored. At the same as younger middle-income respondents in time, the company has established a customer Bucharest (Romania), or groups that are more relations center that regularly follows up with deprived of services, such as rural respondents consumers who have delayed payments, works in Tajikistan. The latter receive electricity only with them to restructure debts, and issues legal 3–7 hours a day in the winter, and express threats to long-term nonpaying customers. As greater willingness to pay more for continuous a result, the company recovered over 2 billion electricity service. BGN in debts in 2013 alone. In Kyrgyzstan and Armenia, electricity and gas companies 85. Overall, the attitude toward energy sector post the names of nonpaying households on reforms is resignation. Consumers expect their building bulletin boards to shame people into energy bills to rise and their budgets and well- paying. Thus consumers often feel they have being to be affected, but do not understand no chance to resolve grievances with the the justification for the reforms; nor do they company, yet feel under constant pressure to believe they have any voice in policy decisions make payments. surrounding the reforms. 43 VI. CONCLUSIONS AND RECOMMENDATIONS The research presented in this report complements prior quantitative research on the poverty and social impacts of energy subsidy reforms. Its findings can inform the development of more socially sustainable energy reforms. First, qualitative findings underscore the need to develop comprehensive solutions to support energy affordability for vulnerable groups. Coping with high energy costs may have long-term negative impacts on health, nutrition, and overall well- being, and affect poor as well as some middle-income households. Helping households reduce their energy consumption without compromising their basic needs could minimize these impacts. Second, this research highlights the need for governments and energy providers to ensure wider acceptance of reforms by (i) improving citizens’ awareness of the rationale for reforms; (ii) committing to high transparency; and (iii) improving the way they communicate about improvements in sector governance. Thirdly, findings highlight the importance of strengthening clarity regarding consumer rights and obligations, introducing accessible and effective customer services, and enforcing strong grievance and redress mechanisms. Lastly, findings indicate that citizen feedback is necessary to understand and address the poverty and social impacts of reforms. RECOMMENDATIONS TO and so on. Energy tariff increases are perceived GOVERNMENT FOR PROTECTING as having a direct impact on such deprivations. ENERGY AFFORDABILITY Households do not have the capacity to infinitely 86. Rising energy tariffs are increasingly reduce their energy consumption, or to switch to encroaching on households’ ability to maintain alternative cheaper sources; hence they choose basic levels of heating, and are affecting other to compromise other basic needs to ensure needs such as nutrition and health. The cumulative continuous access to energy for heating, lighting, impact of rising costs in all utility services, and cooking. These impacts are felt widely along with the economic crisis, has adversely in society by both poor and middle-income impacted all aspects of well-being, including households. Their effects are more starkly felt by health, nutrition, education, social activities, the poor, who have been applying such coping 44 measures for a longer period of time, as well as and families with many children may be especially by households in rural or more economically vulnerable to tariff increases. Households whose depressed regions and pensioners who cannot dwellings are in poor condition may be less able easily augment their incomes. Middle-income to partake and benefit from energy-efficiency households also increasingly feel their lifestyle support. It is thus important to consider the needs affected by rising energy costs. of especially vulnerable households and ensure equity in national mitigation programs. 87. Helping households adapt to reforms without compromising their basic needs calls 89. Social protection programs to help with for a comprehensive set of mitigation measures. energy expenses should be continuously Evolving systems of social protection are strengthened to provide meaningful support to essential to support the monthly expenses of the the poor. In countries such as Romania, where poorest. Among the countries included in this governments have taken concrete measures research, the effectiveness of social assistance to increase coverage, improve targeting, and varies widely; hence continued efforts are reduce fraud and error in benefit allocation, FG required to strengthen social assistance and respondents are more likely to recognize heating make it a reliable safety net for the poorest. benefits as an essential form of support. In the Pro-poor energy-efficiency measures are also other countries of the sample, such as Armenia, essential, as they have the potential to generate Bulgaria, and Croatia, energy benefits are seen long-term savings for the poor and improve their as overly restrictive and very difficult to access heating comfort. Moreover, extending awareness due to restrictive eligibility criteria and complex and support for energy efficiency among the poor application procedures. Yet in other states, such can empower them to look for more efficient as the Kyrgyz Republic and Tajikistan, households ways to adapt to rising costs. Middle-income lack sufficient information about the benefits; households are currently better positioned to they believe that social assistance workers and reap benefits from energy-efficiency investments local authorities use too much discretion when due to both greater financial means and access allocating benefits, and for these reasons do not to better information. express high confidence in social protection as a way of protecting energy affordability. 88. Mitigation measures should be flexible and consider the fact that energy needs and costs 90. The majority of respondents in this study may vary substantially across regions within the favor energy-efficiency investments as a country. For example, due to decentralized heating mitigation strategy to protect energy affordability. systems, urban households in some regions may Households at all income levels are actively putting face much higher costs for heating. Households energy-saving measures in place. Nevertheless, in mountainous regions or regions with extreme wealthier households that can afford more weather may have more difficult access to fuels, advanced insulation and new energy-efficient face higher prices, and have greater heating needs. appliances are the ones most likely to experience The effectiveness of mitigation measures may greater comfort and to save on bills. Government also vary across social groups. Pensioners who programs to support energy efficiency, where they live alone, households with high medical expenses, exist, are not often accessible to lower-income 45 households due to the associated up-front costs, increase their acceptability. Most respondents credit, and cofinancing requirements. In addition, in this research do not see price increases as poor households often lack detailed information a stand-alone issue; rather, they focus on the about the costs and benefits of insulating homes relationship between increasing energy prices and replacing inefficient appliances. Extending and their incomes, as well as what effect the energy-efficiency support to a wider circle of energy price increases would have on other households would be a popular and effective essential goods and services, and/or on their measure to support energy affordability in the long livelihoods. It is impossible to generalize term, and could be more fully explored. consumers’ attitudes to the reforms as a whole. Depending on their location, age, education, 91. In cases where the most affordable and and political views, among other factors, appropriate source of energy is wood or coal, consumers’ opinions on the desired direction it may be prudent to explore community of energy sector reforms across ECA may interventions that could alleviate the stress of diverge widely; they may range from staunch having to purchase winter fuels up front and in opposition to privatization and liberalization, bulk. Poor rural households that are unable to to the belief that the state’s influence should procure heating fuels in bulk before the heating be minimized as much as possible. However, season often pay much more to purchase these an overwhelming majority of FG respondents fuels in smaller quantities throughout the winter. share an expectation that governments should Supporting a community warehouse could make conduct such reforms in an accountable, it possible for households without storage space transparent, and noncorrupt manner; ensure to buy wood or coal in bulk during the time of that tariff increases are economically justified; year it is most affordable. This can be particularly guarantee that revenues are used to improve useful in semiurban areas, where households services for all; and make sure that adequate lack a lot of storage capacity. Small-scale efforts and budget allocations would be made livelihood interventions can also be designed to to mitigate adverse impacts on households. make it possible for individuals to harvest wood sustainably and sell it in areas where there is 93. Because of these perceptions, increasing demand, or produce and sell cheaper biofuels. reforms’ acceptability means engaging Such programs have the added advantage of stakeholders from multiple sectors in increasing incomes in the community in addition determining ways to make energy affordable; to improving access to energy sources. making energy institutions operate accountably and transparently; and ensuring that overall, the RECOMMENDATIONS TO sector is perceived to be efficiently managed. GOVERNMENT AND NATIONAL Governments need to communicate what efforts ENERGY SECTOR INSTITUTIONS are being undertaken to ensure that reforms are REGARDING COMMUNICATIONS conducted transparently; that corruption and 92. Considering that energy tariff reforms other forms of mismanagement are prosecuted; across the region are expected to result in and that energy utilities conform to international energy price increases, it is difficult to make performance standards. Opening wider public these reforms popular, but it is possible to dialogue on mitigation measures can help gain 46 wider acceptance of reforms, and also mobilize 96. Social assistance institutions can use a more civil society actors in monitoring and variety of channels to improve their outreach to communicating aspects of the reform to the targeted beneficiaries. These may include drafting public. messages in minority languages and distributing them on local media channels, which target an 94. There are multiple advantages to collecting audience more likely to be negatively impacted by recurring citizen feedback and establishing rising energy costs (such as pensioners, parents, spaces in which to engage citizens in public minority groups, and residents in areas where dialogue regarding the reforms. Most ECA states energy costs are disproportionately high relative face a context in which the economic rationale to other regions of the country). Employers, energy for energy reforms is poorly understood, but the providers, civil society groups, and/or community reform agenda is highly visible and politically institutions can also be approached to collaborate sensitive. The technical nature of details on in promoting awareness of social assistance energy reforms, combined with a strong impact on programs. Such awareness-raising activities households’ daily life, results in an environment in should also aim to remove the stigma associated which citizens have strong attitudes toward the with receiving social assistance benefits, which reforms, but—beyond elections—feel increasingly would encourage all potentially eligible households isolated from policy decisions that may influence to consider accessing this support. outcomes. Maintaining a low profile around energy policy reforms is likely to perpetuate 97. Simplifying the application process and misinformation and a feeling of resignation providing additional help filing applications can among citizens. Creating more opportunities significantly increase the ability of poor and for public dialogue—for example, through vulnerable groups to take advantage of this citizen feedback surveys, public debates, and support. Low-income respondents across the analysis—can help mobilize greater interest in a study share a concern that the complex process reform’s specifics. It may also encourage more of obtaining benefits may disqualify vulnerable active monitoring of reforms by independent groups. In Bulgaria, some citizens mention they civil society and research institutions, and raise need to pay others to help them fill out their overall public confidence. application; in Tajikistan, respondents believe vulnerable households need legal help to claim RECOMMENDATIONS TO SOCIAL benefits they are entitled to. ASSISTANCE INSTITUTIONS 95. Respondents in this research highlighted 98. In addition, seasonal flexibility in the timing the key challenges that in their opinion prevent of benefits can make it easier for households most vulnerable groups from accessing to manage expenses. Due to the seasonal price social assistance. These include potential fluctuation of wood and coal, many respondents beneficiaries’ lack of knowledge about available state they would prefer to receive the benefit assistance programs and complex application early in the season as a lump sum payment and procedures that may inadvertently exclude take advantage of lower fuel prices, rather than eligible households if they fail to comply with use it monthly to purchase smaller quantities of the procedure. wood at an overall higher price. 47 RECOMMENDATIONS TO making their complaints heard are among the ENERGY PROVIDERS least likely to trust energy sector institutions. In 99. Although most respondents prioritize many rural areas, the relationship between the affordability over service quality, their trust in consumer and the energy company controller— energy sector institutions, and their relationship the main point of interaction between the with service providers, also strongly influences two parties—seems to shape the consumer’s their attitudes toward the reforms. Middle- perception of the sector. Ensuring that utilities income groups in particular often disagree have clear and well-enforced grievance redress with energy price increases because these mechanisms and staff that are trained to are not coupled with increases in quality. address customer concerns is thus essential Weak systems of consumer rights protection, for building trust. customer service, and grievance and redress create a sense of powerlessness regarding RECOMMENDATIONS TO energy institutions and generate resentment of RESEARCHERS higher tariffs. Low-quality service can result in 102. This research has helped illustrate that broken appliances, wasted time, and personal qualitative and quantitative methods should be expense in trying to resolve grievances, and used in concert to understand the poverty and raises questions of whether increased revenues social impacts of tariff reforms. Qualitative data by energy institutions are prudently invested. helps reveal impacts within the household and Improving quality of service can also increase gain insight into citizens’ priorities and behaviors middle-income groups’ willingness to pay. with respect to reducing energy consumption and coping with energy expenses. Qualitative 100. Asenergycosts,consumersexpressgreater research helps identify variations in patterns interest in monitoring their own consumption. of energy use and spending that are obtained Simple bills that include monthly consumption, through quantitative data, and helps identify comparisons to previous months’ or years’ social groups that may be disproportionately consumption, as well as to average consumption affected by reforms. by other households in the area would bolster consumers’ confidence that they are being fairly 103. Qualitative and quantitative data need charged. Ensuring that all consumers pay their to be compared to devise comprehensive fair share, and communicating with the public strategies that address both realities and about efforts to make sure they do, also matters. perceptions. Qualitative and quantitative data Many respondents indicated that they would generate controversial results, which point not accept higher prices because they do not to differences between economic reality and believe that all consumers, and especially large citizen’s perceptions. These differences should commercial consumers, are paying their share. be better understood in order to make efforts to correct misinformation, as well as address 101. Trust in the sector is also largely based on other issues that may influence public attitudes a consumer’s experience presenting grievances for or against reforms. In this sense, analyzing or otherwise interacting with energy sector discrepancies between various sources can help staff. Consumers who are unsuccessful in correct inaccuracies in assessing poverty and 48 social impacts, identify biases, and generally have made it difficult for governments to institute inform better policy solutions. technical solutions that would make the energy sector more sustainable. Understanding these 104. The interests and opinions of key sector interests, and how powerful individuals can and government stakeholders also matter when mobilize groups in favor of or against reforms, trying to implement reforms. In some countries, is also important when designing measures to entrenched interests and rent-seeking behavior make reforms more acceptable. 49 VI. REFERENCES Ameria CJSC. 2014. “Qualitative Assessment of Household Impacts and Acceptability of Energy Reforms in Armenia”. Yerevan, Armenia. Background report commissioned by the World Bank.  Balabanyan. 2014. “Tariff Setting Methodology.” P146333. Washington, DC: World Bank. Buzar, Stefan. 2007. Energy Poverty in Eastern Europe: Hidden Geographies of Deprivation. Aldershot, UK: Ashgate. EBRD (European Bank for Reconstruction and Development). 2003. Can the Poor Pay for Power? The Affordability of Electricity in South East Europe. London: EBRD. European Commission. n.d. “Single Market for Gas & Electricity.” http://ec.europa.eu/energy/gas_ electricity/legislation/legislation_en.htm. Focus group discussions. 2013–2014. Armenia, December 2013–March 2014. Frankhauser, Samuel, and Sladjana Tepic. 2005. “Can Poor Consumers Pay for Energy and Water? An Affordability Analysis for Transition Countries.” EBRD Working Paper, European Bank for Reconstruction and Development, London. Gazizullin, Ildar, Larion Lozoviy, and Devin Ackles. 2013. “Ukraine on the Verge of Energy Poverty: How to Protect Socially Vulnerable Groups.” Policy Brief, International Centre for Policy Studies, Kyiv, Ukraine. GfK Croatia. 2014. “Household Impacts and Acceptability of Energy Reforms in Croatia.” Zagreb, Croatia. Background report commissioned by the World Bank.  ILCS (Integrated Living Conditions Survey of Households). 2012. Armenia—Integrated Living Conditions Survey 2012. Yerevan: National Statistical Service of the Republic of Armenia. http:// microdatalib.worldbank.org/index.php/catalog/5261/related_materials. Khakimov P., and M. Mahmadbekov. 2009. “Abandoned Wives of Tajik Labor Migrants: IOM Study on the Socio-economic Characteristics of Abandoned Wives of Tajik Labor Migrants and Their Survival Capabilities.” Report, International Organization for Migration, Dushanbe, Tajikistan. KYRGYZGAS, n.d. “History of the Company.” http://www.kyrgyzgaz.kg/content/6. M-Vector. 2014. “Qualitative Assessment of Energy Reforms in the Kyrgyz Republic.” Bishkek, Kyrgyz Republic. Background report commissioned by the World Bank.  Mahmadaminov, A., B. T. Owens, C. Oriol, M. Pochoev, and N. Khusenova. 2013. Catalogue of Efficient Technologies in Tajikistan. Marseille: GERES. http://www.geres.eu/en/resources/publications/ item/295-catalogue-of-efficient-technologies-in-tajikistan. Metro Media Transilvania. 2014. “Romania: Qualitative Assessment of Poverty and Social Impacts of Energy Reforms.” Report, Metro Media Transilvania, Cluj, Romania. Background report commissioned by the World Bank.  Morgandi, Matteo, Carola Gruen, and Artan Loxha. 2014. “Protecting Vulnerable Households from Rising Energy Tariffs in Armenia: Options and Fiscal Implications.” ECA Social Protection and Labor Global Practice, World Bank, Washington, DC. 50 National Statistical Service of the Republic of Armenia. 2014. Socio-economic Situation of RA, January– December 2013. Yerevan: National Statistical Service of the Republic of Armenia. http://www. armstat.am. Nussbaumer, Patrick, Morgan Bazilian, Vijay Modi, and Kandeh Yumkella. 2011. “Measuring Energy Poverty: Focusing on What Matters.” Working Paper #42, Oxford Poverty & Human Development Initiative, University of Oxford, UK. Ruggeri Laderchi, Caterina, Anne Olivier, and Chris Trimble. 2013. “Balancing Act: Cutting Energy Subsidies While Protecting Affordability.” Eastern Europe and Central Asia Reports, World Bank, Washington, DC. SATIO. 2014. “Qualitative Assessment: Heating Tariff reform and Social Impact Mitigation in Belarus.” Minsk, Belarus. Background report commissioned by the World Bank.  Sinha, Nistha, Giorgia Demarchi, Alexander Krauss, Anne Olivier, and Sarosh Sattar. 2014. “Distributional Impacts of Gas and Electricity Tariff Increases in Armenia: Poverty and Social Impact Analysis.” World Bank, Washington, DC. Tesliuc, Emil, Lucian Pop, Margaret Grosh, and Ruslan Yemtsov. 2014. “Income Support for the Poorest. A Review of Experience from Eastern Europe and Central Asia.” World Bank, Washington DC. UNDP (United Nations Development Programme). n.d. “Helping Low-Income Croatian Households Save Money on Energy.” http://www.hr.undp.org/content/croatia/en/home/ourwork/ environmentandenergy/successstories/EnergyAdvisors. Vitosha Research. 2014. “Qualitative Assessment: Household Impacts and Acceptability of Energy Reforms in Bulgaria.” Sofia, Bulgaria. Background report commissioned by the World Bank.  World Bank. 2010a. Lights Out? The Outlook for Energy in Eastern Europe and the Former Soviet Union. Washington, DC: World Bank. http://siteresources.worldbank.org/ECAEXT/ Resources/258598-1268240913359/Full_report.pdf. World Bank. 2010b. “Crisis Within a Crisis: How the Financial Crisis Highlights Power Sector Vulnerabilities in Europe and Central Asia Region.” Report, World Bank, Washington, DC. http:// documents.worldbank.org/curated/en/2010/12/18382050/crisis-within-crisis-financial-crisis- highlights-power-sector-vulnerabilities-europe-central-asia-region. World Bank. 2012. “Political Economy Analysis of Energy Sector in the Kyrgyz Republic.” Washington, DC: World Bank. World Bank. 2013a. “Energy Chapter of Public Expenditure Review for Kyrgyz Republic.” Washington, DC: World Bank. World Bank. 2013b. “Republic of Bulgaria: Power Sector Rapid Assessment.” Report, World Bank, Washington, DC. http://documents.worldbank.org/curated/en/2013/05/17776422/republic- bulgaria-power-sector-rapid-assessment. World Bank. 2013c. “Romania: Strengthening Safety Nets for Energy Price Increases. Note on Options to Deal with a Possible Phase Out of Electricity Social Tariffs.” Report, World Bank, Washington, DC. World Bank. 2014. “Assessment of Household Energy deprivation in Tajikistan: policy Options for Socially Responsible Reform in the Energy Sector” World Bank, Washington DC World Bank. 2014. “Gas and Electricity Tariff Increases in Armenia: Poverty and Distributional Impact Analysis.” South Caucasus Poverty Team, World Bank, Washington, DC. World Bank. upcoming. “Understanding Social Impacts and Improving the Acceptability of Electricity Privatization in Turkey “ World Bank, Washington DCSouth Caucasus Poverty Team, World Bank, Washington, DC. 51 ANNEX 1. QUALITATIVE ASSESSMENT SUMMARIES Armenia20* FGDs were held in four regions of Armenia— Shirak, Lori, Gegharkunik, and Kotayk—and the 1. This report presents findings from a qualitative capital, Yerevan. The sample also accounted assessment conducted between December 2013 for households that use diverse energy sources and March 2014.21,22 The objective of the study and have varying eligibility for the Family Benefit was to assess the impacts of recent energy price Program24 (FBP), the country’s main social increases on the poor and to inform the design of assistance program. All FGs were segregated mitigation measures that would be acceptable to by gender. Additionally, twelve key informant the population at large. Thirty FGDs were held with interviews were conducted with local government, low- and middle-income households,23 including national nongovernmental organization (NGO) FGs with individuals in formal employment and and think tank representatives, and with national- those who are unemployed or underemployed. and local-level experts in energy and social protection. 20 This summary note was prepared by Ekaterina Romanova. Data collection and initial analysis was 2. The main findings are as follows: carried out by Ameria CJSC. This note is part of a series of qualitative assessments carried out for the energy sector by the Europe and Central Asia Social nn Tariff increases in gas and electricity pose Development Unit in FY14. The task was led by Michelle Rebosio. an exceptional burden on the low-income 21 The local research and consultancy firm Ameria CJSC population, driving up prices not only of carried out the field work. The pilot was conducted in November 2013 to test and finalize the research gas and electricity but also of wood and instruments. manure. FBP beneficiaries report spending 22 The background information on country context and tariff increases on electricity and gas benefits the total amount of assistance they receive significantly from the Poverty and Social Impact on energy bills during the heating season. Assessment (PSIA) titled “Gas and Electricity Tariff Increases in Armenia: Poverty and Distributional Impact Analysis,” prepared in 2014 by the South nn Respondents state that their response to Caucasus Poverty Team (World Bank, 2014) and tariff increases is to heat a smaller portion the report “Protecting Vulnerable Households from Rising Energy Tariffs in Armenia: Options and Fiscal of their household space (reported by 90 Implications,” prepared by the ECA Social Protection and Labor Global Practice (Morgandi et al., 2014). 24 The FBP is a means-tested and cash-based social 23 Low-income households were recruited to represent assistance program in Armenia. Beneficiary eligibility the bottom two consumption quintiles according is measured by a set of criteria that are summed up in to expenditure levels based on 2012 data; middle- an eligibility score. Based on administrative data, the income households were recruited to represent the FBP benefitted on average 96,867 households in 2012 third wealth quintile. (Morgandi et al., 2014). 52 percent of respondents), and to modify efficiently and how to budget for increased their sleeping and bathing arrangements energy use. At the same time, women have (40 percent). Households also reduced demonstrated a lower degree of interest and spending on food, clothing, and education awareness of energy sector reforms. to be able to pay their energy bills. nn Respondents view energy tariff increases nn In Lori and Shirak, areas that were greatly as unjustified. They prioritize affordability affected by the earthquake in 1988, the over quality. The overall attitude toward situation is particularly dire. Here, a large tariff increases is despair and resignation. number of people continue to reside in Consumers do not believe that they can temporary housing that has been used far influence decision making in the sector. longer than originally intended, and they have limited access to different energy Section I: sources and employment opportunities. As Armenia Country Context a result, tariff increases pose an exceptional 3. The Republic of Armenia (RoA), with a burden on this population group. population of approximately 3 million,25 is heavily dependent on energy imports.26 Only nn Despite the high proportion of household 35 percent of the country’s energy needs can budgets that go to energy payments, be met domestically. The energy import bill respondents have reported paying bills constitutes 20 percent of total imports. Such on time to avoid debt accumulation, dependency makes the country vulnerable to disconnection, and high late payment and energy tariff fluctuations and external market reconnection fees. Urban residents, more and policy dynamics. Given the country’s cold so than rural ones, do not delay their energy winters (temperatures generally range between payments. Controllers in tightly knit rural -10 and -5°C) and subsequent extended heating communities often have personal relations season, energy reliability and affordability is of with consumers and exercise a degree of essence. leniency and flexibility with payments. 4. Electricity and natural gas are the most widely nn Respondents have demonstrated a high used energy sources in the country. According level of awareness of the FBP program, to the RoA’s Public Services Regulation but report increasingly strict eligibility Commission (PSRC), the population consumed requirements and a lack of understanding 1,950 million kilowatt-hours of electricity and of how eligibility scores are calculated. 539 million m3 of natural gas in 2013. This Many believe that the program’s targeting mechanisms are fraught with manipulation. 25 As of January 1, 2014, Armenia’s permanent population was 3.017 million (National Statistical Service of the Republic of Armenia, 2014). About 63 nn Women are the main consumers of energy percent of the population resides in urban areas. With more than 1 million residents, Yerevan, the capital, is at the household level, except for heating, the most populous city. which is used by all household members. 26 Energy imports include oil and oil products from the Due to their traditional roles as homemakers, Russian Federation, Georgia, Iran, and Europe; gas from Russia and Iran; and nuclear fuel exclusively women are more aware of how to use energy from Russia. 53 corresponds to 37 percent of total electricity for their heating needs. Currently, approximately consumption and around 30 percent of total half of the households in the country use gas natural gas consumption in the country. The for heating, although the number has dropped type of settlement (urban/rural), type of housing in recent years due to increase in tariffs. (apartment blocks, single-family homes, Qualitative and quantitative data demonstrate etc.), and socioeconomic status determine that in urban settlements more than 60 percent households’ choice of energy source. of households use natural gas for heating, particularly in the capital, Yerevan; in rural 5. The percentage of households connected settlements, even in those that are connected to the natural gas network in Armenia is one to the gas network, about 60 percent of the of the highest among the countries in the households use wood. Households’ economic Commonwealth of Independent States (CIS). status is also a determinant in what energy Eighty percent of households are connected source is chosen for heating. Only about 35 to this network. About three out of every four percent of FBP beneficiary households use gas households in the poorest quintile have access as their main heating source during the winter; to gas, compared to 85 percent of households they largely rely on other sources, such as wood in the top quintile. Rural residents and FBP and manure.28 recipients have a lower connection rate.27 7. As the government of Armenia (GoA) pursues 6. Gas is the primary source for heating in energy sector reforms to improve the sector’s Armenia. The expansion of the natural gas efficiency, reliability, and sustainability, there network started in 2004, and since then an have been notable improvements over the last increasing number of households rely on gas 27 Sinha et al., 2014. 28 Sinha et al., 2014. FIGURE 3. ACCESS TO GAS, PERCENT OF HOUSEHOLDS BY CATEGORY, 2012 Source: ILCS, 2012. 54 TABLE 1. MAIN TYPES OF ENERGY USED BY HOUSEHOLDS IN ARMENIA FOR HEATING PURPOSES (BY SETTLEMENTS)*   YEREVAN OTHER URBAN RURAL TOTAL, ARMENIA None 2.7% 1.1% 0.5% 1.4% Electricity 28.8% 13.7% 0.9% 14.5% Natural gas 64.6% 60.1% 27.2% 50.5% Wood 3.3% 23.8% 61.8% 29.7% Other 0.5% 1.4% 9.6% 3.9% TOTAL USED 100.0% 100.0% 100.0% 100.0% * Highest values are in bold. Source: ILCS, 2012; National Statistical Service of the Republic of Armenia, 2014. FIGURE 4. MAIN TYPES OF ENERGY USED BY HOUSEHOLDS IN ARMENIA FOR HEATING PURPOSES (BY INCOME AND SETTLEMENTS) 80% 70% 60% 50% Electricity   40% Natural  gas   30% Wood   20% Other   10% 0% Low Mid- High Low Mid- High Low Mid- High income income income income income income income income income Yerevan Other urban Rural Source: ILCS, 2012; National Statistical Service of the Republic of Armenia, 2014. 55 FIGURE 5. SHARE OF HOUSEHOLDS USING GAS AS MAIN HEATING SOURCE, 2004–2012 70 58  % 57  % 56  % 60 48  % 50  % 50 46  % 40 36  % 30 23   % 20 16  % 10 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: ILCS, 2012; National Statistical Service of the Republic of Armenia, 2014. decade—yet issues of inefficiency, dependency, prices set by the Russian on gas imports and and poor accountability remain. Improvements gas company. In real terms, Armenia’s gas in the energy sector included increased tariff increased in the first quarter of 2006 by availability of electricity and piped natural gas. approximately 50 percent and in the first quarter In the 1990s, electricity service was frequently of 2010 by about 40 percent.29 Further increases interrupted and often available for just a few took place again between 2012 and 2013, when hours each day. In 2004, only 16 percent of gas tariffs increased in real terms by 10.6 the population had access to gas. Currently, percent.30 electricity service is available 24 hours/day 9. Energy affordability and rising tariffs remain a and consumers experience fewer interruptions great concern in Armenia. While some progress compared to even a few years ago. At the same has been made in reducing poverty, the poverty time, service interruptions and high costs during level was at 32.4 percent in 2012. Reportedly, the winter season show a need for further service the most recent tariff increases have expanded improvements and for mitigation measures for the share of poor by 2.8 percentage points those who struggle to pay for basic energy use. between 2011 and 2013.31 This estimation does not include potential secondary effects deriving 8. Energy tariffs have fluctuated over the years. from an increase in the price/scarcity of wood While Armenia’s electricity prices remained for rural households. stable in nominal terms from 2000 to 2009, real prices fell between 2000 and 2013. On the other 29 World Bank, 2014. hand, gas tariffs increased drastically in both 30 Morgandi et al., 2014. real and nominal terms, due to the dependency 31 Settar et al., 2014, referenced in Morgandi et al., 2014. 56 10. The FBP is the main social assistance tool and is prepared as fuel for winter. In some cases, for vulnerable households in Armenia. FBP is a manure is also purchased or bartered. means-tested and cash-based social assistance 12. Urban and rural areas have different available program. In recent years it increased its coverage energy sources, and also differ in how they use and improved its targeting. About 6 percent of energy. Approximately 45 percent of participants the population benefits from the program. Given with access to natural gas reported using it the country’s poverty levels, coverage remains as their primary source of heating, and using rather limited. Eligibility scores consider the electricity or wood as their secondary source. amount of energy consumed by beneficiaries, In urban areas, electricity and natural gas are yet not the energy tariff or its increase. mainly used for heating, while in rural areas Consequently, it makes beneficiaries vulnerable wood (by around 90 percent of the observed to tariff increases: While tariff rates change, there population) and manure (67 percent) are used is no indexation of the social assistance. FBP for this purpose. Even in urban areas, residents recipients also pay a reduced tariff for gas, but living in single-family homes report switching to only if they do not exceed the set consumption wood (but not manure) for heating and cooking ceiling. That, in turn, forces vulnerable families to due to the increase in gas tariffs. For cooking, turn to other energy sources so as not to exceed urban residents largely use electricity and gas, the allotted amount of gas per month and to while 80 percent of rural residents rely on wood. continue to qualify for social assistance. Portable gas is used mainly as a supplementary source for cooking by those households that do Section II: Findings not have access to natural gas; it is therefore ENERGY USE AND SPENDING PATTERNS more common in rural areas. 11. 13. Energy consumption in Armenia follows the Armenian households use electricity, region’s weather patterns, with more energy networked (natural) gas, portable gas, wood, used and higher expenses incurred during the and manure. Large networks centrally provide winter months. Peak consumption for electricity, electricity and natural gas. Portable gas is natural gas, wood, and manure occurs during purchased either from suppliers who visit small the heating season. The only energy source settlements or from gas stations. Wood is mostly that reaches its peak consumption during the purchased from licensed suppliers who have summer is portable gas, since it serves as a permission to cut trees or collect wood from supplementary source and is mainly used for forests, although some households collect wood the cooking and canning activities that typically from their own properties. Wood is sometimes take place during the summer. obtained through bartering, such as exchanging livestock and agricultural products for wood. 14. Reliance on gas, especially for heating, This practice is more common in rural areas. is higher in urban areas, where the coverage A few households obtain wood illegally from is higher. The qualitative study reaffirms surrounding forests, although it is difficult for quantitative data that show consumption of the population to engage in illegal logging, as it gas is higher in urban areas. The use of both is strictly controlled. Manure is mainly collected electricity and natural gas is higher in winter from residents’ own livestock during the year months, reflecting the need to heat homes. In 57 FIGURE 6. AVAILABILITY OF ENERGY SOURCES (BY TYPE OF RESIDENCE) 100%   80%   Electricity   60%   Wood   Natural  Gas   40%   Portable  Gas   20%   Manure   0%   URBAN  AREAS   RURAL  AREAS   Source: Focus group discussions, 2013–2014. FIGURE 7. PATTERN OF ENERGY CONSUMPTION THROUGHOUT THE YEAR (BY SOURCE) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ELECTRICITY NETWORKED GAS PORTABLE GAS WOOD MANURE Source: Focus group discussions, 2013–2014. rural areas, consumption of electricity and of the population reporting that electricity and networked and portable gas is higher in summer natural gas consumption is at maximum level than in urban areas; this is the result of making on weekends, and 90 percent stating that use of preservatives and canning food for winter. electricity, wood, and manure is highest during 15. Consumption of energy is highest during the evening. Consumption is higher during weekends and evenings. Electricity, natural gas, evenings and weekends because this is when and wood drive consumption during these times, more individuals are home. This is especially true with 70 and 65 percent of observed groups of of families with children and working adults. For 58 FIGURE 8. CONSUMPTION PATTERNS THROUGHOUT THE YEAR IN URBAN AND RURAL SETTLEMENTS 8A. ELECTRICITY 8B. NATURAL GAS 100%   100%   80%   80%   60%   60%   40%   40%   20%   20%   0%   0%   Jun   Jul   Aug   Oct   Nov   Dec   Jan   Mar   Feb   Sep   Apr   May   Jun   Jul   Aug   Oct   Feb   Sep   Nov   Dec   Jan   Mar   Apr   May   Rural   Urban   Rural   Urban   Source: Focus group discussions, 2013–2014. much of the population, household chores are an on the time of day and week. Consumption of evening and weekend task. On the other hand, energy for heating is usually lower during the consumption of portable gas, wood, and manure night, since many believe it is unsafe to leave is distributed evenly throughout the week. wood or gas-based heating on overnight. Respondents explained that they need to heat 16. The choice of energy source differs depending their homes consistently regardless of day or on income level. Middle-income families typically time. In addition, families with infants also stated use electricity for heating and cooking, while that their energy consumption does not depend low-income families more commonly use wood FIGURE 9. CONSUMPTION PATTERN DURING THE DAY (BY SOURCE) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Morning Afternoon Evening Night ELECTRICITY   NETWORKED  GAS   PORTABLE  GAS   WOOD   MANURE   Source: Focus group discussions, 2013–2014. 59 FIGURE 10. ENERGY CONSUMPTION (BY ENERGY SOURCE AND PURPOSE) 100% 90% 80% 70% Electricity   60% Wood   50% Natural  gas   40% 30% Portable  gas   20% Manure   10% 0% RURAL URBAN RURAL URBAN HEATING COOKING Source: Focus group discussions, 2013–2014. for these purposes. Middle-income families very eligibility criteria for the FBP is the level of energy rarely use manure, which the poor mostly use to consumption by the household. Exceeding the save money. The study also indicates that low- established consumption limit results in loss of income families are less likely to use networked eligibility. For example, if a household consumes gas, even if they are connected to the grid. Many more than 300m3 of natural gas per year, it is low-income families stated that they could not no longer eligible to receive social assistance afford to use gas. and pay subsidized prices. Consequently, FBP 17. Families that receive social assistance also recipients limit their consumption of electricity have different consumption patterns. One of the and natural gas. In rural areas, both FBP recipients BOX 10. USING MANURE AS ENERGY More than 50 percent of respondents (most of them residents of rural areas) reported using manure to supplement wood for heating, due to rising costs of other energy sources. The respondents prefer wood to heat their homes because of its availability and relative affordability. Manure that is collected from one’s own stock is almost free and can help further reduce heating payments. However, respondents complained about the smell and filth that results from burning manure. A pile of manure prepared for heating. (Kamo, Shirak region) “We put wood in the stove, put a layer of manure on it, again wood and again manure.… Like butter and bread we put wood and manure with layers, it warms up the house very well, we can survive, what else can we do.” Respondent, 45 years old, rural area 60 FIGURE 11. ENERGY CONSUMPTION PATTERN (BY GENDER AND PURPOSE) 80% 70% 60% Electricity   50% Wood   40% Natural  gas   30% 20% Portable  gas   10% Manure   0% WOMEN MEN WOMEN MEN HEATING COOKING Source: Focus group discussions, 2013–2014. and other households prefer to use wood as their for this purpose. Men are in charge of purchasing main source of heating. However, families that and chopping wood. Women, especially those do not receive benefits use gas as their second who stay at home, report not heating the homes main source for heating and cooking, while those if they are alone. They describe it as an energy- that receive benefits use manure and electricity saving strategy, to heat the home only when to save energy. men and other family members are home in the 18. Women and men appear to have different evening and on weekends. Overall, women seem patterns of energy consumption. Women are the to be more cognizant of saving energy and the main consumers of energy in households, as they need to make changes in the family budget when perform most of the household chores (with the energy prices increase. exception of heating-related tasks). Women use most of the appliances, but men are responsible COPING STRATEGIES for heating the house, especially if wood is used 19. Energy tariff increases pose a substantial BOX 11. GENDER DIFFERENCES IN ENERGY USE Women and men have different perceptions of how energy is used. Women cite using more sources of energy and describe using energy for a wide range of purposes. Men, on the other hand, describe mostly needing energy for heating. Women are therefore more nuanced when listing the purpose and variation in the amount of consumption during the day, week, and throughout the year. These differences are probably due to men and women’s different household roles and the fact that women spend more time at home than men. 61 burden on households, particularly vulnerable ones, all family members live in one room or children including FBP beneficiaries. The burden is most sleep in the same bed. Households in which significant during the heating season. The majority there are infants, elderly persons, or persons with of low-income respondents and FBP recipients disabilities—that is, individuals who need extra report spending almost the whole amount of their care—do not cut energy or heating consumption income on energy bills during the heating season. In despite heating costs. Eighty-five percent of the summer, households observed in the qualitative respondents said they also cut spending on study report spending between 20 to 30 percent of food and clothing. Some explained that they their income on energy. do not buy meat or dairy; reduce their number 20. Despite the high share of the household’s of hot meals; and consume produce from their budget designated to energy bills, respondents garden plots or the canned food they prepared report paying bills on time to avoid debt in the summer. It is more common for rural accumulation, disconnection, and high late residents to substitute purchased foods with payment and reconnection fees. Respondents self-produced food, which makes them better indicated that they prefer to borrow money from able to save cash for energy payments and fuel friends and family (and in rural areas, from the purchases. Rural residents have also admitted energy controller), or to sell produce from their that they must limit making dairy products and garden plots or other household items, to pay instead sell milk to avoid additional energy energy bills if they do not have enough in their use, or even to reduce making preservatives typical income stream. Participants who are for winter. This in turn hinders their income connected to the networked gas supply report and livelihood options. Both urban and rural borrowing money more often to pay their gas residents stated that they must cut spending on bills. Some respondents clarified that they their children’s education and daycare, as well do not want to be in debt to the government. as spending on family outings, celebrations, Additionally, they feel that they lose their right to and vacations. The population feels the need complain about service quality or interruptions to find additional employment, including labor in service if they become indebted to the energy migration, to increase the household income companies. and improve their ability to cover expenses and bills. 21. Participants make a clear link between the rise in energy prices and the need to make 22. Residents of the 1988 earthquake zone are cuts in household spending. All households in a particularly dire situation and are unable employ a variety of coping measures to reduce to adequately heat their homes in winter. energy consumption and energy payments. Respondents in Shirak and Lori, the two regions FBP beneficiaries and the unemployed report most affected by the earthquake in 1988, using a greater number of coping measures demonstrated the highest degree of vulnerability than other population groups. Ninety percent of to rising energy costs. The majority of families respondents said that in winter, they reduce the continue to live in temporary housing that has area of space that they heat. About 40 percent been in use for much longer than it was originally change sleeping and bathing arrangements, and intended. These temporary houses are poorly 23 percent avoid being at home. For example, insulated and inhabitants commonly use basic 62 insulation methods, such as taping off windows, even when measures are limited in scope and vents, and doors, and placing extra rugs on floors effectiveness. Activities to improve insulation and walls. Installation of plastic windows and and energy efficiency range from lining and doors, or using other more effective insulation covering windows and doors with cellophane technology does not work for these homes. While and/or insulation tape, to putting rugs on floors electricity is provided, there is limited access to and walls, to closing ventilation vents. Installing natural gas in these homes. Due to their poor plastic windows and doors, and in some cases, conditions, networked gas is not even considered heated floors, was described as the most in this area. In addition, it is quite hazardous to use effective way to improve a home’s insulation and wood and manure in such structures because of make heating more efficient. The costs of such poor ventilation and degraded building structure, measures are prohibitively high for the majority making heating exceptionally challenging. In of respondents, however. Additionally, old these regions, employment opportunities and building structures often do not allow for such access to land, even for subsistence farming, are improvements. The population also believes also limited. that plastic windows hinder proper ventilation, 23. All respondents seek ways to improve which causes humidity and mold. their homes’ insulation and energy efficiency, 24. While there have been few substantial “We have additionally “If you climb the roof you will covered the walls with stone die, falling down straightly.” on all four sides.” MALE RESPONDENT 63 YEARS OLD, RURAL AREA FEMALE RESPONDENT 50 YEARS OLD, URBAN AREA, SPITAK “Houses constructed by state government are like three pigs’ houses, if you blow it “We have reinforced will collapse … if it is windy with wood from four sides the roof blows off.”1 to make it livable, it is not possible any more.” MALE RESPONDENT 63 YEARS OLD, RURAL AREA FEMALE RESPONDENT 33 YEARS OLD, URBAN AREA, SPITAK 1 “Three pigs’ houses” are the government-constructed houses that were built following the earthquake. The residents complained that these houses are poorly built. These are one-story panel buildings that do not have basements. Some of the houses have tin roofs, the others have 3 cm deep penoplast covers. On several occasions, strong winds blew off the roofs and the residents had to go and bring them back and put them in place. Also, cleaning off the snow from the roof is quite dangerous. 63 differences in electricity consumption due to 26. Households that heat with wood face tariff increases, respondents report a surge difficulties related to the seasonality of in the use of wood and manure for heating. expenses; those that purchase small quantities Households state that they have already been of wood every month are generally more limiting electricity consumption for some time, vulnerable and face higher overall costs. and worry that any further cuts will significantly Purchasing patterns for wood vary depending on impact their quality of life. At the same time, the amount of money available and the storage households—particularly low-income ones and capacity of the household. Payments are those in rural areas—increasingly switch to required at the time of purchase; however, rural wood and manure for heating; 65 percent of low- residents report paying in installments if they income respondents (compared to 25 percent know the supplier. Wood prices are substantially of middle-income respondents) reported lower in the summer, which is when households switching away from electricity and gas to wood prefer to buy it. Households that buy in smaller (and to manure only in rural areas). The trend is quantities throughout the year do not take noted even for households that are networked advantage of the best price, as the cost of wood into a gas supply system. Households with a can rise substantially in winter. Households that gas supply report paying more for all energy rely on manure prefer to buy it once a month; its sources, which in turn forces them to minimize foul smell makes them reluctant to store it for consumption of gas and supplement or even too long. completely switch to wood, and in rural areas, 27. Female-headed households report managing manure. payments after tariff increases more effectively. 25. Gas and electricity tariff increases reportedly Both male- and female-headed households also drive price increases of wood and manure. 32 stated that the new tariffs pose an additional Concerns about illegal logging in Armenia financial burden on their families; however, remain high. While some respondents admitted female-headed households appear to more to acquiring wood illegally, the majority stated effectively readjust their budgets and spending that they purchase wood from a licensed seller priorities. More women than men said they use or receive a permit to cut wood for domestic different coping mechanisms and cut down on consumption. Others cut trees in their orchards. energy use. This is most likely related to the fact Respondents noted a spike in prices of wood since that women, even those who are not heads of the gas and electricity tariffs increased. Female- households, are the main consumers of energy headed households reported additional costs and find themselves in a better position to know associated with paying for transportation and where they can accrue savings. cutting wood that households with men do not incur. Additionally, in a small number of cases in SOCIAL ASSISTANCE: which manure is purchased rather than gathered, THE FAMILY BENEFIT PROGRAM the costs also rose due to energy tariff increases. 28. Respondents demonstrate a high level of awareness of the FBP. Overall, the low- 32 Prices for wood have increased by 20–30 percent income population is more aware of the FBP’s since utility tariffs increased in 2013 (Morgandi et al., 2014). eligibility and application requirements than 64 the middle-income group. The population manipulate that score at his own will. As one knows how, where, and when to apply for social male respondent in a rural area explained: assistance. Rural residents complained that “Everything is in their [the social assistance they often have to travel to an urban center to program officer’s] hands. If they want to give apply. A cumbersome application process and somebody [benefits] they will do it, if they transport expenses often prevent people from don’t, they won’t give.” trying to apply even if they know they qualify, because the initial expenses and bureaucratic 30. Women tend to both apply and qualify for hurdles do not justify the meager monthly the FBP more often than men. This suggests benefit they would receive. potentially higher vulnerability among female- 29. The population believes that the FBP headed households, but, on the other hand, overall is allocated fairly in their community, also suggests cultural norms that make it more but they report increasingly stricter eligibility acceptable for women to seek social assistance. requirements and a lack of clarity in In a household where both a man and a woman calculating eligibility scores—a process that qualify, the woman is more likely to apply may be fraught with manipulation. Mostly because it is believed she is more likely to be urban respondents stated that FBP targeting accepted. Additionally, respondents explained is appropriate and reaches those in need in that women are more patient and persistent their community. At the same time, only 40 in the application process, while men give up percent of rural residents believe that FBP easier when faced with bureaucratic application allocation is fair. Interestingly, recipients requirements. of the FBP are more critical of the program, 31. Even after applying multiple coping saying it fails to target the people that may strategies, FBP beneficiaries report spending benefit from social assistance. Increasingly most of the benefit amount on energy bills during strict eligibility requirements lead people to the heating season. FBP recipients switch away underreport housing conditions, property from gas to wood and manure more than any ownership, informal income sources, and, other population group. This is largely driven in some cases, even marital status. Rural by the fact that FBP recipients cannot exceed residents, for example, indicated that owning a set amount of gas consumption to qualify for livestock and/or subsistence farm plots may the social assistance. To continue to receive disqualify them from eligibility, even when assistance and be able to heat their homes, FBP they meet other criteria. Because there are recipients reduce the overall space to be heated different weights assigned to each criteria and insulate their homes. In sum, FBP helps and these weights change, the population is beneficiaries cope with their expenses but does often unclear on how the final eligibility score not correspond with greater energy access or is calculated. Consequently, the population improved heating and energy conditions in their believes it is at the social assistance program homes. In some instances it can even have the officer’s discretion to determine the final reverse effect, with FBP recipients limiting their eligibility score and, as a result, s/he may energy consumption even further. 65 RELATIONSHIP WITH ENERGY SECTOR contact their energy providers, saying it is hard PROVIDERS to reach them; representatives are often rude 32. Energy company operations and quality of and unhelpful; and information is unclear. In rural service were assessed as average, with lower areas, a local controller may provide information ratings in rural areas and areas without access about payments and interruptions. The controller to networked gas. Households without access to may even help with payments or arrears, serving networked natural gas rely more on electricity; as as a financial middleman. The controller is a result, these segments of the population more often key in moderating relations between acutely experience poor or interrupted electricity consumers and the provider. Television, radio, service. This, in turn, results in lower assessment and newspapers are cited as the main sources of services. Overall, respondents across different of information about tariff increases or any other groups complained about frequent electricity associated changes in service provision. fluctuations, regular disconnections, and the 34. Women are more likely to contact energy poor quality of gas. Many admit there have been providers for information or to address a some improvements in energy provision since claim, with a slight exception in rural areas. the 1990s and early 2000s, but say challenges There, women are less likely to interact with a persist. Rural residents additionally complained controller, because they are not responsible for about the lack of clarity in billing and slow repair payments. Men tend to handle energy payments efforts in the event of interruptions. or negotiate late payments. Women rated energy 33. Respondents know their local energy company performance higher than men. provider and how to reach it, yet interactions with providers are quite restricted and consumers ACCEPTABILITY OF ENERGY REFORMS rarely approach companies with questions 35. Respondents are aware of energy tariff or concerns. The population does not like to reforms, but the prevalent opinion across FIGURE 12. EVALUATION OF ENERGY SERVICE PROVIDERS (5-EXCELLENT, 1-POOR) 5.0   4.0   3.0   2.0   1.0   Yerevan Other Urban Rural ELECTRICITY  PROVIDER     GAS  PROVIDER     Source: World Bank field work, Armenia 2014. 66 all groups is that a rise in energy tariffs is services. Respondents also believe they have unjustified. Respondents state that for tariff no way to impact decision-making processes in increases to be justified, incomes would have the energy sector. to increase. Participants largely prioritize 38. Women demonstrated a lower interest in affordability over quality. Respondents state and awareness of energy sector reforms. All that even improvements in services would respondents reported that men show more not make further tariff increases acceptable. interest in the reforms and follow the news on The exception is middle-income respondents, television, radio, or newspaper. Women stated half of whom indicated a willingness to pay if they are too busy with their household chores prices rose by 5 percent under the condition of and do not have time to follow or understand the improved quality of service. reforms and their implications. Section III: Recommendations “Around 30 percent of the 39. The qualitative assessment points to several population uses electricity issues that could be addressed to mitigate with very low voltage power against the impacts of energy tariff increases. (reaching only 160–170 volts In particular, the GoA may want to: instead of 220 in evenings). nn Consider mitigation measures beyond the The wires are 25–30 years FBP that can support a broader part of old, the stations are very old, the population affected by energy price and poles are out of order.” increases. This could mean supporting livelihood opportunities for the poor; finding RURAL COMMUNITY LEADER ways to reduce the costs of education for SHIRAK REGION those who cannot afford it because of energy price increases; or supporting energy- 36. If tariffs increase again, respondents stated efficiency measures. Focus in particular on that they will continue to use energy in the vulnerable households, including female- same volume; any further limitations on energy headed ones. Consider making credit consumption will adversely affect their quality available for families who want to make of life. Inability to pay any more and the inability energy-efficiency investments but cannot to further cut consumption were cited as the key afford the up-front costs. reasons why the population does not support tariff increases. nn Support areas affected by the 1988 earthquake through programs to improve 37. Additionally, respondents doubt the housing/provision of permanent housing; success of energy reforms or improvement in increase the energy efficiency of current services. The earlier tariff increases resulted housing; and increase benefits for those in in few significant improvements in the quality this area, given their greater energy costs. of services. In some cases—for example, with gas services—the population reported a further nn Further study households’ reliance on wood decline in the quality of gas and provision of and other sources of energy (including 67 manure, corn stalks, and so on); the costs nn Expand payment plan options to include of using these sources of energy (in terms payment installments stretched out through of time and money); and the impacts on the the year can help the most vulnerable environment. Develop community-based consumers pay their energy bills without activities to increase the availability and falling deeper in debt, especially during the warehousing of wood from legal sources most financially stressful time of year. and to decrease the price of wood in remote, nn Improve communications around FBP and rural communities, and rural communities eligibility score calculations and address near forests where logging is illegal. concerns over fairness of eligibility for the Consider supporting wood warehousing for benefit. low-income rural residents. nn Determine the implications of the limits Belarus33* on gas usage for FBP participants and, 1. This summary presents findings from a if necessary, remove the limit for these political economy analysis of the district heating beneficiaries. sector in Belarus and a qualitative assessment on the impacts of and attitudes toward the nn Set up a process to monitor gas and heating tariff reform conducted between electricity service interruptions. Improve December 2013 and May 2014. The political the quality of service provided to customers economy analysis is based on 39 key informant and set up mechanisms to inform interviews with representatives of government customers of improvements in service authorities, civil society organizations, district quality. Consider involving customers in heating companies, consumer associations, reporting service interruptions and low- and the media. The qualitative assessment is quality service. based on 18 FGDs with low- and middle-income households. Separate FGDs were conducted nn Provide customer service training for with households that receive social assistance. controllers and other energy service All FGDs were segregated by gender and age. provider staff that interact with the public. Develop processes for customers to assess 2. The main findings are as follows: the quality of customer service. nn Poor district heating users who live in nn Reflect regional and seasonal variations in old apartment buildings are especially household energy expenditures in the FBP vulnerable to tariff increases, as they to ensure that social assistance is effective in alleviating the energy expense burden for 33 This summary note was prepared by Ecaterina Canter, Ezgi Canpolat, Izabela Leao, Klavdiya Maksymenko, all its recipients (such as modifying the FBP Nicolas Perrin, and Sophia V. Georgieva. Data so that higher payments are made in the collection and initial analysis was carried out by Center of System Business Technologies SATIO. This winter; a second option is to smooth tariffs note is part of a series of qualitative assessments so payments are not greater in the winter carried out for the energy sector by the Europe and Central Asia Social Development Unit in FY14. The and people do not get into debt). task was led by Michelle Rebosio. 68 cannot control their consumption of heat. nn Respondents prefer not to contact energy Because old buildings are poorly insulated, providers. The low level of interaction respondents who live in these buildings between consumers and providers is a pay twice the amount to heat the same result of low prices for energy services and surface area than those who live in newer low expectations for service quality. buildings. nn Energy affordability is not the main driver of Section I: opposition to reforms. Opposition is rooted Belarus Country Context in a legacy of social contract, where energy services are regarded as an entitlement 3. The government of Belarus (GoB) has the government should provide. According embarked on district heating tariff reform to to deeply entrenched societal beliefs, the improve the financial viability of the heating state has a paternalistic obligation to sector. The heating subsidies for residential provide services such as heating, and at consumers, along with the heating sector’s low prices. high dependency on imported natural gas, have put a large fiscal burden on the national budget. nn Middle-income households regard utility The GoB aims to gradually eliminate subsidies bills as manageable and they do not apply and increase residential tariffs. Beginning in measures to cope with energy prices, while 2014 the cost of heating, hot water, natural some of the low-income households report gas, and electricity will grow annually. Price cutting expenses on food and clothing to increases will not exceed US$5 per year and afford energy. This is especially the case will be consistent with annual nominal wage during the winter months. increases. nn Belarus has an effective social support 4. In Belarus, 61 percent of the population system that can be used to mitigate relies on district heating for heat, and less poverty impacts. However, the available than 1 percent of this demand is met by types of social assistance are stigmatized private companies. The use of district heating (respondents described people who is highest in urban areas, at 81 percent. The received assistance as “alcoholics” and heating sector is largely dominated by the “spongers”). Households therefore do not public companies. The main providers of automatically perceive social assistance district heating services are Belenergo State as a mechanism for helping with energy Association and multiservice utilities (its expenses. Russian acronym is ZhKHs). Belenergo is a nn Households that live in apartments that are state-owned company that provides district served by multiservice utility companies heating and electricity services in Belarus’s big complain about unclear bills. They pay one cities. ZhKHs are municipally-owned housing bill for a number of services (electricity, water, authorities; they provide district heating heating, and so on), which makes it difficult services in big cities and smaller towns that are to follow what is spent on each service. not covered by Belenergo. 69 5. The heating tariff reform will contribute to the Section II: Findings country’s economic sustainability. As a result ENERGY USE AND SPENDING PATTERNS of increasing tariffs and the phased elimination of subsidies, the GoB will experience increased 9. In Belarus, households generally use district fiscal savings. The Ministry of Finance will be heating, electricity, natural gas, and wood. able to allocate public financial resources to Apartments and single-family detached houses strategic priority needs, instead of covering differ in how they use energy. The majority of heating sector losses. The business sector will households in apartment buildings use district experience gains as it will not pay overpriced heating for heating and hot water supply. tariffs, which are currently imposed to sustain Respondents who live in single houses use gas cross-subsidization. and wood for heating and electricity for heating water. Electricity is mostly used for lighting. 6. Citizens are not sufficiently aware of For cooking, most of the households use gas the reform process. There are no strategic stoves and electric appliances such as such communication efforts about the reform as microwaves. Some respondents who live in process and the public is largely uninformed. apartments with district heating report that they Nonstate actors are not included in the reform use gas stoves as a supplementary source of process, with the exception of some business heat in cold temperatures. These respondents representatives. turn up the flame to heat the air, which is very dangerous. 7. Opposition to heating reforms is rooted in a legacy of social contract, where energy services 10. Respondents who live in old apartment are regarded as an entitlement the government buildings report spending more on district should provide. According to deeply entrenched heating than residents of newer buildings. societal beliefs, the state has a paternalistic Apartment building tenants’ district heating obligation to provide services such as heating. bills are calculated by dividing the total amount Citizens believe they are entitled to low-cost of heating consumption in the entire building by service delivery. the individual apartment size. The old apartment 8. Belarus has an effective social support buildings are poorly insulated, and respondents system that can be used to mitigate the who live in these buildings pay twice the amount negative impacts of price increases on to heat the same surface area as those who live vulnerable households. Available social in newer buildings. assistance mechanisms in Belarus include a targeted monthly social assistance benefit and 11. Energy expenses fluctuate with the seasons, a nonrecurring social benefit, which can be with more energy used and higher expenses used to cover utility payment arrears. Income incurred during the winter months. The heating level is an important eligibility criterion for season in Belarus starts in mid-October and receiving state social assistance. The GoB also ends in mid-April. Households report especially plans to provide discounts on utility bills to higher heating expenses between December households that spend more than 15 percent and February. They state that they spend more of their income on utility bills. on electricity during the winter, as they use more 70 electricity for lighting because of less daylight children, especially female-headed households, time. receive help from their relatives who do not expect anything in return. Some of the low- COPING STRATEGIES income households report working additional jobs in order to pay utility bills. Respondents 12. Low-income households apply several who receive social benefits more often apply measures to cope with energy prices, especially the coping mechanisms mentioned above than during the winter months, while middle-income households that do not receive assistance. households rarely use such measures and believe that utility bills are manageable. Low-income households state that they reduce spending “There is no feeling of on food and consume less meat, fish, and security. You have to plan fruit. Low-income respondents also substitute all the expenses. You can’t purchased food with food grown on farmland afford to buy anything and and dacha.34 Another coping mechanism of you can’t save money.” low-income households is to cut spending on clothes. Respondents state that they rarely FEMALE FGD RESPONDENT buy new clothes, and when they do, they prefer cheap, secondhand items. Women respondents 13. Respondents generally prioritize utility bill mention reducing spending on cosmetics as a payments, and it is rare to delay payment or coping mechanism. Low-income families with not pay at all. To avoid arrears, respondents 34 Dacha refers to a small Russian house in the countryside that is especially used in the summer. FIGURE 13. COPING MECHANISMS SOURCE: FOCUS GROUP DISCUSSIONS, 2013–2014. 23% Delays and non-payments 6% 30% Farmland, dacha 16% 10% Additional job 8% 37% Borrowing money from friends and relatives 25% 67% Receiving help (as gift) from relatives, friends 18% 83% Cut down expenditurs on clothes 61% 90% Cut down expenditurs on food 67% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Poor with social benefits (n=30) Poor without social benefits (n=51) Source: Focus group discussions, 2013–2014. 71 pay their utility bills first and distribute their SOCIAL ASSISTANCE remaining resources among other expenses. In 16. Focus group respondents who do not receive rare instances, low-income households cope social assistance perceive cash assistance with by delaying payment or not paying at all. These some level of stigma. Many of them state that households say reasons for nonpayment and such assistance is mostly used by groups they payment delays include illness, large payments describe as “alcoholics” and “spongers” who do for the installation of gas meters, the need to not work, and associate a certain level of shame buy clothes for children, and unemployment. with receiving it. Non-recipients state that they 14. Women and men use different mechanisms prefer to rely on earned income or other coping to cope with energy expenses. Men more strategies to manage energy payments before frequently report using coping strategies resorting to cash transfer social assistance such as working more or changing jobs, while programs. women tend to seek help from relatives and 17. Social assistance recipients and poor groups friends. Women are also more active in reducing who apply for assistance argue they are treated spending on food. with prejudice at social assistance institutions. 15. Households without individual metering Respondents mention that some officials lack incentives to save energy. Households who work at social assistance institutions are that have individual meters for gas, water, and disrespectful to them and make statements electricity try to save energy in order to reduce such as, “You should not have had children if costs. If individual metering is not provided, you are unable to financially support them.” the tariffs depend on the total consumption of 18. Respondents and social assistance energy in an apartment building and the size of workers complain about the effectiveness and the tenant’s apartment. Respondents without targeting of social assistance. They state that individual metering lack incentives to save. some people who do not really need social They use measures such as window insulation, assistance hide their incomes and the details not to reduce heating costs but to increase of their family situations in order to be eligible indoor temperatures and improve their living for targeted social assistance. According to the conditions. social assistance providers, it is very difficult to uncover such applicants and to legitimately “I don’t have to save heat. deny them assistance. My neighbor saves energy and pays 15,000–20,000 19. The majority of social assistance beneficiaries who receive monthly allowances rubles (around US$2) less prefer to get this benefit in the form of cash than I do, but he has to wear so they can freely use it. In contrast, most of warm clothes while I can the respondents who do not currently receive wear a T-shirt.” such benefits consider noncash benefits (bill discounts) the best form of support for energy FGD RESPONDENT WITH INDIVIDUAL METERING, KOBRIN payments. They believe that noncash support 72 BOX 12. BENEFICIARIES OF SOCIAL ASSISTANCE PREFER CASH Beneficiaries of cash subsidies are mostly female-headed households and families with many children. These respondents state that they spend most of the assistance on expenses for their children. Families usually apply for assistance at the beginning of the school year, when they incur higher expenses associated with preparing children for school. The assistance is mostly spent on clothes and footwear— the substantial purchases that the household is normally unable to afford. They also spend assistance on food or medication. Respondents state that they prefer cash assistance because it is flexible and can be used for different purposes. can be easily accessed by broader groups of social assistance report that they would be households, who may find heating unaffordable significantly challenged if prices increase after tariff increases. 10–15 percent. They state it will be impossible for them to afford energy if prices increase 20. Women tend to get help from state social 25 percent. Eleven percent of low-income assistance providers more often than men, respondents who do not receive assistance as they are more active in seeking help state that a 25 percent price increase will be from others. Generally, women are the main acceptable, while 25 percent of middle-income beneficiaries of social assistance partly due to respondents said that such an increase will the specifics of family structure (single women be acceptable. Low-income respondents with children, families with many children). argue that payment delays will become more Usually, the absence of a husband as the key common should heating prices increase. provider leads to the need to seek help from state organizations. RELATIONSHIP WITH ENERGY SECTOR ACCEPTABILITY OF ENERGY REFORMS PROVIDERS 21. Respondents lack adequate information 23. The majority of respondents have minimum about tariff increases and believe that rising interaction with energy providers. District prices will benefit private interests. Only a few heating users do not generally interact with participants know about tariff reforms in the providers. The low level of interaction between energy sector. Respondents perceive reduction consumers and providers is a result of low of cross-subsidies as a positive way to reduce prices for energy services and low expectations pressure on industries; however, respondents for service quality. are skeptical that the population would benefit from the elimination of subsidies. Respondents 24. Respondents are generally satisfied with believe that the reduction of cross-subsidization services. The majority of households are would only be profitable for industries. satisfied with the quality of heating. Only a few respondents complain about low temperatures 22. Respondents have different attitudes at home (below 18°C), Complaints about low toward tariff increases. Recipients of indoor temperatures are associated with periods 73 BOX 13. INTERACTIONS BETWEEN CITIZENS AND ENERGY PROVIDERS An FGD respondent from Bobruisk interacted with the service provider regarding high heating bills. When he asked for clarification, the charging procedure was explained to him. He was told that every section of the building had its own meter and that billing was based on this metering. The building in which he lives is special because there are nonresidential tenants at the first floor (that is, a bank and shops). The meter is common in the apartment; it measures the heat consumed by the nonresidential tenants and the private apartments. The respondent was told that the nonresidential tenants are charged higher tariffs. He was unsatisfied with this explanation. He believes that the service company charges the tenants more compared to nonresidential tenants. The service provider did not provide information on the method used to distribute the expenses among the apartments and the nonresidential tenants. Because of this experience, the respondent does not trust the service provider. of intensely cold weather and with periods Section III: Recommendations shortly before the heating season starts and 27. Implement targeted communication after it ends. Some respondents also complain mechanisms directed toward the population in about occasional overheating when the weather order to promote greater sector knowledge and is warm. increase the acceptability of tariff increases. 25. Respondents complain about unclear bills, Publicly address issues such as the heating but they prefer not to contact providers regarding sector’s transparency and effectiveness; the billing. Respondents have vague knowledge of potential growth of the district sector if subsidies bills and think it is difficult to get clear answers are to be eliminated; the unfairness of the current from the service providers. The majority of subsidy system; and the long-term benefits of a payments for public utilities (for example, heating tariff reform. The background of a utility waste management, water heating, and district bill is perceived as the most convenient place heating) are included in one bill, which is paid to communicate practical information. Local to a multiservice utility company. The unified bill provides some information about the payments for each service; however, respondents usually do not follow the billing details and only pay attention to the lump sum. 26. Female respondents are more involved in interactions with service providers. Women are also slightly more interactive with service providers. There are more examples of women interacting with heating sector institutions regarding temperature and quality of services. Background of a utility bill in Pinsk. 74 newspapers are an important communication could include information on using energy-saving channel for small settlements. Internet sites are bulbs and how to efficiently use appliances) and also perceived as an important communication the promotion of energy-saving behavior. channel. Utility webpages should be simplified 31. Create conditions for heat-saving behavior and information should be clear and easy to and investments. Heat-saving behavior would access. be promoted only if specific incentives were introduced, such as individual metering. Although 28. Adopt regulatory measures and capacity individual metering and regulation are perceived building for multiservice utilities and local by residents as the best way to control heat, authorities to increase the heating sector’s readiness to invest in them remains quite low. organizational efficiency and transparency. Suggested actions include: (i) technical 32. Enhance existing targeted social assistance assistance on price setting, practical to improve accessibility and coverage for mechanisms to enhance energy-efficiency poor and vulnerable households. As the tariff activities, tools and platforms for increased increase would impact not only the poorest information accessibility, and feedback but also middle-income households, specific mechanisms for consumers and service measures should be adopted to provide targeted providers’ interactions; and (ii) policy support assistance for households struggling to pay for on the establishment of benchmarking and public utilities. performance indicators, professional training, incentives to perform, and the creation of 33. Promote interaction between the population formal spaces to increase citizen–government and public utilities by providing feedback interaction at the local level. channels for issues like bill clarity. Increased 29. Introduce the ability to pay for heating in social accountability of public utility companies installments to make it easier to cope with could include the comprehensible information higher expenses during the heating season. on the billing process as well as educating the The heating season is the most stressful period population on existing measures and control for households dealing with increased energy options. The population’s feedback on the payments. Heating tariff increases would quality of heating—including cases of under- intensify the burden on households and worsen and overheating—should be sought. their quality of life. Introducing the ability to pay in installments would lessen the burden of Section IV: Ethnographic Interviews heating expenses during the heating season. ETHNOGRAPHIC INTERVIEW: SINGLE 30. Increase tariffs gradually to give households MOTHER time to adjust their energy consumption patterns Kate is a single mother who lives in Bobruisk. and restructure expenses, as well as to increase She is 29 and her daughter is 4 years old. motivation to invest in energy efficiency. Further Kate works as a teacher in the kindergarten price increases should be accompanied by an her daughter attends. Her monthly salary is enhanced energy-saving education program (that currently below the minimum subsistence 75 budget for two people. Kate cannot change her preserves to make healthier meals in winter. job at the moment, because she does not have Kate is concerned with the recent increase in anyone to babysit her daughter in the event she kindergarten fees. She is almost unable to afford has to work on weekends (as a shop assistant). clothes for herself and often buys secondhand clothes for her daughter. Usually she buys Kate lives in a two-room apartment on the first clothes and footwear for her child in the summer floor of an old apartment building (built in the months. 1960s–1970s). She replaced two windows (in the kitchen and her child’s room) using the Kate is not interested in the detailed analysis of money she received for her maternity leave. her public utilities bills, although she has been She says she is currently unable to make any active in resolving problems with the utility other energy-efficiency investments. The living company. While on maternity leave, she tried to conditions in her apartment are normal (23°C), contact utility companies and local authorities but she would prefer if her home were warmer. concerning problems with her building (it needs capital repairs and the tenants do not know Kate has received targeted social assistance anything about a planned start date). Currently from the state since December 2013. She she cannot be involved in these issues, however, receives 700,000 rubles per month. After she as it is too time consuming. receives the assistance for six months, she can reapply for it only one year after she has stopped ETHNOGRAPHIC INTERVIEW: RETIRED receiving benefits (it is not reasonable to apply WOMAN LIVING ALONE earlier, because the income for the respective Ludmila is a 58-year-old woman. She lives months when she received targeted assistance alone in a three-room apartment in Smorgon. equals the minimum wage). Ludmila has a vocational education. She used to work in trading and has more than 25 years In order to meet her monthly expenses, after of experience. Due to low salaries, she now getting her salary Kate usually pays regular receives a small pension of nearly 2 million bills (public utilities, Internet, phone, television, rubles. In the summer she gathers and sells kindergarten fees, transport ticket), which berries; in the spring she earns extra money together amounts to almost 1 million rubles; selling flowers. This additional income helps the remaining amount is spent on food. She her deal with her public utilities expenses, which pays around 200,000 rubles for public utilities she pays for on time. (excluding electricity), out of which heating accounts for nearly 70,000 rubles. Winter is the Ludmila replaced two windows in her apartment most stressful period for her, not only because several years ago, after she received some of her public utilities expenses, but also due money from selling her mother’s apartment. to the fact that her child becomes ill more She only replaced windows in the northern frequently and prices increase on food. She part of the apartment, which was the coldest. has to buy only the most basic products, such She prefers old windows as they offer a more as cereals, potatoes, dairy, and bread. In the comfortable indoor climate. The new windows summer Kate tries to make fruit and vegetables smell and result in increased humidity, which is 76 quite bad as she lives on the first floor. Ludmila for it involved the difficulties associated with regrets not insulating the walls from the inside. preparing children for school. The application One of her walls that borders with the entrance is procedure was quite long. Mikhail mostly dealt quite cold. Ludmila has to hang a carpet on that with the process of collecting documents. The wall to keep it warm. Generally the temperature process was very difficult; it took the family about conditions are satisfactory. Ludmila had her one month to collect all the documents. They radiators cleaned this winter. She says she received around 1 million rubles from August till complained about them during several heating January. As Helena is now unemployed, in order seasons but did not risk cleaning because she to apply for social assistance she would have was afraid it would be a dirty process. However, to get a job, which she thinks will be difficult to the procedure was quite clean. As she observed, do. As she left her job on her own accord, she the radiators did not offer proper heating is afraid that she will not be able to register as because of the dirt that had collected inside. She unemployed now. was satisfied with the quality of the work done Helena dislikes dealing with the organizations and temperature conditions have improved. that provide social assistance. She says she does not like to be perceived as someone ETHNOGRAPHIC INTERVIEW: A FAMILY seeking help. She prefers to be independent WITH SIX CHILDREN and rely on her family’s own resources to raise Helena and her husband Mikhail have six her children. With respect to prospective social children. They have lived in Smorgon for 3–4 measures, Helena prefers to receive noncash years. They built an apartment with the help of a subsidies. Knowing that she had a discount preferential loan. Their living space is composed on public utilities would make it easier to deal of two apartments (a two-room and a three- with other expenses. She also wishes that the room apartment that were merged together). process of applying for noncash subsidies Helena had to leave her job recently. Now she is would require collecting fewer documents. unemployed and it is very difficult for her to find a new job. Mikhail is in the military and earns a Bulgaria35* salary of about 5 million rubles. 1. This report presents findings from a qualitative The apartment has an individual heater and assessment on impacts of and attitudes toward is heated by natural gas. The gas bill is quite energy tariff reforms in Bulgaria that was reasonable, around 100,000 rubles. The family conducted between November 2013 and March does not try to save gas, as the indoor conditions 2014. for their children are their priority. The family has to insulate windows before the heating season. 35 This summary note was prepared by Sophia They do not consider investing in other energy- Georgieva. Data collection and initial analysis were efficiency measures, as they lack the financial carried out by Vitosha Research. This note is part of a series of qualitative assessments carried out resources to do so. for the energy sector by the Europe and Central Asia Social Development Unit in FY14. The task was led The family has received social assistance by Michelle Rebosio. The note is also part of the ESW on Energy Affordability in EU–11 countries led by since the previous fall. The reason they applied Caterina Ruggeri Laderchi and Nistha Sinha. 77 2. The main findings are as follows: nn Cash transfers and energy-efficiency support are both considered effective nn Respondents from both low- and middle- measures to support energy affordability income groups find it necessary to reduce as tariffs increase. Employment creation, basic expenses such as food, clothing, and higher salaries, and pensions are also viewed to inadequately heat their homes in order as crucial to ensuring energy affordability in to cope with energy bills; they believe that the long term. Currently, study respondents further tariff increases are likely to have a are concerned that energy prices are strong impact on their basic needs. scheduled to increase while their incomes nn Heating expenses are the highest for district remain stagnant or have even declined due heating users who reside in big cities and to job loss or salary reduction. who also lack viable alternative sources for heating. At the same time, rural and small- Section I: Findings town residents are strongly affected by 3. Findings in this qualitative assessment are electricity tariff increases. They intensively based on FGDs and interviews with household use electricity to heat water, produce members and key informants from national and subsistence food (irrigation, refrigeration), local social assistance agencies, the heating and for primary or supplementary heating. accountant office, and the district heating company. Twenty-three FGDs were held in six nn Public opposition to reform is to a large regions of Bulgaria with low- and middle-income extent rooted in perceptions of bad sector households.36 Additionally, eight key informant governance and in a lack of understanding interviews were conducted with social assistance, the justification for tariff increases. The energy company, and civil society representatives; majority of respondents relate tariff three ethnographic interviews in households were increases to the corrupt and profit-seeking also conducted (included in Annex I). behavior of monopolies and private investors. 4. The qualitative research presented here was conducted as part of a three-country study nn Electricity and district heating users feel on energy affordability in the EU–11, which powerless to clarify bills, report problems also includes Romania and Croatia. As new EU with service, and pursue other grievances members, these three states are in the process with providers, which enhances their of implementing energy reforms compliant with resentment of tariff increases. the third energy package of the EC (European nn A very limited proportion of poor households Commission, n.d). These include raising benefit from the heating allowance program. electricity, gas, and district heating tariffs to cost The program is perceived as having a very recovery level, introducing competitive markets difficult application procedure and overly for electricity and gas, and investing further in strict eligibility criteria. Eligibility for the renewable energy sources, among others. program is especially difficult for informal 36 Low-income households were recruited to represent and seasonal workers; a majority of Roma the bottom 40 percent; middle-income households respondents belong in the latter group. were recruited to represent the third wealth quintile. 78 5. Energy market liberalization has not spending on food and clothing. All groups of progressed as fast in Bulgaria as in other new respondents note the need to cut costs on EU member states. Even though electricity and food and clothing to manage energy expenses. district heating tariffs are among the lowest in the While middle-income groups report substituting EU, initial reforms have drawn significant public lower-quality products for higher-quality ones, opposition. In January 2013, a rise in electricity low-income households see a direct impact tariffs provoked mass protests across the on the quantity of food they can afford to buy, country and led to the government’s resignation. which affects their nutrition and health. Among A second wave of protests began in June 2013 the low-income sample of respondents, four and included a demand for greater transparency out of every five report buying less food; 40 in energy policy decisions. While these events percent of middle-income respondents mention have complex roots that go beyond opposition reducing the amount of food purchased in to energy tariff reforms, they indicate the level of the household, yet the majority of them note visibility and sensitivity to the reform agenda. having to opt for cheaper foods. Among the poor, urban households are more affected by 6. FGDs reveal that public opposition to the food deprivation because they are less likely reforms is rooted both in issues of sector to preserve and store food for the winter (this governance and customers’ economic strategy is mentioned 3.5 times less frequently by vulnerability. First, the increase in energy tariffs is urban respondents). For example, respondents widely associated with sector mismanagement, from an urban household ethnographic interview rather than with the costs of energy generation note that they skip medical exams in the winter; and distribution. In the case of electricity, prior pensioners in the household refrain from getting tariff increases have most often been perceived dental exams and buying medicine in order to as resulting from disadvantageous contracts have more cash available to feed younger family granted by the government for the generation members. Respondents from a household in of renewable energy (among others); these a small town, with two working adults and a contracts are perceived as corrupt, creating teenager, reported that that they routinely have to excessive profits for some and higher expenses buy low-quality food with suspicious ingredients, for all consumers. In the case of district and consider this restriction to be the most heating, high and rising bills are most frequently harmful they endure. Electricity and heating are attributed to a situation in which customers vital to households, hence spending on them is bear the cost for network losses, and to a lack prioritized at the expense of other basic needs. of control over fraud and theft that raises the expense for all paying customers. Second, 8. Reducing the amount of energy consumed though equally as important, resentment toward is another common strategy for managing tariff reforms reflects the real burden of energy energy expenses. Households report heating costs on the budgets of low- and middle-income fewer rooms; heating rooms only when multiple households and impacts their quality of life. household members are home; reducing appliance usage; and installing energy-saving 7. Households cope with increased electricity, bulbs. Even though these strategies particularly gas, and district heating tariffs by reducing impact the quality of life of the poorest people 79 (as they are more likely to employ them), their sources did so a decade ago or even earlier, cumulative impact in terms of savings is whereas middle-income households have perceived to be lower for low-income groups been more likely to consider new sources more than for middle-income ones that can invest recently. Overall, switching to cheaper sources in more advanced energy-efficiency measures is not an easy option—most respondents in such as home insulation. Poorer groups’ the sample, for whom switching to wood was greatest obstacles to investing in energy- technically an option, have done so already. efficiency measures include their high-cost/ Apartment residents connected to district low-priority nature, compared to other pending heating do not currently have viable alternatives. needs; their high up-front cost and/or the need 10. Being able to afford energy is also important to take commercial credit to finance building- for households’ ability to carry out essential level insulation; difficulties organizing building- livelihood activities, many of which are related level insulation with other residents; and, to to electricity use. Electricity comprises an equal some extent, distrusting contractors. Together, or higher share of reported energy expenses these obstacles make such investments appear even for households that do not use it as a main risky in terms of generating future savings.37 heating source (see Figures 1 and 2). In fact, 9. Switching to lower-cost energy sources is rural households, which heat their homes mostly one way households have coped with rising with wood, report higher overall expenses on costs over time. Households tend to switch electricity throughout the year compared to from electricity, coal, or gas to wood, which is a urban households. For many residents of rural significantly cheaper heating source.38 However, areas and small towns, electricity is tightly linked wood is problematic in that it generates indoor to subsistence food production (water pumps smoke, requires labor or incurs a cost for for irrigating small plots of land and freezers transportation and chopping, and requires to store food for the winter). In addition, these additional investments in the dwelling, such households also often use old and inefficient as repainting walls each year. It is also not an appliances that consume a lot of electricity. option for many apartment residents who live Rural respondents are much less likely to report in buildings without chimney pipes. Some energy-efficiency improvements or to purchase district heating users have tried to switch, fully new appliances than urban ones. Among rural or partially, to electricity or gas, but with prices and small-town respondents, electricity is also rising, they do not expect this to generate long- sometimes used as a complementary heating term savings. It is notable that low-income source and is the prevalent source of energy for households that report switching to cheaper heating water via electric boilers. This makes them more susceptible to high expenditure 37 These findings are aligned with prior qualitative burdens from rising electricity tariffs than urban assessments on pro-poor energy-efficiency district heating users.39 programming in Bulgaria (in 2011) and Poland (in 2011, 2013). 38 Within the FGD sample, the reported annual cost for 11. While it is rare for households not to pay heating with wood was in the range of 150–300 BGN, energy bills, payment delays are common. with district heating 290–540 BGN, with electricity 420–580 BGN, and for the group heating with gas, 370 BGN. 39 To be confirmed with survey data. 80 FIGURE 14. ANNUAL EXPENSES BY FIGURE 15. ANNUAL EXPENSES BY DISTRICT HEATING USERS SOLID FUEL USERS ELECTRICITY   SOLID  FUEL   DH  EXPENSE   ELECTRICITY  EXPENSE   Mokresh 700 Dren Radomir 600 Lom Kichevo 500 Sevlievo Sestrimo 400 Gradets Kyustendil 300 Novi Pazar Elhovo 200 Plovdiv-Stolipinovo Gorna Malina 100 Belovo Resen 100   200   300   400   500   0   0 SOFIA PERNIK VRATSA PLEVEN PLOVDIV Source figues 14 and 15: Focus group discussions, average reported values in BGN. Electricity and gas payments are prioritized or and nonpayment, the Sofia district heating delayed only in the short term (1–2 months) to supplier has made efforts to proactively collect avoid disconnection. For district heating, where payments, such as starting a “loyal customer” households cannot be disconnected, payment program that offers financial incentives to pay delays are more widespread. In fact, delaying bills on time, and a calling center that can help is an established practice for low-income customers arrange a payment installment plan. households, whose combined electricity and Court cases have been initiated against long- district heating bills for a winter month can reach term nonpayers; according to a Sofia heating 100 percent or more of the family’s monthly company representative, over 20 million BGN income. Low-income households commonly were retrieved via court decision in 2013 alone. pay off their winter bills only in the spring or summer, including penalty fees. Even so, many 13. Perceptions vary widely regarding the HB’s customers prefer this system to one in which effectiveness; the perceived effectiveness is they sign a contract agreeing to pay a specific influenced by the type of energy source used, amount each month reflecting their average as well as by regional and seasonal variations monthly consumption. Respondents offered in heating expenses. Overall, rural groups and various reasons for this, most often citing a beneficiaries that use wood for heating find reluctance to commit to a certain bill every the benefit to be most useful. In their case, the month or out of fear that the amount agreed benefit may cover the majority of wood expenses would not accurately reflect their consumption. for the heating season. On the other hand, In order to avoid long-term payment delays district heating users—especially in regions 81 where district heating tariffs are higher, such the black market rather than using them for fuel. as Vratsa—find the HB of limited use; it covers In general, distrust of institutions drives poor a third or less of their district heating cost. A households to prefer cash over social tariffs social assistance representative in a small town or voucher support. Households that receive reported that the benefit should be enough to the benefit consider it an essential source of cover the expense of heating one room through support regardless of the share of expenses it the winter, and that recipients often choose to covers. heat the kitchen or the smallest room in the house to live in during that time. A social worker in a 15. Still, all groups underscore that the HB remote rural village, on the other hand, reported should not be the government’s main mitigation that the HB is only enough to cover about one measure for rising energy tariffs. A segment of tenth of required heating expenses. She saw this respondents—mostly middle-income and low- as a function of the long heating season in their income groups of men who are excluded from location, and evidence of the fact that the benefit this benefit—see themselves on the losing side amount has not grown proportionately to the of such government support, as taxpayers and price of firewood in their area. In sum, there is no contributors to its budget and also because they clear understanding or consensus by either HB are strongly affected by the reforms. They would recipients or administrators on what the desired rather see solutions take the form of a control effectiveness of the benefit should be in terms on the rise of tariffs and an increase in jobs and of covering energy costs, and its effectiveness incomes. in covering heating expenses is found to vary widely among households in the sample. 16. Sentiments against social assistance programs also often invoke ethnic hostilities, particularly 14. Despite challenges in coverage, restricted against the Roma, who are widely perceived as access, and varying degrees of effectiveness, their main beneficiaries. The few opinions that the HB program is well targeted and considered were voiced about fraud and forgery of HB-related an essential support mechanism for those who documents were also mostly directed against the currently receive it. Among the FGD sample, Roma. By contrast, ethnic minority groups are groups of HB recipients and Roma were found more likely to report that they face discrimination to be the most vulnerable, reporting the starkest in accessing social assistance. Minority groups deprivation in terms of energy use and the complained against the eligibility criteria that highest relative energy expenditure. Concerns requires HB beneficiaries to be registered for 6–9 expressed about HB program fraud do not months with an employment office in order to relate to wealthier groups undeservedly taking access the benefit. Members of minority groups advantage of the benefit; rather, to vulnerable stated that they rely on informal and seasonal households being excluded from receiving work so they are usually not unemployed for long the benefit. Such concerns mostly consist of periods, yet their overall income is very low. This complaints about certain peoples’ connections criteria, they say, discriminates against them. to social workers that allow them to prepare It is worth noting that this requirement is also their application better and thus avoid rejection, opposed by non-Roma who rely on informal or or about families who sell vouchers for wood on seasonal work; for example, residents of a village 82 in the sample whose main livelihood is seasonal For example, district heating companies answer construction work. only grievances and inquiries that they believe are relevant; ones considered irrelevant by 17. Overall, respondents think that tariff changes the company go unanswered. Consumers are should be proportionate to changes in income. routinely concerned by their inability to either Participants from all categories in the sample understand their bill or compare it to their actual relate their difficulties with managing energy bills level of consumption. In fact, many electricity to the fact that the levels of salaries, pensions, customers never see their bills—they are and incomes as a whole have stagnated over the either told what they owe by the local payment years. In this regard, participants cite the ratio center, or the amount is directly withdrawn between average incomes and energy prices in from their accounts (if they have chosen online other European countries, and believe they bear payments). For district heating, customers see a higher burden than other EU citizens, relative their bills in terms of the amount they owe, but to their incomes. They blame the government for are unable to access information on how much failing to raise salaries and pensions as per the they consumed (these bills are prognostic and rising cost of living. based on consumption from the previous year). 18. Consumers also oppose energy reforms District heating respondents from the capital because they do not trust energy sector are convinced that bills are manipulated by the institutions and because they believe there heating company. is nothing a consumer can do to address 19. Part of the reason for the lack of trust in grievances against these institutions. providers is the absence of real alternatives for Communication between consumers and consumers. There are three electricity providers providers of electricity and district heating is in the country, but consumers do not have the difficult because these institutions have highly option to switch between them, as they each bureaucratic procedures. Respondents say that serve a specific geographic area. There is no real these institutions follow unclear rules that are to alternative to district heating, either. Households the customers’ disadvantage. This is illustrated that choose to disconnect heating radiators by one low-income woman from Sofia, a district still face relatively high basic service fees and heating user, who stated, “To fight against such the additional costs of alternative heating, an institution, one must have a lawyer and which makes switching expensive. A minority must have money to pay somebody to defend of households have installed independent gas your interest.” Even routine concerns about heating systems and disconnected themselves inconsistent bills or unclear charges take time from district heating. These consumers are and money to resolve. Respondents invoked uncertain of the long-term value of their multiple examples of billing and service mistakes, investment, given the high up-front costs and which customers have had to proactively the fact that gas prices are also rising. As a pursue at their personal cost and time, and with result, citizens largely feel “unprotected” in the uncertain outcomes. Interviews with providers face of rising tariffs, with no other choice but to show that the institutions lack capacity and accept higher bills and continue to reduce basic systematic approaches to handling such cases. consumption to be able to pay them. 83 20. Study participants shared the view that referred to recent media stories, such as on the electricity and district heating tariff increases Kozloduy nuclear power plant, the Belene project, are driven by political or private interests. In and the South Stream gas project.40 These the electricity sector, government contracts projects receive wide media coverage as they with suppliers—perceived as corrupt and relate to the country’s energy sovereignty and disadvantageous to end users—are often seen external relations. However, when it comes to as a cause for tariff hikes. Residents commonly communication on tariff increases, respondents refer to the unfairness of electricity exports to believe that information is limited and less Turkey at lower prices than those that prevail on transparent, and that official statements are the domestic market. Green energy investments geared toward preparing the public for upcoming and the “green energy” tax applied to electricity tariff hikes and not toward informing them is also a source of contention—citizens associate about the state of the sector and causes for this tax with quick profits made by few investors reform. At the same time, stories that come from at the expense of all citizens. Higher costs for “anonymous” government sources that reveal district heating are associated with theft and corruption schemes are trusted widely. losses in the system. 21. Opinions on hopes and priorities for general Section II: Policy Implications and Con- improvements to the sector differ across clusions 23. The qualitative assessment leads to the respondents, but all support the idea of greater following conclusions: control and predictability of tariffs. Some believe that energy institutions should be state nn Policy actions need to focus on both: (i) run, blaming tariff increases on nontransparent effective mitigation of adverse impacts on privatization and energy companies’ profit- household well-being and poverty impacts; seeking behavior; others, by contrast, blame and (ii) governance and accountability bad governance on state monopoly over the concerns. Failing to proactively address sector and believe more competition should be either of these sets of constraints is likely to allowed. Even though individual respondents compromise the overall social sustainability express different views on what the role of the of the reforms. state should be, it is notable that all views show frustration with uncontrolled and nontransparent nn The HB program can be an effective measure tariff increases and reflect a common desire of mitigating poverty impacts; however its for greater predictability, transparency, and coverage of poor households needs to be systems of control in the sector’s management. 40 The Kozloduy and Belene projects refer to bids that the Bulgarian government has opened to international 22. Media—newspapers and TV—are a main investors for developing domestic nuclear energy. In source of information on sector reforms, although 2013 the government summoned a referendum on whether the Belene nuclear power plant should be respondents also claim a high degree of mistrust built; the referendum was deemed as “failed” due to very low turnout. The South Stream project (led by toward “official statements” made in the media. Russia’s Gazprom company) refers to a gas pipeline In the discussion on overall attitudes toward from Russia to Central Europe, which crosses through Bulgarian territory. The Bulgarian government initially energy sector policies, respondents frequently agreed to the project, but work was later halted due to reported noncompliance with EU law. 84 significantly expanded, and access for eligible to be employed in the informal economy, households must be more actively facilitated. which impedes their ability to receive social assistance; and (iii) government policies nn Where possible, regional and seasonal to compensate energy tariff increases with variations in household energy expenditures social assistance may escalate hostility should be reflected in the HB to ensure that against Roma, who are perceived by non- social assistance can effectively alleviate Roma as being the primary beneficiaries of the energy expense burden for all its social assistance. recipients. nn Social accountability interventions need to nn In addition to addressing the cost of district be integrated in both electricity and gas and heating and gas, mitigation measures district heating services to improve trust and should also alleviate adverse impacts ability of consumers to seek their rights vis- of higher electricity prices, especially on à-vis providers. Such interventions should rural and small-town residents. Electricity include, among others, strong grievance consumption is essential for subsistence redress mechanisms. food production and other rural livelihood activities, and also for meeting basic needs nn Clear and transparent bills will help increase such as heating water. Efforts in this regard consumers’ trust in providers. At a minimum, may also include encouraging the use of all consumers should be able to see their bill more energy-efficient appliances. and the amount of energy consumption on which it is based. nn Pro-poor energy-efficiency investments nn Communication efforts by the government, can help decrease the vulnerability of both the media, and energy sector institutions urban and rural residents to rising energy (regulators, utilities) also need to focus tariffs. Currently, efforts to reduce energy on the efforts for improving governance, consumption are widespread; they affect transparency, and control in the electricity, consumers’ ability to adequately heat their district heating, and gas sectors. Such homes without offering significant savings. efforts also need to be more firmly based Reducing energy consumption by the poor on quality analysis of the sector; better (such as by heating less space) is harmful to present the arguments for tariff and subsidy their health and less cost effective than the reforms; and highlight good practices more advanced investments that middle- from other EU member states in this area. income households make. Media statements that are limited to nn Measures to support energy affordability official announcements on impending tariff through tariff reforms need to be sensitive increases are unlikely to fundamentally to the distinct needs of Roma populations. improve understanding and acceptance of These include (i) Roma dwellings are often in the reforms. much worse condition and in need of more basic repair than standard energy-efficiency nn More generally, the government also needs investments; (ii) Roma are much more likely to focus on increasing the transparency and 85 accountability of efforts to reform the energy Spending on energy sources sector. Publishing contracts awarded in the The household is connected to the district heating sector and involving third-party monitors network, which provides heat and hot water. In could help increase public confidence in the winter, district heating bills are about 200 the energy sector and in the government’s BGN/month. The highest bill of the last heating reform efforts. season was in January 2013 for 235 BGN; the lowest one was in April for 80 BGN. The family Section III: Ethnographic Interviews also received a reconciliation bill for 275 BGN at the end of the season, thus adding 46 BGN SOFIA CITY, URBAN AREA, APARTMENT IN to their average monthly bill during the heating A CONCRETE BUILDING season. The amount seemed to them unusually This family lives in a 94-square-meter apartment high. The average annual district heating in a 30-year-old building, where they have three expenditure amounts to 1,440 BGN, or 9 percent rooms and a kitchen. The household consists of their income; however these expenses are of four people—three adults and one teenager. concentrated in half of the year. Electricity bills Two of the adults are retired (78 and 68 years are on average 30–32 BGN/month year-round; old). They live with one of their two daughters they may range from 25 to 38 BGN throughout (an employed systems administrator, 44 years the year. old) and with her daughter (a 17-year-old high school student). During the day they frequently Coping strategies take care of their other daughter’s baby, who To cope with energy expenses, the family cuts lives in a separate household. spending on food, clothing, entertainment, The household’s income consists of two books, and medical expenses. The two pensions and a salary. They also earn some pensioners have passed up needed dental additional income by making traditional spring work and skipped buying medicines. Until souvenirs, and by selling houseplants they grow recently the pensioners worked a plot of land themselves. The average monthly income per to produce fruit and vegetables. Now they try to capita is 320 BGN. sell plants and souvenirs at the market, and use 86 that money to buy some produce to preserve stove, a microwave oven, a water boiler, an for the winter. The family needs to save money electrical radiator, an air conditioner, an electric in the summer to pay the winter’s heating bills. blanket, two television sets, and a computer. In the past they have had to restructure their During the heating season bills range between debt with the district heating provider to repay 100 and 150 BGN/month. The heating bill is all heating bills. They are not aware of social lower in November (about 100 BGN), and highest assistance benefits for heating. in December and January (over 160 BGN). Off- season bills are approximately 40 BGN/month. BOTEVGRAD, URBAN AREA, APARTMENT If they leave the house, for example, to go on IN A BRICK BUILDING vacation for 10 days, their monthly bill may The apartment is a 33-year-old 42-square-meter go down to 30 BGN. Their annual electricity studio that consists of one room and a kitchen. expenses are about 1,000 BGN or 7 percent of The family, which consists of two working their income. adults and one teenager, has lived there for two years. The wife, who is 42 years old, works as a Coping strategies line operator at an automobile electronics plant; To cope with energy expenses, the family her husband, 54, works as line manager at the cuts spending on entertainment and same enterprise. The family’s monthly income social gatherings such as going to movies, is 1,200 BGN. The wife’s parents live in the restaurants, or meeting friends outside of the same building and often watch the 14-year-old home. They do not buy new clothes unless child during the day. The family also sometimes essential, and do not purchase high-quality dines at the grandparents’ place, thus avoiding foods. They use electricity sparingly; they rarely cooking every day. turn on the air conditioner and do not heat the house when no one is home. The child spends Speending on energy spirces time with grandparents during the day, which The household uses electricity for all household saves heating and cooking expenses. The needs—heating, cooking, and powering couple has installed new windows and doors to appliances. The home appliances include a better insulate the home, and purchased an air refrigerator, a washing machine, an electric conditioning unit for heating and cooling, which 87 they believe uses less energy than their older For heating they use an old wood stove that the radiator. The family is not aware of any social husband made himself by transforming an old assistance programs. electrical stove into a wood stove. The stove heats water for the radiators and the water VILLAGE OF SKRAVENA, RURAL AREA, boiler. They have one radiator on the ground TWO-STORY HOUSE floor and three radiators in the bedrooms upstairs. When the stove is working it also This house was built in 1952 and the family has heats water for household use. In the summer lived there since 1967. The area of the house is months they use electricity (an electric boiler) about 80–90 square meters and consists of a to heat water. dining room, kitchen, and bathroom on the first floor and a living room and two bedrooms on the The family’s electricity bills vary between 50 second floor. The couple, both 68 years old, are BGN/month in the winter and 60 BGN/month in both retired and live there alone. Their monthly the summer. Annually electricity bills amount to income consists of their pensions and is 240 about 660 BGN or 11–12 percent of their income. BGN/month each. Coping strategies Spending on energy sources To cope with energy expenses the household Their only energy source for heating is wood. reduces heating; when the weather is mild, they In December, January, and February they use do not heat the house during the day, only at 2 cubic meters of wood per month, at 60 BGN/ night. They have invested in an energy-saving cubic meter, or a total of 120 BGN per month. electric water boiler. They buy lower-quality foods During the other months of the heating season, and take advantage of sales and promotions, and they use 1–1.5 cubic meters of wood, which also produce food themselves (fruit, vegetables, amounts to 60–90 BGN per month. Some years poultry, and eggs). Sometimes they need to they start heating earlier in September, and/or purchase food on credit at their local store until (depending on the weather) continue heating they receive their pension. The household does until April. Annually they spend about 600 BGN not receive a heating allowance as they are aware on wood or 10–11 percent of their income. they exceed the income threshold. 88 Croatia41* nn Poor district heating users are especially vulnerable as they are unable to control 1. This report presents findings from a qualitative heating consumption and cannot switch assessment on social impacts of and attitudes to an alternative energy source. These toward energy tariff reforms conducted in May households cannot afford the up-front cost 2014. Qualitative research was carried out of installing individual meters that would as a part of programmatic economic sector calculate their bills based on usage instead work (ESW) on energy affordability in the EU– of apartment size. Some cities outside of 11,42 which employs a multisectoral approach Zagreb have even higher district heating to addressing energy affordability issues in rates. Croatia, Bulgaria, and Romania. In six regions of Croatia, 22 FGDs43 were conducted with nn As for existing social assistance programs low- and middle-income households44 that use that can help households afford energy, diverse energy sources. All FGs were segregated respondents do not perceive these as an by gender. Six key informant interviews were adequate source of support because: conducted with representatives of energy §§ the system is decentralized and companies, social assistance workers, and there is no guarantee that their local civil society representatives. Additionally, government can afford to provide three ethnographic interviews were conducted assistance to households that are with households. The qualitative research eligible; findings reflect the opinions and perception of respondents. §§ vulnerable households, especially rural ones, have little information about 2. The main findings are as follows: Croatian existing social assistance programs; households have accepted tariff increases as part of EU accession without major opposition. §§ social assistance is prone to fraud, However, most respondents are struggling with especially given the widespread bill payments. The majority must make cuts in practice of informal/undeclared food purchases to cope. incomes, which leaks the distribution of 41 This summary note was prepared by Ezgi Canpolat. the benefit to ineligible households; Data collection and initial analysis was carried out by GfK Croatia and supervised by Sophia Georgieva. This §§ Roma in some locations feel that social note is part of a series of qualitative assessments carried out for the energy sector by the Europe and assistance institutions discriminate Central Asia Social Development Unit in FY14 and is also part of the programmatic ESW on Energy against them; and Affordability in the EU–11 countries. Caterina Ruggeri Laderchi and Nistha Sinha co-led this work. §§ allowance for wood is distributed in 42 EU-11 is here used to refer to Bulgaria, Croatia, the November, when wood prices are the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, and Slovenia. highest. 43 Two FGDs were pilots and they were not included in the findings. 44 “Low-income” respondents were recruited to nn Households highly rank the option of represent roughly the poorest 40 percent; “middle- energy-efficiency support as a way to help income” respondents were recruited to represent roughly the third income quintile. reduce energy costs. The most common 89 method for saving energy is to use the energy prices. Since 2012, energy firms have cheaper night tariff for electricity. determined prices with the approval of the Croatian Energy Regulatory Agency (HERA). In nn Even though most households have May 2012, the cost of electricity increased by accepted and are resigned to high energy 21 percent after four years of consistent tariffs. prices, there is a lack of understanding about Between 2000 and 2012, natural gas prices the justification for increasing energy tariffs. increased by more than 150 percent. Despite In Croatia, unlike in Bulgaria and Romania, such increases, Croatia still has the third-lowest there is a strong belief that increased use of natural gas prices in the EU, after Hungary and renewable energy will help lower costs for Romania. District heating tariffs also increased residential users. in 2012 after five years of stability. nn Consumers interact with energy providers 4. Electricity and natural gas are the two most frequently, mostly in relation to clarifying widely used energy sources in the country. HEP bills. Group (Hrvatska Elektroprivreda), Croatia’s oldest national electricity company, produces Section I: the most electricity in Croatia. In 2008, two new Croatia Country Context electricity companies began providing service 3. In Croatia, the liberalization of energy to the Croatian market: a German company markets started in 2002 and was completed in called RWE AG and an international supplier 2012 as part of Croatia’s EU accession process. called GEN-I Zagreb. Since the emergence of The government of Croatia adopted the EU’s new suppliers on the market, households can Third Energy Package in 2012 prior to joining choose their electricity provider. In 2012, a total the EU, and, as a direct consequence, liberalized of 49 companies held a gas supply license and FIGURE 16. ENERGY EXPENSES BY INCOME Average  monthly  household  income/  Average  monthly  expenses  for  energy   1200   14   961   12.2   12.3   12   1000   913   887   866   11.1  890   840   864   815   820   10.2   737   9.5   732   9.9   9.9   9.6   10   10   800   9.1   9.1   8   600   6   400   4   200   80.7   83.7   80.6   87.8   88.1   95.7   88.8   102.6   106.1   2   70   72.6   0   0   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   average  monthly  household  income  (in  EUR)   average  monthly  costs  for  energy  (in  EUR)   share  of  energy  costs  in  total  household  income   Source: GfK Croatia, 2013, “Incomes and costs.” 90 36 companies held a license for gas distribution. and biomass increased by 8.6 percent and the In Croatia, only 11 percent of households are consumption of other renewables increased connected to district heating systems; 13 by 102.1 percent. companies provide district heating in 18 towns. 7. Social assistance in Croatia is administered at There are clear regional differences in the type local and state levels. It is poorly targeted due to of energy sources used across the country: the a lack of coordination between central and local piped gas and district heating networks are agencies. The central government is responsible present mostly in the northern and eastern parts for granting guaranteed minimal support (GMS) of the country, whereas households in southern to vulnerable households. Local governments Croatia rely almost exclusively on electricity. are responsible for providing assistance for 5. Energy affordability and rising tariffs living costs, which encompasses energy costs, remain a concern in Croatia. After the global and fuel wood costs. Living assistance and financial crisis of 2008, Croatia experienced fuel wood assistance are provided in cash. a significant economic downturn. Household There are few or no enforcement mechanisms incomes have been declining since the crisis, to ensure that local governments fulfill their while energy prices and household monthly legal responsibility to provide assistance. Even energy expenditures have been increasing. though GMS recipients are entitled to such The share of energy expenditures in household assistance, in many cases, local governments budgets increased from 9.5 percent in 2003 to lack sufficient funds to provide the assistance 12.3 percent in 2013. to all who are eligible. 6. In recent years, the use of renewable Section II: Findings energy sources increased in Croatia, while the consumption of most energy sources ENERGY USE AND SPENDING PATTERNS declined. In 2012, the consumption of 8. Croatian households use electricity, natural electricity decreased by 1.8 percent and gas, portable gas, district heating, and wood. natural gas and district heating decreased by The type of energy used by a household depends 6.1 percent. The consumption of fuel wood on its income level and location. The majority of low-income FGD participants in rural areas report using wood for heating because it is the cheapest energy source. Middle-income families in rural areas state that they use electricity for heating.45 Access to and use of district heating is highest in urban areas. Middle-income respondents in urban areas mostly use district heating. For cooking, FGD participants mostly use portable gas. 45 Only two FGDs were conducted with sixteen middle- A wood stove in a Roma house in Zagreb. income household members in rural areas. 91 FIGURE 17. AVERAGE ENERGY EXPENDITURE PER SEASON MARCH-­‐MAY   JUNE-­‐OCTOBER   NOVEMBER-­‐FEBRUARY   AVERAGE   781 687 420 387 423   358 368 437   347 233 357   172 GAS   DISTRICT  HEATING   ELECRICITY   Source: Focus group discussions, 2014. 9. The majority of FGD participants purchase 11. Women and men appear to have different wood from suppliers. Only a small number patterns of energy use and different approaches of respondents collect wood from their own to saving energy. The majority of female and properties. Social assistance recipients use male respondents agree that women, especially assistance to buy wood. When they run out those who stay at home, are households’ main of money, they acquire wood by helping the consumers of energy and are better positioned foresters in exchange for wood scraps. The to save energy, as they perform most of the Roma population uses assistance to buy wood; household chores (with the exception of they also collect wood pallets from warehouses heating-related tasks). According to female and utilize old furniture people throw away. respondents, women are more concerned about 10. Most energy expenses fluctuate with the saving energy compared to men. In FGDs with seasons, with more energy used and higher households that use wood, female and male expenses incurred during the winter months. respondents both state that men are in charge Consumption of natural gas, district heating, of preparing, transporting, and cutting wood. and wood is highest during the heating season. Electricity consumption is generally the same 12. Respondents make paying energy bills throughout the year, with the exception of a priority so as to avoid debt accumulation, middle-income households in rural areas. disconnection, and high late payment and These households use electricity for heating reconnection fees. Respondents state that and report paying higher electricity bills during they cut other expenses or borrow money from the heating season. friends and relatives to afford their bills. Even 92 with these coping strategies, 35 percent of emergency. Most respondents switch to riding respondents—mostly low-income ones—say bicycles. they do not manage to pay their bills regularly. 14. Switching to lower-cost energy sources Respondents with part-time jobs mention they is one way households cope with high costs. are late with payments because they receive Households that previously used gas stoves irregular salaries, or due to unemployment. have switched to wood for heating and cooking District heating bills are some of the most due to increasing gas prices. Many low-income difficult to pay in a timely manner because these households also report that they have stopped bills are large and concentrated in the winter using electric water boilers, heating their water months. Moreover, households are unable on wood stoves instead. District heating users to control their consumption because bills express a desire to switch away from this are calculated by apartment size, rather than source yet they are unable to disconnect from amount consumed. the central heating system. COPING STRATEGIES 15. Middle-income households apply coping 13. Households make a clear connection mechanisms that have a marginal effect on between the rise in energy prices and the need to their well-being. Respondents state that to cope make cuts in household spending. Ninety-eight with rising energy prices they buy discounted percent of participants in FGDs report reducing groceries, reduce spending on cosmetics, and spending on food to cope with increasing shop for clothing during sales. They also drive energy prices. Low-income households, less and switch to riding bicycles. Respondents including social assistance recipients, note that mention that they are likely to have social they reduce their number of hot meals in a day, gatherings at their homes instead of meeting stop eating fruit, eat lower quality products, outdoors. and bake and eat more bread. The respondents acknowledge that these measures affect their 16. Using two-tariff meters46 that calculate nutrition and well-being. Some households electricity consumption at different rates also report buying food from neighboring depending on the time of the day is another countries such as Italy and Slovenia, where food common strategy for managing energy costs less. Low-income and rural households expenses. The two-tariff meter lets consumers substitute purchased food with homegrown use electricity at a lower rate after 10 p.m. in the and homemade food, and consume produce summer and 9 p.m. in the winter. Respondents from their garden plots or eat the canned food state that they must alter their lifestyles to take they prepared in the summer. Another coping advantage of the cheaper tariff option; they use strategy is to cut spending on clothing; most the washing machine, dishwasher, and oven respondents say they stopped buying clothes. during the night. One negative effect reported by They also gave up trips, vacations, and outings, 46 Electricity companies use two-tariff meters to charge consumers two different tariffs at different all of which became luxury activities when times of the day. In Croatia, electricity companies let energy prices increased. Respondents say they consumers use electricity at a cheaper rate from 10 p.m. to 8 a.m. during the summer and from 9 p.m. to 7 either sell their cars or only use them in an a.m. during the winter. 93 the respondents is that the noise generated by of tenants with splitters is calculated through electric appliances disturbs any children in the the building’s shared meter. Respondents household, as well as the neighbors. in these cases state that their bills did not decrease after installing splitters. Even if a 17. Households also reduce the amount of household discontinues use of district heating, energy they consume to cope with high costs. and removes radiators from the apartment, To save on lighting, low-income households they still receive a bill for DH shared costs in (including social assistance recipients) use the building; this issue has spurred public wax candles and turn off the lights when they dissatisfaction in some locations. watch television. Low-income respondents say they stay out of their homes or stay with 19. The majority of respondents believe that relatives, and also reduce bathing, showering, increasing the use of renewable energy sources and ironing to avoid using energy. Other energy- will reduce energy costs for households; they saving tactics include heating fewer rooms and therefore consider investments in renewable keeping radiator temperatures at a minimum. energy a top priority for the sector. Respondents Forty percent of households report saving state that Croatia should increase its use of electricity by turning lights off and 36 percent of solar and wind power to produce energy and respondents use energy-saving bulbs. Female reduce electricity imports. They think solar respondents said they reduce or quit ironing to panels should be installed on houses and be save energy. Low-income female respondents financed by the state. Respondents argue that mention doing laundry manually. renewable energy source use will benefit all citizens. 18. District heating users state that they do not have control over their bills and lack incentives 20. Most households believe it is important to to save energy. District heating is billed based use energy-efficiency measures such as home on the size of the apartment. According to EU insulation and to install polyvinyl chloride (PVC) regulations, residents should install individual windows. However, most respondents lack the heating meters, which would allow households financial resources to invest in these measures. to be billed based on the actual amount of Under the current system, households can get heat they consume. Some households have assistance for installing solar panels and façade installed such meters; however buying the insulation. More than half of all respondents meters requires an up-front cost. Using meters do not have adequate information about these is also contingent upon agreement among all support systems. Respondents who are aware residents of an apartment building; in order to of the assistance for insulation complain that be billed based on consumption and not area of the assistance, which covers 40 percent of the the dwelling, more than 80 percent of tenants total costs, is only given after the insulation is in a building need to install splitters (meters). completed. This is problematic because low- However, not every household in a building income households lack the up-front money to has the financial means to do so. In cases invest in the insulation. Respondents also state where less than 80 percent of a building’s that there is a lot of paperwork to be completed tenants have splitters, even the consumption in order to get this assistance. 94 SOCIAL ASSISTANCE as highly bureaucratic and complex. Eligibility criteria. Eligibility criteria are perceived as 21. Household awareness of available social too restrictive. Respondents also state that assistance mechanisms and eligibility when applying for assistance they have to requirements depend on the type of assistance document income from the year preceding the and the household’s income level and location. application. They argue it is likely for someone Low-income households are more familiar with who previously worked to be unemployed at the the assistance for buying wood (about one- time of application, yet be disqualified under the third have heard of such measures) and middle- existing requirements. income households are more familiar with the assistance for living costs that covers utility 23. Respondents complain about the bills (more than half have heard of it). Rural effectiveness and targeting of social households are less familiar with the two types assistance, as well as ethnic discrimination of assistance compared to urban households. by social assistance institutions. Recipients Even households that know about social of fuel wood assistance report receiving cash assistance programs generally have limited in November, when wood prices are highest. information about the eligibility requirements. The amount they receive has stagnated over the years even though the price of wood has 22. Respondents point to restrictive rules and a risen. Respondents state that the process of complex application process as key difficulties verifying applicants’ eligibility lacks oversight, in accessing social assistance. The application which results in corruption. They report that process for social assistance is often perceived undeclared incomes are common in Croatia, FIGURE 18. AWARENESS AND USAGE OF SOCIAL ASSISTANCE 100 TOTAL   RURAL   URBAN   LOW   MIDDLE   90 80 70 56 57 60 49 50 44 40 35 29 28   29 28   30 23 19 18   20 13 12 14 11 8 10 0 0   0 0 heard of using heard of using Assistance for buying wood/firewood Assistance for living costs – paying utility bills Source: Focus group discussions, 2014. 95 and some people only register a portion of electricity suppliers, and several mentioned their income and/or represent their wages as that company representatives had visited them. minimally as possible in order to be eligible Suspicion of new providers is mainly based on for assistance. For example, some note that previous negative experiences with telecom adult children of better-off families can receive operators, where respondents were offered assistance despite living in good conditions better services but never received them. Rural because they are unemployed and do not respondents have limited information about have property in their own name. Roma claim new providers and do not know where to get that they experience discrimination in the more information. application process for social assistance. Roma 26. Respondents often contact electricity are more likely to claim that they experience and district heating providers about high and discrimination in the application process for unclear bills. Electricity and district heating social assistance. users mention that when they contact energy 24. When asked to choose whether they would providers, they encounter rude officials who prefer to receive social assistance in the form of do not provide information related to billing. either cash, voucher, or social tariff,47 the most Respondents believe that new bill calculation popular option (ranked first by 45 percent of methods are deliberately introduced to facilitate respondents) is vouchers for façade insulation or fraud. Social assistance recipients frequently PVC window installations. Respondents believe contact electricity providers about paying debts that vouchers have a clear purpose and cannot in installments and are generally satisfied be misused, whereas cash might be spent on with the responses they get. Respondents alcohol or cigarettes. The social tariff option is who contact electricity providers regarding unpopular, as there are concerns it is vulnerable broken meters are mostly satisfied with to fraud due to the problem of undeclared their interactions. They state that electricity incomes. Social assistance recipients are more company officials promptly come and replace likely to prefer support with payment of utility faulty meters. There were fewer interactions bills or social tariffs. with the natural gas supplier. Respondents have contacted their gas supplier about rates, RELATIONSHIP WITH ENERGY maintaining gas supply, and meter replacement. SECTOR PROVIDERS Respondents were generally satisfied with their interactions with gas company officials. 25. Respondents do not trust new electricity providers and do not transfer their services to them. All respondents are aware of the new 27. Respondents from all income groups are dissatisfied with the quality of gas. Households 47 Respondents were given three options for how believe that gas is mixed with air; they suspect vulnerable households should receive assistance: this because it takes longer for them to boil the (i) by providing money in addition to existing social assistance; (ii) by using a social tariff and charging water compared to when they use pure gas. low-income households lower energy prices; and (iii) They also report an unusual flame color and by providing vouchers to cover insulation expenses. Respondents evaluated each option according to smell. Respondents state that if gas was pure, the appropriateness of the assistance for vulnerable households and to what extent it would help. consumption would decrease. 96 WHAT RESPONDENTS THINK OF POTENTIAL PRICE INCREASES: “We would eat “We would live in the dark.” breakfast on Monday, LOW-INCOME FEMALE lunch on Wednesday, and ELECTRICITY USER, SPLIT dinner on Friday” LOW-INCOME “We would bathe MALE DISTRICT HEATING USER, OSIJEK only on Saturdays, and in bowls like in old times. “We would slice the We would use rainwater bread thinner. Our children or we would boil would be slender.” the snow.” MIDDLE-INCOME SOCIAL ASSISTANCE RECIPIENT MALE NATURAL GAS USER, OSIJEK FEMALE WOOD USER, OSIJEK 28. Households do not have adequate about further electricity price increases, while information about tariff increases and believe middle-income respondents indicate that they that private interests drive price increases. would be able to afford a 5–10 percent increase Although respondents are aware of price in electricity prices. Respondents from Zagreb, increases, they do not know when and by where district heating is the cheapest energy how much energy. Residents associate price source, note that they would be able to afford a 5 increases with corruption or bad sector percent price increase. However, district heating governance. Respondents blame price increases users in Slavonski Brod, Rijeka, and Varazdin— on the high number of company employees and where district heating prices are higher— their exorbitant salaries, and also accuse the are especially vulnerable to price increases. provider of raising electricity prices when it runs Vulnerable respondents feel resigned toward out of money. Respondents similarly think that tariff increases; despite complaining about price providers raise district heating prices in order to changes, most respondents feel helpless and pay their employees high salaries. The increase believe they are unable to influence the reform in gas prices is attributed to Russia, from process. where a significant portion of gas consumed domestically is imported. Section III: 29. Respondents have different attitudes toward Policy Implications and Conclusions tariff increases. Low-income households and 30. The qualitative assessment leads to the recipients of social assistance are concerned following conclusions: 97 nn Existing social assistance can be an nn Utility bills should be presented in a effective measure of mitigating poverty clearer manner, reflecting consumption impacts; however, there needs to be a every month. In addition, better customer central mechanism that guarantees social service of the utility company can increase assistance to eligible households. National satisfaction with the provider. and local governments should develop a nn Mechanisms for grievance redress should single list of eligible households for social be provided to Roma populations, who assistance and secure a source of funds for feel that social assistance institutions providing assistance to these households. discriminate against them. nn Poor district heating users should be provided assistance for up-front costs of Section IV: individual meter installation, which will Ethnographic Interviews allow them to control their consumption of heat. In order to be effective, more than ČAKOVEC, HOUSE 80 percent of tenants in any one apartment Four people live in the household: a husband and building must have a meter. wife with two children who are 10 and 6 years old. Both spouses are currently unemployed. nn Energy-efficiency programs should be This year they received assistance for buying accessible to lower-income households. wood from the city of Čakovec, which was 900 These programs can cover up-front costs kunas. They have lived in a 60 m2 house for for investing in energy-efficiency measures six years and had to take out a loan to buy it. and can allow for gradual investments. They also receive 1,800 kunas per month. They nn The process of verifying applicants’ spend most of this money on food and utility eligibility for social assistance should bills. have better oversight. Applicants who Spending on energy sources do not declare their income and/or have informal income should be identified and They use wood for heating and electricity for disqualified for assistance. lighting, cooking, and heating water. When they moved into the house, they used electricity nn The cash assistance for fuel wood should for heating because they had not yet bought be provided when wood prices are cheapest. a wood stove. They pay electricity by paying 98 slips, which they receive every six months. After Social assistance reconciliations they have to make additional They do not know much about the types of payments. They are two months behind on their assistance that are available for paying utility regular electricity payments. They arranged with bills. They like the idea of cash assistance, the electricity provider to pay the additional sum but say someone should keep track of how in three installments, each of which is 200 kunas, the money is spent. “Some people receive but have not yet made the additional payments. assistance and then go to bars. It is really They believe that the most electricity is consumed inappropriate,” they said. They believe that by the water heater and the cooking stove, which the social tariff is prone to manipulation; are turned on for at least two hours a day. households that would pay lower rates under the social tariff would engage in They do not buy wood. Instead, the husband wasteful usage habits, they say. They think goes to the forest almost every day to pick up the voucher for insulation is the best idea wood scraps to use for heating. Their neighbor because households could save energy that also delivers wood scraps to them and the way. People would automatically have lower husband helps the neighbor in return. They electricity and heating bills. spend the assistance they receive to buy wood (900 kunas) on food because with the assistance Attitudes toward energy reforms they could buy only 3 m3 of wood, whereas they need 20 m3 in the winter. They do not know who sets the price of electricity, but believe the price is unrealistically high. The Coping mechanisms price of electricity should be adjusted according To pay their bills, they sometimes borrow money to the living standards of Croatian citizens. from their mothers. They also manually mow They were visited by the representatives of the lawn instead of using a lawn mower in order new electricity suppliers, but did not sign any to save oil. Other coping mechanisms include contracts because the representatives were keeping the clothes dryer in the bathroom to not persuasive. They state that if the price of heat the bathroom, and using wood for cooking electricity increases 5 percent they will try to during the winter to save electricity. They pay the rates in installments like they have installed PVC windows three years ago and now done so far, but they have no expenses left to spend 10 m less wood than before. 3 cut. “We have nothing left to give up,” they said. 99 SLAVONSKIBROD, TWO-STORY HOUSE apartment, they lower the radiators to 13 °C. The respondent has not gone to a cinema in 30 years; The respondent is 65 years old and is a he does not buy new clothes or shoes. He does retired locksmith. He lives with his wife, who not travel and has not had a summer vacation in is a housewife, and his son, who is 25. The 15 years. He only spends money to eat and pay respondent has been living in his current house the utility bills. Several years ago they bought for 34 years. Seventy percent of the family’s new appliances, which consume less electricity. income, which is 2,500 kunas per month, is He believes that one can save energy by buying spent on utility bills. more energy-efficient appliances. Spending on energy sources Social asisstance The family uses natural gas for heating, heating The respondent is not familiar with available water, and cooking. Seventeen years ago they assistance mechanisms to vulnerable households. used wood for heating, but started using gas He knows about the assistance for buying wood when it was introduced to where they live. They and for paying utility bills, but is not aware of the think natural gas is easy to use and not harmful conditions for receiving them. He thinks the best to human health. social assistance for vulnerable households would be to pay their utility bills for them. He believes that Electricity rates are about the same throughout if vulnerable households are given cash they will the year. After reconciliations they have to make spend it on cigarettes and alcohol. additional payments. The respondent believes that the price of electricity increased twice in the Gender differences past year and decreased once. He does not know He and his wife equally worry about saving how much the price increased or decreased. energy. The bills are paid depending on who has the money. His wife checks to make sure the Gas rates are highest during the winter months. meter was read properly. They are lower in March, April, and in the fall— around 150 kunas. In the summer the family Attitudes toward energy reforms pays only 40 kunas for hot water. The gas meter is read every month and the respondent receives The respondent heard that energy prices rates every month. The summer is an exception will continue to rise over the next few years. because they receive only one rate in September He thinks the high price is not justified and for the entire summer. The price of gas was 90 probably set by the country’s officials. The lipa per m3 17 years ago, when they started respondent knows the new energy suppliers and using gas, and now it is over 3 kunas. They heat he transferred to his service to a new supplier only 35 m2 of their 52 m2 living space. because his bills would be 7 percent lower. He sent the papers himself and filled the online Coping mechanisms application. He would be able to pay the higher The family pays their utility bills first and splits price of electricity and gas up to a 10 percent up what remains according to their priorities. increase. He says he has no other option but to They save electricity by turning off the lights and pay. “We will keep paying and keep our mouths use energy-saving bulbs. Before they leave the shut,” he said. He does not know where else to 100 save since 70 percent of his income is spent on kunas—they try to make arrangements with the utilities. electricity provider to repay the total amount in installments. They try to pay electricity bills first SPLIT, APARTMENT and cut other costs. Once, they borrowed money A husband and a wife with two children (one to make additional payments. They use electric 8 years old and one 15 months old) live in the appliances after the cheap tariff is turned on. household. They have lived in this apartment for They use energy-saving bulbs and bathe their 8 ½ years. Both spouses have been unemployed children together to spend less electricity on for a year. The husband is registered with the heating water. They charge the stove during the unemployment office and they receive child night when the cheap tariff is turned on, and support. Sometimes their parents help them then use the stove for heating during the day. and sometimes the husband works illegally in Social assistance order to make some extra money. It was the wife’s idea to apply for social Spending on energy sources assistance, and she researched the available types. She found the paperwork to be The wife uses electricity for everything in the complicated. It took 15 days to gather all forms apartment: heating, cooking, lighting, and heating they needed. They are now waiting for the reply. water. They have always used electricity for The respondent believes that people who receive heating. In the winter they receive higher bills the assistance do not spend the entire amount because of heating. Their bills are now higher than on utility bills; they also spend it on food. before because of their second child (for example, they do more laundry). They spend 80 percent of Gender differences their income on utilities. The respondent noticed The wife takes care of paying bills, checking the that the price of electricity increased in the previous meter, and maintains the household appliances, years, but she does not know by how much. which are turned on overnight. The husband suggested purchasing energy-saving bulbs. Coping mechanisms They try to pay their electricity bills on time. When Attitude toward reform they have to pay larger amounts—more than 600 The wife believes that the arrival of new suppliers Photographs of Roma houses in Zagreb 101 should decrease the price of electricity. She expensive, higher-quality services. They heard from her acquaintances that there are no would not want to pay higher tariffs even if significant differences in price between old and services improve. new suppliers. She also heard that the transfer nn Households have coped with prior tariff procedure from old to new supplier is complicated. increases by spending less on food and The respondent would mostly benefit from the lower delaying energy payments at the risk of price of electricity. HEP could turn on the cheap tariff being disconnected. Respondents have not a couple of hours earlier because during the night significantly reduced energy consumption the appliances make noise, which disturbs their as a result of the tariff increase because children and their neighbors. In the event of further they believe they are using the minimum price increases, the respondent would have to keep amount necessary. They expect that in the paying. “I do not know where else to save. I simply do event of future increases, they will have to not know what I would do,” she said. make even more drastic cuts to other basic needs. Romania48* nn The overall attitude toward reforms is one of 1. This report presents findings from a qualitative resignation. Consumers do not believe they assessment of household vulnerability and can influence decision making in the sector. attitudes toward energy tariff reforms that was nn Support for energy efficiency is considered conducted between November 2013 and March the best mechanism to help households 2014. manage the long-term impacts of rising 2. The main findings are as follows: tariffs. Heating benefits are also a well- known and valued source of support, but nn Respondents do not believe that tariff their coverage is more restricted; they are increases in gas, electricity, and district more likely to help households meet short- heating are justified given their income term expenses rather than help them save levels and the quality of service they receive. in the long run. They believe that increasing tariffs are a result of monopolies, corruption, or bad nn District heating users describe governance in the sector, rather than the disconnecting from the network and need for financial sustainability. switching to lower-cost heating sources as a way to save and to have more control nn Participants would rather have access to over energy consumption. However, this affordable, low-quality energy than to more option entails an up-front cost that is often too high for the poorest people, and they 48 This summary note was prepared by Sophia Georgieva. Data collection and initial analysis were even find their heating costs increasing as carried out by Metro Media Transilvania. This note better-off neighbors disconnect from the is part of a series of qualitative assessments carried out for the energy sector by the Europe and Central district heating network. Asia Social Development Unit in FY14. The task was led by Michelle Rebosio. The note is also part of the nn Priorities for improvements to the sector ESW on Energy Affordability in EU–11 countries led by Caterina Ruggeri Laderchi and Nistha Sinha. revolve around price, and mainly include 102 putting a cap on expected tariff increases. expected to grow gradually by 3–5 percent Respondents also call for more transparent per trimester until the end of 2018. Average billing and better capacity of providers to electricity prices for residential customers address customer service concerns. increased by 10 percent in July 2013 and are expected to grow at a similar rate between 2014 and 2018, rising every six months. Residential Section I: Findings consumption of electricity would increasingly 3. This study is based on FGDs and key be purchased from the competitive market (10 informant interviews. Twenty-six FGDs were percent in 2013, 30 percent by the end of 2014, held in eight regions of Romania, with low- and so on). District heating tariffs have grown and middle-income households49 that use at different rates across the country. Among diverse energy sources. Additionally, 10 key the locations in the qualitative sample, some informant interviews were conducted with tariffs stayed the same between 2011 and 2013 social assistance, energy company, and civil (for example, Cluj, Timișoara, Deva); others society representatives, and four ethnographic increased moderately, by 13 percent (Craiova) interviews were conducted in households (see or 36 percent (Bucharest); and others saw a summaries in Annex I). more dramatic increase in the same period (for 4. The qualitative research presented here was example, 61 percent in Medgidia, 126 percent in conducted as part of a three-country study Reșița). on energy affordability in the EU–11, which also includes Bulgaria and Croatia. As new EU 6. FGDs in Romania reveal that tariff increases members, these three states are in the process have affected the household budgets of both of implementing energy reforms compliant with low- and middle-income groups, and especially the third energy package of the EC (European their consumption of basic goods such as food Commission, n.d). These include raising and clothing; in addition, they have not led to a electricity, gas, and district heating tariffs to cost substantial difference in energy consumption. recovery level, introducing competitive markets Participants make a clear link between the rise for electricity and gas, and investing further in in energy prices and the need to make cuts in renewable energy sources, among others. household spending, but most of them prefer to avoid reducing energy consumption as a coping 5. The Romanian government has announced measure. The most commonly cut expenses a schedule for increasing gas and electricity are for food. All low-income respondents and prices through 2018. Gas tariffs increased by over half of the middle-income ones state 5–7 percent between 2010 and 2012 and by an that they need to reduce spending on basic additional 8 percent and 2 percent in July and foodstuffs, whereas the remainder of middle- October of 2013, respectively. According to the income respondents report that they only cut government’s road map for the liberalization nonessential foods (sweets, drinks, and so on). of the natural gas market, gas tariffs are Rural residents often substitute purchased foodstuffs with self-produced items, and are 49 Low-income households were recruited to represent thus better able to save cash for fuel purchases the bottom 40 percent; middle-income households were recruited to represent the third wealth quintile. in the summer and fall. 103 7. Payment delays are the second most 2010 and 2012, and 2 percent in 2013.50 The widespread coping strategy. Half of the low- advantages of disconnection include switching income participants in the sample and about a to a cheaper source of heating (as district heating fifth of the middle-income ones state that they is currently costlier than heating with gas), and have no choice but to delay energy payments being better able to control consumption in during the heating season. Payment delays are the future. For poorer residents, the up-front more common among district heating users. cost of disconnecting from district heating and Groups that consume electricity and gas do not installing an independent gas heating system use this strategy very often, as their services is high, but they often feel pressed to switch can be disconnected after two months of when other neighbors in the building do, as the nonpayment. As a result, they face pressure to cost for the remaining subscribers becomes mobilize resources in a shorter amount of time. gradually higher. Additional coping strategies that are applied 10. Households that heat with wood take sporadically through the year include borrowing measures to buy it in bulk during the late money from friends and relatives, borrowing summer, when prices are cheaper; those that with interest from credit unions, or purchasing purchase small quantities of wood every month food on credit. Other coping mechanisms were are generally more vulnerable and face higher mentioned that have a less direct link to making overall costs. Purchasing patterns for wood energy payments, such as minimizing spending vary depending on the household’s amount of on clothing. available money and its storage capacity. Rural 8. The cost of heating, and changes experienced households in the sample were more likely to in the past three years, vary widely according purchase all the wood needed for a winter at to where and what energy sources are used. once, in August–September. Many of these Overall, the cost of heating is highest for groups households reported relying on self-produced that use district heating and lowest for groups foods through the summer to save cash for that heat with wood. As mentioned above, wood. Urban households that use wood were among district heating users, some locations more likely to purchase it twice per year or in in the sample (Cluj-Napoca, Timișoara, Deva) smaller amounts every month, either because did not witness a substantial (or any) change they have fewer savings at the end of the season in prices between 2011 and 2013; whereas or less space for storage. Households that buy others (Reșița, Medgidia) have experienced a in smaller quantities throughout the year fail drastic increase. In Reșița, where prices have to take advantage of the best price (the cost of risen more starkly, approximately 58 percent of wood can rise by up to 50 percent from summer district heating subscribers have disconnected to winter). Roma groups in the sample were themselves. more likely to spread out wood purchases and 9. In all of the sample settlements, respondents buy small quantities every month; they were describe giving up or wanting to give up 50 Calculations made by Metro Media Transilvania based district heating services. On the national on data provided by the National Regulatory Authority level, disconnections occurred at a rate of for Local Public Services (NRALPS)—State of Energy Services, Romanian National Regulatory Authority. approximately 4 percent per year between Cited in Metro Media Transilvania (2014). 104 also more likely to report collecting wood from informing vulnerable groups about the program. forests and construction sites. Respondents state that two of the eligibility criteria—not being indebted to local authorities 11. Energy affordability is perceived as and not owning land—make it difficult for certain problematic even under current tariffs, and is vulnerable individuals to access the program. related to availability of stable income. Low- Respondents believe it is particularly unfair that income groups report that spending on energy vulnerable households that have accumulated bills comprises about a third of their income in debt with the municipalities are ineligible for the nonheating season, and half in the heating this benefit, since they have accumulated this season. About a quarter of the low-income debt because of poverty. Roma were more likely respondents state that winter energy bills are than non-Roma to cite insufficient awareness of actually higher than the amount they receive the benefit or not knowing about the benefit in from stable sources of income. Middle-income time to apply. They were also more likely to state groups report that they spend about one-third that they were rejected for the program because of their income on energy in the heating season of unpaid taxes to local authorities. and a fifth during other times of year. However, respondents tend to take into consideration only 13. The HB’s effectiveness also varies by source their stable income sources (salary, pension), of energy used; it is reported as most effective and do not take into account homemade or for households that use district heating and homegrown food, seasonal jobs, or other gas, and least effective for households that heat occasional income, and the reported share of with wood. For district heating respondents spending is therefore likely to be exaggerated. the benefit covers a wider portion of their total Still, these findings indicate that a household’s heating costs, on average between 20 and 50 ability to afford energy depends on its ability percent, depending on the household’s income to obtain income from less stable sources. and its overall expenses. For households that This creates an overall perception of insecurity heat with wood, the share of expenses covered among respondents regarding their ability to was more uniform (20–25 percent of total costs); face the increasing cost of energy. those households in general view the benefit as a less substantial source of support compared 12. The HB program is a widely known and to poor district heating and gas users. Still, both valued source of support for those who receive low- and middle-income recipients regard it it; yet respondents think that many vulnerable as a valuable source of support. Most groups groups cannot access it. HB recipients believe perceive the distribution of the HB to be fair; that the program is fairly easy to access. The that is, they do not associate it with corruption majority of non-recipients—from both low- and or regard it as reaching ineligible households, middle-income groups—have not applied for the despite occasional cases reported in the media. benefit, either due to lack of information about The few objections raised regarding fairness eligibility criteria or because they know they are of social benefits involved Roma forging not eligible. Lack of information is mostly cited documents in order to qualify for the benefit; as a problem in rural areas, and participants tend this situation was cited only by respondents in to blame their local municipality for not better bigger cities, such as Bucharest and Iași. Roma 105 groups, on the other hand, complained about most skeptical about the benefits of energy- discrimination but mostly in regards to how it efficiency investments, as their dwellings are prevents them from finding employment and often in very poor condition (many have broken receiving help with filling out applications for doors or windows) and advanced energy- social benefits. efficiency measures are not a priority for them. 14. Overall, respondents believe that 16. Study participants described limits to energy government support for advanced energy- price increases after which paying for energy efficiency improvements is the best way to help would lead to hardship or delayed payments. households face rising energy tariffs. Support Low-income groups considered a 10–15 for energy efficiency is seen as most effective percent increase in tariffs a critical maximum at because it has a long-term effect on both which they would not be able to catch up on bill managing costs and overall well-being, in that payments. According to them, even a lower level households do not have to compromise heating of increase would severely impact their ability to comfort in order to reduce spending. Social meet their basic needs (which some are already allowances, by comparison, are considered experiencing). Middle-income respondents valuable for helping families manage month- more consistently stated that a 5–10 percent to-month expenses but not for helping reduce increase would not have a significant impact on bills in the long term. HB recipients find both their well-being, but an increase of 20 percent the benefit and energy-efficiency financing or more would be a critical limit at which they equally important to their household, while non- would be forced to delay or not pay bills. recipients rank the prospect of energy-efficiency cofinancing much more highly. None of the 17. All groups state that energy price increases groups expressed a particularly high preference should be matched with rising incomes, and for social tariffs or tariffs based on consumption that even under current prices, the quality of thresholds, as they believe that households service should also improve. Participants largely cannot easily control energy consumption. prioritize affordability over quality. They state 15. All respondents are highly motivated to that even improvements in services would not improve their dwellings’ energy efficiency, and make further tariff increases acceptable. The have made efforts to make such investments majority of respondents believe that services according to their means. The great majority of are already too expensive and that companies the middle-income participants have already should be able to take care of maintenance and installed PVC windows, and over half have also improve service quality under current pricing. An insulated outside walls and roofs. Less than half exception was the group of respondents from of the low-income participants have installed Bucharest who stated that they would be more PVC windows, but those who have not have likely to accept higher tariffs if they also saw attempted simpler energy-efficiency measures some improvement in service quality. For this such as using sponges and cushions to insulate group it is important to know what the additional windows. In addition, about a third of all low- revenues from higher tariffs will be used for (for income respondents have undertaken outside example, improvements in the electricity or gas wall or roof insulation. Roma groups are the network). It is also important to have better 106 interactions with energy providers so as to with the costs. Some Roma groups mentioned easily address queries, resolve grievances, and their intent to disconnect from the services. experience better customer service. 20. Awareness of energy sector reforms and 18. Respondents also voiced concern with institutions is limited mostly to the change in service quality, even if this is not as important tariffs. Most respondents believe that issues to them as the cost of services. These concerns related to energy reform are too complex to be refer mostly to the adequacy of heating/hot understood by nonspecialists. Others, mostly water provided, as well as to customer service. urban residents, state that citizens have low In district heating, grievances include: (i) heat interest in the sector because they do not believe losses in the network that raise the cost relative they can influence decision making. Television to the quantity of heat consumed; (ii) not enough and radio are cited as the main sources of heating in colder fall and spring months, which information on tariff increases and they are requires some households to use additional widely trusted, given that prior announcements electrical heating appliances; and (iii) the fact for increasing tariffs have so far proven to be that the hot water temperature is low when it is true. first turned on and that the water needs to be run for a long time for the temperature to be Section II: right, which forces customers to pay for larger Policy Implications and Conclusions quantities of hot water. For gas, key grievances 21. The qualitative assessment leads to the concern customer service—long wait times following conclusions: and the poor attitude of employees—as well as unclear bills. For electricity, unclear bills and nn Impacts of reforms have been felt unevenly added taxes (for renewable energy, television, across the country (for example, some and radio) were mentioned as most problematic, district heating customers have experienced along with some complaints about frequent a much larger increase in tariffs than others). power cuts, power fluctuations, and quality Thus, poor and vulnerable households of customer service. Participants frequently that have been exposed to a more drastic suggested reestablishing local offices that were increase in tariffs are disproportionately closed and staffing them with more employees affected. Making mitigation more effective to address concerns or billing issues. for such groups may include creating additional local support programs and 19. In general, the attitude of respondents prioritizing national support programs, toward tariff increases is resignation. Citizens (such as energy efficiency), among others. have already experienced rising prices of energy and other goods and services, and believe this nn As costs across energy sources differ trend will continue. They also doubt their ability widely, and the rate of tariff growth for the to influence the reform process and feel they same source differs across regions, the have no voice in tariff decisions. As energy is HB program’s ability to protect the poor vital to their life, most think they will continue to against rising energy costs is also likely reduce spending on other basic goods to cope to be uneven across groups. Additional 107 measures of support can be directed to poor responsiveness to service disruptions and households for whom the benefit does not billing inquiries. Shorter wait times in gas cover a substantial part of expenses. or electricity offices are measures that can immediately improve customer satisfaction. nn The HB program is a widely known valuable Respondents frequently suggested source of support for recipients from reestablishing local electricity and gas both low- and middle-income groups. customer service branches to facilitate Restricting program access in the future access to the providers. to only the poorest is likely to be met with some resistance. The program has a good nn Improving bill clarity may also have wide reputation for fairness and is not associated visibility and help improve trust. Taxes that with corruption, which is likely to minimize are currently part of bills (such as the TV/ such opposition. Better information on the radio tax) need to be better explained, or program and support to access it in rural these funds need to be obtained through areas is one way to ensure eligible recipients other sources. are included. nn Mechanisms for collecting citizens’ feedback nn Roma groups, and Roma women in particular, on services and/or aspects of reforms would benefit from more dedicated that affect them directly can improve trust communication on the HB program and between customers and energy suppliers, eligibility requirements, as they report being as well as improve communication about least aware about the program. and understanding of reforms. nn Energy-efficiency improvements are nn Communication about reforms in the sector highly regarded as an effective way to help should also include discussion of similar households face rising energy costs in the reforms and best practices in other EU long term. Government support directed member states, as well as a link to overall at thermo-insulation for poor and lower/ development of the country in relation to middle-income groups can help decrease income and job opportunities. One of the the burden on households in the long term, greatest concerns offered by respondents including those that are not eligible for is that energy tariffs are growing and the social assistance. overall cost of living is increasing, while their incomes are stagnant or even declining, and nn Improvements in customer services and that energy tariffs impact the price of other interactions with consumers—especially in basic goods. gas and electricity services—would have high visibility and can be achieved in the shorter Section III: Ethnographic Interviews term, versus other service improvements that require greater investment and are less CRAIOVA, URBAN AREA, APARTMENT likely to be noticed in the long term (such The household consists of three members: a as reduction in network losses). Specifically, wife, her husband, and their 8-year-old son. customers would like to see better The wife (age 32) is employed part time as a 108 nurse. She works approximately four hours a bills; in 2012 they accumulated a debt of 2,000 day and earns 400 RON/month. Her husband is RON. The family took a high-interest loan from a employed as a security guard in a bank, and his credit union to pay the sum in one lump payment. monthly income is between 600 and 650 RON. In Although they acknowledge that there are 2011 and 2012 he had a second job as a family’s disadvantages to delaying payment as a coping private driver that earned him an additional strategy—such as the risk of legal proceedings income of 400–600 RON/month. At this time, and having their heaters or the gas and water the husband is only working as a security guard. pipes sealed off—they feel it is the only way they They live in a two-room apartment in a block of can cope with heating expenses. The couple has flats. seen their incomes decline in recent years, while the cost of living (medicine, food, consumable The household uses district heating for heat goods) has increased considerably. and hot water, electricity for lighting and home appliances, and gas for cooking. Between The household also delays paying electricity April and September the household pays bills up to 30 days, which is the last day before approximately 150–200 RON/month for water, receiving a disconnection warning. They have gas, and heating combined, while during the so far avoided being disconnected. Another winter (October–March) these expenses can coping measure is to reduce their electricity reach 350–400 RON/month. The household consumption; they no longer use the bread does not have heat cost allocators that allow maker, do the laundry less often, and make the family to control the consumption of district sparse use of the electric iron. The family has heating. also reduced food expenses (buying meat only for the child), cut back on buying toys or sweets Electricity consumption is billed once every for the child, and reduced spending on clothing three months, and the household is then allowed and cigarettes. another three months to make the payment. Electricity bills are relatively consistent through Of all coping strategies, they rank delaying the year and can vary between 40 and 90 payment of the bills first, followed by borrowing RON/bill, depending on the use of appliances. money from nonbank entities and cutting back Sometimes the bill is higher when the family has on smoking. The household is unable to adopt had to delay the payment of a previous bill. The any energy-saving measures because they are family is aware of recent energy tariff increases, unaffordable. The owner’s association was and of the fact that energy prices will continue at one time interested in having their block to grow. fitted with external thermal insulation, but the costs were estimated as too large not only for Coping with energy spending themselves but for their neighbors as well, so The household needs to delay bill payments in the project was dropped. order to cope with basic expenses, especially in the winter. They have not paid their district The household does not receive any HB, as they heating bill since January 2013 and they are are ineligible due to unpaid taxes, bank loans, 3,000 RON in arrears. Over the past three years and 5-year-old driving tickets. They applied the household was unable to pay district heating for HB in 2012, but the city hall rejected their 109 application on the grounds of unpaid taxes and approximately 50 RON/month compared to two tickets. They are not aware of any other support years ago, but that the price of wood stayed the mechanism, such as the grant for energy-saving same throughout the last two years. measures (thermal insulation), or other types of Gas bills are highest in the cold season, between social welfare programs. October and March, when they vary between The household is aware that energy expenses 250 and 400 RON. Between April and September, will continue to rise but does not have a long- they vary between 20 and 100 RON, when gas term plan for weathering the higher cost of is only used for cooking. Electricity bills range energy. They can only plan their budget each between 200 and 250 RON/month and do not day to the next. Their most likely plan for coping vary substantially across the seasons. The long-term is to try and get better-paying jobs, or electricity bill is higher (approximately 300 perhaps to leave the country. Given their current RON/month) in January and February—the financial status, they cannot manage even a 5 respondent attributes this to lower temperatures percent increase in their energy bills, and in no in the house, due to which the water boiler way could cope with a 10 or 15 percent increase. needs longer to heat and uses more power. The electricity bills are lowest in August (about 30 GALDA DE JOS, RURAL AREA, PRIVATE RON), when the reconciliation bill is calculated HOUSE and the supplier accounts for money that the The household consists of four members: the household has overpaid in the previous six respondent (young woman, age 24), her brother, months. The household purchases wood once mother, and grandfather. The respondent is a per year, for approximately 300 RON, most often college student in Alba-Iulia (nearby city) and is in September, but limits their usage to heating not employed at present. She had until recently during the coldest periods. In the summer, been employed by a private company; however approximately 30 percent of the household’s the company was sold and she was laid off. budget is spent on gas and electricity bills, Her mother and brother both found work in the while in the cold season approximately 70 previous two weeks. They live in a private house percent of the household’s budget is spent on that is owned by their grandfather. The only wood, gas, and electricity bills. The highest reliable source of income in their household is energy expenses are recorded during December, the grandfather’s pension. January, and February. The high portion of household income that goes to energy expenses The household uses gas for heating and is explained by the fact that the only regular firewood as a secondary heating source for family income is the grandfather’s pension; the grandfather’s room. They also use gas other informal or fluctuant revenues are not for cooking. Electricity is used for lighting, for considered or reported by the respondent, thus heating water in a boiler, and for other small the proportions could be inaccurate or slightly home appliances. The respondent estimates exaggerated. that their monthly gas bills are now 60–70 percent higher than two years ago (or higher by Coping with energy spending approximately 100–150 RON/month). She also To cope with energy bills during winters, gas believes that their electricity bill is now higher by consumption is reduced by using wood to 110 heat the grandfather’s room, as wood is a PITEŞTI, URBAN AREA, APARTMENT cheaper fuel. Other coping measures included The household consists of three members: the borrowing money, giving up entertainment respondent (age 27), her husband, and their activities, avoiding driving the car, changing the four-year-old child. The respondent works as family’s nutrition patterns (meat is supplanted a shop assistant and earns approximately 650 with potatoes), and unplugging the boiler when RON/month. Her husband makes 1,000 RON/ not in use. Sometimes, there are unwelcomed month. They live in a three-room apartment circumstances that make it even more difficult for that is owned by the husband’s parents, in an the family to cope with paying the bills: medical apartment building that was built in the 1990s. issues, going to Alba-Iulia for the respondent’s The household uses gas for heating, cooking, college courses, or other events in which the and hot water generation, and electricity for family is forced to postpone paying some bills. lighting and powering home appliances. In the Even then, the household only needs to delay past year the family has installed a gas boiler payment about once a year and has never been for heating. They were previously connected disconnected from electricity. They have not to the district heating network, but the cost adopted any energy-saving measures such became unbearable. They were among the last as thermally insulating the walls or changing residents in the building to disconnect from doors or windows, because they have lacked district heating because their bills rose a lot the money to do so. The household receives when other neighbors disconnected. Over the heating benefits via discounted gas bills. The past two years the couple’s wages have been respondent is well aware of the application reduced by approximately 200 RON/month due procedure and finds it moderately difficult. to challenges their employers have experienced Among various potential forms of social from the financial crisis. The respondent believes support, the respondent considers the grant (as that electricity and gas bills have grown in the a sum of money) for energy-saving measures to same period, but cannot state by how much as be the most efficient. She believes it would have the husband normally manages the bills. the strongest potential to help the people most During summer months energy bills account for in need, due to its long-term impact on reducing about 10 percent of the household’s income, but the household’s spending on heating during in winter months they reach approximately 35 the cold season. The respondent said that such percent. January, December, and February are the support should target a slightly wider circle of costliest months for both electricity and gas. The people than the HB, for example, households respondent states that if they switch off the heaters with income levels of up to 700 RON/month per in some rooms at night, they pay around 300–350 family member. RON for gas, and 150–200 RON for electricity. In The respondent is aware of the fact that energy March, April, and September, expenses seem to prices are about to increase. She believes that be lower for gas, at approximately 100–110 RON/ even a 5 percent increase will make it more month, and during summer months the household difficult for the family to cope, but there is nothing spends around 60 RON on gas, as it is only used they can do about it except for continue to pay the for hot water generation and for cooking. Electricity bills and intensify their other coping strategies. is also more expensive in December, January, and 111 February (150–200 RON), as the gas boiler uses hand due to the restrictive eligibility criteria (the more power. Throughout the rest of the year, example she quoted refers to the condition of electricity spending is within the range of 50–80 not owning a motor vehicle that is newer than RON/month. nine years). She believes that monthly cash assistance is an important source of support for Coping with energy spending poor families, and grants for energy efficiency To cope with the difficulties of paying energy would also be effective. bills during winters, the household has reduced the amount it spends on clothing. On rare Regarding future tariff growth, the household is occasions the family borrows money from their concerned because they do not expect any rise parents, but must repay the loan in the following in their incomes; in fact, their wages may be month. They reduce gas consumption by heating further reduced. They think the most probable only one room in the winter, where all three consequence is that they will cut back on food family members sleep together. They have also spending. installed PVC frame on the windows and used economy bulbs to save electricity. They believe GĂVĂNEŞTI, RURAL AREA, PRIVATE that these measures have not substantially HOUSE lowered their energy bills because the rise in The household consists of an extended family tariffs has offset the gains. Therefore, their bills of seven people: the respondent (a day worker), are about the same, both before and after the his wife (employed), and their child (age 7); his adoption of these energy-saving measures. The mother (a housewife) and father (a pensioner); most significant impacts on the family’s ability his brother (a day worker); and his grandmother to cope with energy expenses are when a family (a pensioner). Six months prior to the interview, member experiences health problems, or when the respondent lost his job, which dropped the there are delays in receiving wages. Loss of household’s monthly income by 580 RON. Both employment is perceived as being the biggest he and his brother get to work only during the threat to the household’s ability to deal with warm season, in agriculture, construction work, energy expenses. Although energy bills account or helping other households; and they earn no for a third of the monthly budget, the family income during the winter. They live in a brick managed to avoid until now any delay in making house owned by the grandparents that consists payment, and so has never been disconnected of six rooms and a kitchen. They cook and eat from any energy source. meals together, and pool their resources into The household does not receive any form of a single budget for all their food and energy social benefits (heating benefits, guaranteed expenses. The respondent and his wife pay minimum income, family grants) as they were the electricity bills, while his parents deal with deemed ineligible. The respondent thinks it purchasing the wood for heating. They rely is also quite difficult to receive such benefits, on wood for heating and on wood and gas on the one hand due to the administrative cylinders for cooking and heating water. They inconveniences involved (numerous documents have a wood-fueled installation in the yard to must be obtained from various institutions, heat water in the summer. Electricity is used for which takes a lot of time), and on the other lighting and powering household appliances. 112 The household’s largest expenses are for more than 2–3 days. The respondent estimates electricity; they pay bills that reach on average that energy expenses (electricity, gas, and 170–200 RON, once every two months. There wood) comprise approximately 20 percent of the are no notable seasonal variations in electricity monthly household budget. The household has bills. In the last year, consumption happened to not implemented energy-efficiency measures. be higher in the summer, as the household was They do renovations only to repair what is renovated (which involved the high consumption absolutely necessary. They use energy-saving rates of a concrete mixer, power drill, and other light bulbs but do not see a difference in the bill; powered tools), and they used an electric they cannot afford to replace appliances with bread maker; however, such costs are rather more energy-efficient ones. The household does circumstantial. In the respondent’s opinion, not receive any heating benefits. In the past year electricity prices have increased in the last two they did not apply as they had previously been years by approximately 10–15 percent. They do rejected because they exceeded the income not notice an increase in wood prices. The price threshold for eligibility. of gas cylinders has gone up slightly. The family’s concerns regarding the electricity The household purchases wood for heating in supply is primarily its price, and some delays the autumn, and also sometimes in the winter. in receiving bills. One year ago, the household In 2013, they bought 200 RON worth of wood was billed 1,800 RON by the electric company, in September, and the rest of the winter supply yet they could not clearly determine how such was sourced from a relative (they felled old trees a significant amount could have been reached from the person’s property). In the previous (whether they forgot to pay or some bills winter they purchased 300 RON worth of wood were lost in the mail). Following this incident, in December, and one additional cubic meter in the family replaced the meter, and has since February (for 260 RON). This quantity was more perceived some reductions in their bills, despite than sufficient and some was leftover for the the tariff increase since then. The respondent following year. The family prefers to buy wood believes that using renewable energy can during the spring and summer when prices are reduce electricity tariffs. He also suggests some cheaper by 20–30 RON/cubic meter, but then improvements in billing and customer service, their funds are diverted elsewhere to agricultural namely ensuring that bills are received in a expenses (planting, plowing, and so on). timely manner and that the company responds Coping with energy spending promptly to disruptions in service (they had To cope with energy expenses, the household previously been left without electricity for 2–3 sometimes purchases wood of lower caloric days in the winter). efficiency (branches), as it is cheaper at 140 RON for a wagonload. They cut back on buying In the case of a 5 percent growth in the price clothes, nonessential foodstuffs, or soft drinks, of electricity, the household’s strategy would be and mostly consume food produced in their own to reduce spending on clothing and foodstuffs, household (poultry, pork, and other foodstuffs and probably to reduce the sums involved in sourced domestically). The family does not agricultural works by only cultivating smaller borrow money and does not delay payments by surfaces. They would then redirect the money 113 saved toward paying energy bills. Should the 2. This analysis is based on data collected price increase reach 10 percent, the family through FGDs and individual interviews. Twenty- would be forced to delay payments, and might eight FGDs were held across the country with even risk getting disconnected. They estimate low- and middle-income households.55 FGs the household can only support a maximum were conducted separately with households increase of 2–3 percent, beyond which the ability that receive social assistance to pay energy to make payment will become quite difficult. bills and those that do not. The sample also included consumers who live in mountainous Kyrgyz Republic 51* areas and in plains, as well as consumers from rural and urban settlements. Topographic 1. This report presents findings from a qualitative characteristics of the locale were considered assessment of the poverty and social impacts in the sample because there are special energy of energy tariff reforms conducted between tariffs for residents of high altitudes.56 All FGs November 2013 and March 2014. , 52 53 The were segregated by gender. Six additional FGs objective of the study was to better understand had a specific focus on gender differences in how poor and middle-income consumers may energy consumption and the use of coping be impacted by tariff reforms; their perceptions mechanisms. These took place in March 2014. of energy sector institutions; and the perceived effectiveness of measures that aim to mitigate 3. The main findings are as follows: reform impacts. The qualitative work contributed nn The type of energy that households use is to an activity that aimed to help the Kyrgyz largely determined by household income, Republic establish a sustainable, transparent, type of housing, place of residence, and and equitable tariff-setting methodology weather conditions. Coal remains the that promotes adequate service quality and population’s main heating source, but there improved transparency and accountability in the is growing diversification in energy sources power and heating sectors.54 for heating. Coal is more commonly used in the north. Low-income and rural residents 51 This summary note was prepared by Ekaterina Romanova. Data collection and initial analysis depend on coal but increasingly supplement was carried out by M-Vector. This note is part of a it with manure and other sources to reduce series of qualitative assessments carried out for the energy sector by the Europe and Central Asia Social their heating bills. Urban residents rely Development Unit in FY14. The task was led by Michelle Rebosio. more on electricity. Smaller families and the 52 The local research “M-Vector” carried out the field elderly report reverting back to electricity work. The pilot was conducted in November 2013 (from coal) for heating due to its greater to test and finalize the research instruments. The main field work was done in December 2014 and six convenience and affordability. Electricity gender-specific FGs were conducted in March 2014. 53 The country context section of this summary report has substantially benefited from the Political 55 Low-income households were recruited to represent Economy Analysis of Energy Sector in the Kyrgyz the bottom two consumption quintiles according Republic (World Bank, 2012), the Energy Chapter of to expenditure levels based on 2011 data; middle- Public Expenditure Review for Kyrgyz Republic (World income households were recruited to represent the Bank, 2013b), and other supporting documents for the third wealth quintile. Tariff Setting Methodology work (ECSEG) and Energy 56 Residents in mountainous regions (with an elevation Subsidy work (ECSP3). above 1,800 meters) receive lifeline tariffs for energy, 54 Balabanyan, 2014. and the rate of poverty is high in these areas. 114 use is increasing most rapidly in urban up to 30 percent more if services continue centers. to improve. At the same time, many think that even if tariffs increase, investments will nn Women are the main consumers of energy not be made and resources will be diverted in households, as they perform most of the for personal gain. household chores (with the exception of heating-related tasks). Section I: The Kyrgyz Republic Country Context nn Heating payments comprise a large share 4. The Kyrgyz Republic is an energy-rich of a household’s energy expenses. Heating country. The energy sector accounts for about bills are a particularly large burden for rural 4 percent of GDP and 16 percent of industrial residents during the winter months, when production. The cost of power generation is savings from harvests are exhausted and generally low, and relies on clean sources of employment options are limited. energy (93 percent hydropower). However, the nn Despite the size of energy bills, respondents energy sector also faces a number of significant report paying bills on time to avoid incurring challenges, including weak governance, lack or accumulating debt, disconnection, high of transparency, poor financial viability, poor late payment and reconnection fees, and to record keeping of financial flows and cost- avoid having their name publically displayed recovery, and deficient service delivery. As in a list of nonpayers. a country with a continental climate, where nn Middle- and low-income consumers believe winters last between November and March and that they pay unreasonably high energy bills, winter temperatures range between –2.22°C and that rich consumers avoid payments and –11.6°C, heating reliability and adequacy are while enjoying high consumption levels. essential. nn Respondents report seeking ways to 5. While energy tariffs are among the lowest in improve their homes’ insulation and Europe and Central Asia, energy affordability energy efficiency, even when the measures echoes geographic disparity in poverty rates. they can afford are limited in scope and There are significant variations in the poverty effectiveness. Low-income groups mostly rates between regions of the Kyrgyz Republic but reduce heating spaces and tape off windows, also within them, as well as between urban and doors, and vents. The use of energy-saving rural residents. Bishtek, the capital, has lower electric devices or bulbs is reportedly cost poverty rates, while in mountainous areas, rural ineffective because despite their high cost, areas, and in the south, poverty rates are much the quality is poor. higher. Similarly, availability and affordability of energy sources varies by region and between nn Participants recognize improvements to urban and rural settlements. the energy sector and service provision. However, the willingness to pay higher tariffs 6. The country’s primary energy sources are reflects income level. Urban residents and electricity, coal, and gas. Coal remains the main middle-income consumers are willing to pay source for heating. The cost of coal reflects not 115 only the seasonal fluctuations in demand, but wide differentiation of tariffs both for end users also transportation and storage costs. Access and sector entities, which reflects changing and to electricity is almost universal. Subscription not-always-warranted social, economic, and to networked gas service continues to grow. 57 political priorities that often fail to take the actual In the south, the population relies more on costs of power and heat into consideration when electricity than on any other source of energy. setting tariffs. Networked gas service is available in most parts of north of the country, but is mostly unavailable 9. In 2010, attempts to increase energy in the south. Gas is mostly used for cooking tariffs triggered serious unrest that led to the and as a supplementary source for heating. In overthrow of the government and the removal rural areas, in addition to coal, residents also of the president. Since then, tariffs returned to use wood, manure, and cotton stalks for heating pre-2010 levels (see Figure 1) and subsequent purposes. Overall, the type of settlement and governments have been reluctant to raise tariffs, housing, socioeconomic status, and family despite the fact that without additional funding size drive a household’s choice of energy and the energy sector cannot make the necessary heating source. investments for the energy infrastructure’s maintenance, upgrading, or expansion. A 7. The energy sector lacks financial viability and depleted infrastructure, lack of investment, and suffers from poor service quality. The sector is poor governance, along with growing demand a source of a substantial quasi-fiscal deficit: (7–10 percent growth of electricity consumption while the power sector alone accounted for 2.5 every year) have led to poor quality of service percent of GDP in 2011, its financial standing and increasingly threaten the sector’s financial and quality of service are poor and underfunded. stability. Recognizing these challenges, in Continuously poor financing and the sector’s 2012 the government introduced the energy low cost-recovery for almost two decades since development strategy for 2012–2017 to launch independence has led to severe underspending the energy sector’s reform, which includes tariff on maintenance, rehabilitation, and related reforms. deterioration of already poor power and heating service quality. From 2009 to 2012, the 10. Social assistance mechanisms to mitigate consolidated distribution companies reported rising energy costs vary and include cash an average of 43 outages per day. transfers and reduced energy tariffs. Most social assistance payments are monthly cash- 8. Energy tariffs remain relatively low and are based transfers to recipients. There are also a major cause for the above challenges. Power noncash programs, such as housing subsidies tariffs in the Kyrgyz Republic are among the programs. These are subsidies or reduced lowest in the world and below cost-recovery. energy tariff payments for various energy Similarly, heating tariffs are also well below sources; payments are calculated according cost-recovery levels, and are cross-subsidized to the set norms of living space and utilities by revenues from electricity exports, as well consumption standards and actual household as by state and municipal budgets. There is a income. While the existing social assistance and subsidy regulations cover a broad range of 57 KYRGYZGAS, n.d. 116 FIGURE 19. ELECTRICITY TARIFFS FOR HOUSEHOLDS (TYINS FOR 1 KILOWATT-HOUR) 200 180 160 tariffs of the policy from 140 the April 23, 2008 120 tariffs of the policy from 100 November 12, 2009 80 60 Actual tariffs 40 20 0 0 10 10 06 07 08 09 11 12 01 20 20 20 20 20 20 20 20 12 4. 7. .0 .0 .0 01 07 01 Source: Political Economy Analysis of Energy Sector in the Kyrgyz Republic, 2012. Note: Tyin is a local monetary denomination smaller than Sum; 100 tyins = 1 Sum. vulnerabilities and needs, the targeting remains and manure in rural areas. Coal-based stoves imprecise and there is no provision for indexation are additionally used for cooking and warming of payments if tariffs increase. Different up food or water for washing, bathing, and other government entities are responsible for different household needs. Networked and portable gas is programs, and the quality and conditions of used mostly for cooking and only in exceptional assistance consequently vary. There is also an circumstances for heating. overlap in eligibility requirements; for example, low-income or pensioners residing in areas of 12. Several factors influence consumers’ choice high altitude may qualify for several assistance of energy and heating sources, and the amount programs. they consume. These include purpose; type and size of housing; and type and location of the settlement. Although electricity is broadly used Section II: Findings throughout the country, urban residents and those who live in high-rise buildings rely on electricity ENERGY USE AND SPENDING PATTERNS for many more purposes—78 percent of urban 11. The qualitative study confirms that respondents indicated that they use electricity electricity, coal, and gas are the main energy as their primary heating source, compared to sources in the Kyrgyz Republic. Electricity only 43 percent of rural respondents. Residents is used for a variety of applications and its of high-rise buildings that have district heating consumption is particularly high in urban areas. use gas or electric heaters as supplementary Respondents report using an increasing number sources when heating output is low. Residents of electric appliances, including A/C and various of high-rises without district heating choose heating devices. Coal remains the main energy electric heaters for their reliability, safety, and source for heating, followed by electricity, wood, ability to individually control them (see Picture 117 1). Electric water heaters or boilers have gained Normally we heat up only significant popularity and are widely used by during the nighttime, different groups throughout the country (Picture in order to keep the 2). Their use, however, is still more common in warmth over night. urban areas. Networked gas is only available in urban areas and within these, in multistory Our neighbors do not mind buildings. Portable gas is more commonly used it [coal heaters], everyone in rural areas as a supplementary source for understands that it is difficult cooking; in urban areas it is used for cooking to live in apartments only when there is an interruption in electricity without district heating. and/or networked gas service. Coal is used Many of our neighbors use for heating mostly in single-family homes in coal stoves too.” urban and rural areas. Generally, it is purchased from licensed suppliers. Notably, the use of FEMALE FGD PARTICIPANT coal is more common in the north. The use of URBAN AREA manure and cotton stalks is observed only in 13. The majority of the population relies on two or rural and often remote or mountainous areas, more energy sources for heating. Respondents where other energy sources are unavailable or indicated that they prefer to combine different prohibitively costly due to additional expenses heating sources to either manage their energy for transportation and delivery. Rural residents expenses, or because it is more convenient to report increasingly switching to manure as a do so. Single-family houses have larger square supplemental source of heating.58 Manure is footage and thus require more energy to heat the mainly collected from a family’s own livestock larger space. At the same time, in the multistory during the year and is prepared to be used as buildings connected to district heating, district fuel for winter. On rare occasions, those who do heating’s heating output, if available, is often not own livestock also purchase manure. Cotton insufficient, which requires this population to stalks are available after the cotton harvest. use more than one source for heating. Coal- based heating systems are quite labor intensive; “I live in an apartment in situations where residents need to heat a and district heating is not smaller space or quickly warm up a room, they available in our building. may rely on electric or gas heaters. Those who We have a stove in the mostly use electricity switch to supplemental kitchen that was constructed sources to manage their heating bills. Rural to use coal for heating. residents use manure and cotton stalks, and in rare cases diesel generators, to further cut their 58 FGD moderators noted that in the north, respondents frequently referred to bio-gas as an innovative source coal expenses. The use of more than one energy for energy generation, but mostly for heating. It is source is common in northern households, while based on the accumulation of gas produced by the fermentation of manure. The cost of equipment to in the south it is more common for households produce bio-gas is still prohibitively expensive for to rely solely on electricity. the majority of rural residences. Only high-income rural residents are able to purchase the necessary equipment to produce bio-gas for household use. 14. Energy consumption follows the region’s 118 Left to Right: a portable stove that uses charcoal or coal; electric water heater or boiler, commonly known as Ariston for the name of the manufacturing company; electric heater climatic patterns, with more energy used (and weekends because this is when more individuals higher expenses incurred) during the winter are home. This is especially true of families with months. Peak consumption for electricity, children and working adults. For much of the coal, wood, and manure occurs during the population, household chores are an evening heating season. The only energy source that and weekend task. Bathing and laundry are also reaches its peak consumption during the weekend activities. These are often labor- and summer is networked and portable gas, since time intensive, as they require heating large it is used for cooking and canning, activities amounts of water. Coal is the only heating source that typically take place during the summer. that is used consistently throughout the week. It Additionally, the population, especially in rural is more commonly used in the evening to heat areas, often cooks outside on open-flame homes for the night. Residents of mountainous portable stoves (see Picture 3) or traditional areas, where temperatures are lower, stated that tandyr stoves, thus minimizing energy they heat their homes twice a day, once in the expenses during that time. morning and once in the evening. 15. Heating expenses pose a notable burden on 17. The type of energy source used for heating household budgets. Respondents indicated that differs depending on income level. While they pay the most for the energy source they use electricity is broadly used by all groups for for heating. Those who rely on electricity-based various purposes (including heating), low- heating stated that their electricity bills are income respondents are more likely to use coal exceptionally high in the winter and that they are for heating. Low-income respondents also state often unable to pay the whole amount, and so that electricity is rather expensive and often accrue debt. Electricity payments are made on unaffordable for them, and they thus avoid a monthly basis, while coal is most commonly electricity-powered heating. Middle-income purchased in bulk once a year. Portable gas and respondents prefer electricity for heating for wood are purchased as needed. its relative affordability and, most importantly, 16. Consumption of energy is highest during its convenience. This group also increasingly weekends and evenings. Electricity, coal, and consumes electricity because of the growing gas drive consumption during these times. number of appliances in their households. Consumption is higher during evenings and Greater use of new technologies in a household, 119 including A/C and electric heaters, requires habits. In homes with only adults, temperature more energy and incurs higher payments. These levels are kept lower. Overall, women seem to be respondents admit generating high bills that are more cognizant of saving energy and the need disproportionate to their budget, but explain that to make changes in the family budget when using such devices affords them a particular income no longer covers energy expenses. status, given that the use of these devices is common and even expected; they are therefore COPING STRATEGIES unwilling to stop or reduce their use, even if 19. While energy service improved to some doing so will reduce their energy payments. extent in the Kyrgyz Republic, years of instability 18. Women and men seem to have different and unreliable service have led the population patterns of energy consumption. Women are a to adopt multipurpose stoves that can work household’s main consumer of energy because on different energy sources, such as coal, gas, they do most of the household chores, with wood, and/or electricity. A large share of the the exception of heating-related tasks. Women population in the country lives in single-family use most of the appliances, but men have homes and lacks central or district heating and responsibility for heating the house, especially if networked hot water. District heating and hot coal is used for this purpose, since it is a labor- water services in multistory buildings operate intensive task. Men are in charge of purchasing, poorly and with frequent interruptions, or delivering, and storing coal, as well as lighting the have completely failed. The three stoves used coal stove and keeping the heating temperature most often by the population in the country steady. Women report not heating the homes are (i) traditional stoves; (Pictures 6 and 7), if they are there alone. They describe it as an (ii) kontromarka (Picture 4); and (iii) universal energy-saving strategy, to heat the home only stoves (Picture 5)—all designed for use with when men and other family members are there different energy sources. in the evening and on weekends. The presence of children, elderly, or adults requiring additional 20. Energy payments pose a burden on all care significantly changes a household’s heating observed groups of consumers, especially Left to Right: A traditional coal stove, common in private single-family homes, especially in rural areas. Designed also for cooking and heating water; a three-way stove designed for different types of fuel (coal, gas, firewood, electricity). More common in urban areas and households with higher incomes; a traditional handmade stove, common in rural areas. Designed to use firewood, coal, cotton stalk, and so on; Kontromarka, a popular coal-based stove for old, private single-family houses common in small towns and rural settlements. Typically, it is installed in the center of the house for even distribution of heat. 120 before and during the heating season. Based than the payments that are due. Reconnection on self-reported information, households spend may also take a long time, which poses additional up to 45 percent of their monthly income on hardships; in winter months, not having energy bills. Middle-income households report electricity even when other heating sources spending a higher share of their income on are available significantly worsens quality of energy—around 30 percent compared to about life. Respondents also noted that electricity 20 percent by low-income respondents. Middle- providers publicly shame those who have not income groups also indicate a high level of paid their bills. A list of names of consumers energy consumption and lower adoption of with arrears are displayed by building entrances energy-saving measures compared to other and announced publicly in media or schools. population groups, particularly low-income 22. To afford energy payments, the population ones. Payments are higher in winter because of copes in a variety of ways, mainly by limiting heating expenses. energy consumption and practicing advance 21. Despite the fact that energy bills represent a budgeting. Respondents acknowledge that the high portion of household budgets, respondents amount of their energy bills depends on the report paying bills on time to avoid debt time of the year, and 62 percent of respondents accumulation, disconnection, and late payment said they take that into account when planning and reconnection fees. Respondents reported their household budget. Advance payments are that electricity providers typically cut services made when the bills are lower, largely over the shortly after an energy bill is overdue. FG summer. Thus, an accumulated extra balance participants complained that their service is cut on the account helps cover the difference of within 3–4 days of not paying. Reconnection and higher bill amounts in winter. Such practices are late payment fees are often several times higher more common for urban areas. In rural areas, FIGURE 20. PERCENT OF MONTHLY INCOME SPENT ON ENERGY BILLS, % (N=200) 30.00%   25.00%   20.00%   15.00%   % participants 10.00%   5.00%   0.00%   10% or less 11-15% 16-20% 21-30% 31-40% over 40% Source: FG discussions 2013-2014; M-Vector. 2014. “Qualitative Assessment of Energy Reforms in the Kyrgyz Republic.” Bishkek, Kyrgyz Republic. Background report commissioned by the World Bank. 121 “Debtors are shown on TV, “Poor families never in public announcements, delay the payments, because employers are being they cannot afford penalties informed and even schools and reconnection costs, where children of debtors so they have to find the studying are being informed money no matter what. about nonpayment of the They would rather not pay energy bill. In other words, for coal, but [paying for] they would do anything to electricity is a priority.” shame a debtor and it is a FEMALE FGD PARTICIPANT very effective measure for MIDDLE-INCOME, RURAL conscientious people.” MALE FGD PARTICIPANT MIDDLE-INCOME, URBAN “Men usually ask women to borrow money and they [men] will return “The deadline for the payment the money, in turn.” is the 25th of each month, FEMALE FGD­­ PARTICIPANT so 26-27th controllers are LOW-INCOME, URBAN walking around the streets and cut off all debtors. Even if consumer pays on the 26th or 27th, next bill will show an unpaid balance anyway.” FEMALE FGD PARTICIPANT MIDDLE-INCOME, RURAL the population often has to sell some livestock amounts pay more for it. Transportation and to afford their bills during the heating season. the need for storage are additional coal-related Those who rely on coal indicated that they try expenses. In addition to advance payments to buy coal once a year, and in advance of the and coal purchases, respondents state that heating season, if storage space allows. Once they also save to ensure their bill is paid on the heating season starts, and especially during time and in full in winter. Moreover, to manage the extreme cold years, the price of coal may energy bills and ensure they are affordable, 75 go up sixfold. Those who buy coal in smaller percent of respondents said they try to reduce 122 TABLE 2. COPING MEASURES REPORTED BY RESPONDENTS MEASURES PREVALENCE (%) IMPORTANCE/ RATING Conserving energy 75 1 Budgeting for energy expenses 62 2 Selling food or livestock 17 3 Borrowing from friends or family 35 4 Saving money/reducing spending 27 4 Prepaying bills 8 5 Other 30 6 Note: Multiple answers allowed (N=2014). Importance is listed according to ranking respondents assigned to each measure (1—highest priority; 5—lowest). Source: FG discussions 2013-2014; M-Vector. 2014. “Qualitative Assessment of Energy Reforms in the Kyrgyz Republic.” Bishkek, Kyrgyz Republic. Background report commissioned by the World Bank. their consumption of energy. When they cannot homegrown or homemade ones, and they are thus afford to pay their bills, respondents prefer to better able to save cash for energy payments and borrow money from friends and family, pay in fuel purchases. Spending on other household smaller increments, sell produce from their needs, such as repairs or car maintenance, is garden plots, sell household items or livestock, also reduced. Additionally, the population cuts or get short-term petty jobs to supplement their spending on traditional celebrations, such as typical income stream. Respondents noted that tois.59 Tois are usually held in the fall after the women are more likely to borrow money or are end of the harvest season. They have significant given the responsibility of borrowing money, cultural and family value and are highly regarded; because such an action by men is considered as such, the population invests a great deal shameful. of resources in these celebrations. Notably, respondents state that they increasingly choose 23. Participants prioritize energy payments over to hold back on tois, limiting their contributions other necessities and cut spending on clothes, or even not attending them to avoid spending food, and traditional celebrations. Eighty-nine money (Table 2). and fifty-two percent of respondents indicated that they cut expenses for clothing and food 24. All respondents seek ways to improve the respectively. While it is not a preferred way to save, insulation and energy efficiency of their homes, reducing spending on food is common. People even when the measures are limited in scope explained that they do not buy brand-name or and effectiveness. The range of such measures higher-quality products, and rely on produce they includes (i) lining and covering windows and grow on their land plots. It is more common for 59 A toi is a traditional celebration for various occasions, rural residents to substitute purchased food with such as a wedding or the birth of a child. 123 TABLE 3. ITEMS/ACTIVITIES REDUCED TO COVER ENERGY BILLS . Expenditures Prevalence Importance Leisure (tois) 70% 1 Clothes 89% 2 Secondary goods 35% 3 Food 52% 4 Other 27% 5 Note: Multiple answers allowed (N=204). Importance indicates priority ranking assigned by respondents to each item (1—highest priority; 5—lowest). doors with insulation tape; (ii) putting rugs on that is heated, and tape off windows, doors, and floors and walls; and (iii) closing ventilation vents. They also mention that in cases where vents. The choice of measures often (but not they cannot afford to properly heat a room, they always) reflects income levels. Middle-income use bottles filled with hot water and other such populations report installing plastic windows devices to heat beds before going to sleep. and doors more often than low-income groups. Although external building insulation is rather These measures were described as the most effective, its use is limited due to differences effective way to improve a home’s insulation in income among residents of multistory and heating efficiency. Low-income groups buildings, and the fact that building residents mostly resort to reducing the amount of space make varying degrees of commitment to costly Figure 21. Measures used by respondents to improve insulation and energy efficiency (N=204) %  par&cipants   Others   19  % Insula2on  of  ceiling   17  % Plas2c  windows   19  % Close  off  ven2la2on   28  % Insula2on  of  floor   42  % Economic  use  of  energy   43  % Insula2on  of  doors   67  % Insula2on  of  windows   84  % 0   10   20   30   40   50   60   70   80   90   Source: FG discussions 2013-2014; M-Vector. 2014. “Qualitative Assessment of Energy Reforms in the Kyrgyz Republic.” Bishkek, Kyrgyz Republic. Background report commissioned by the World Bank. 124 improvements. Energy-saving equipment and A male respondent from a light bulbs are not popular across different mountainous village saidthat groups of consumers, due to their high costs, he had to travel to the poor efficiency, and short durability. city 10 times to collect all 25. Men and women have different roles when documents and spent more it comes to reducing energy costs. Men are than Som 5,000 (US$100) described as being responsible for insulation in travel expenses alone. and home improvements, while women are “My friend has no hand and in charge of managing budget savings. Male every year he proves that participants expressed a great deal of interest his arm has not grown back in learning about insulation and receiving like a lizard’s tail. This is insulation materials. Women were more likely ridiculous.” than men to say that they use different coping mechanisms and to cut energy use. This is MALE FGD PARTICIPANT LOW-INCOME, URBAN most likely related to the fact that women, even those who are not the head of the household, are the main energy consumers, and thus find 27. Overall, the observed population expressed themselves in a better position to know where a highly negative view of the social assistance savings can be made. offices and the existing programs. A highly cumbersome and bureaucratic process deters SOCIAL ASSISTANCE PROGRAMS AND many potential beneficiaries from applying and ENERGY SUBSIDIES fosters negative views of social assistance 26. Respondents demonstrate limited mechanisms and social service providers. awareness of social assistance programs. Respondents reported facing several challenges Both recipients and non-recipients of different during the application process. A number social assistance programs are unaware of the of programs require annual confirmation of programs’ scope, targeting, and application eligibility. Applicants must collect all required procedures. They do not know where and how documents within limited and often conflicting to get information. Social assistance offices are time periods. Social assistance offices are often only located in urban centers and there not available in many rural settlements and are few or no representatives in rural areas, applicants have to invest additional time and especially in remote villages. Rural residents money traveling to submit documents. These explained that they do not have access to expenses sometimes exceed the amount information where they live, and traveling of social assistance an applicant would to urban centers is often too expensive and eventually receive. A lack of transparency, poor difficult. Urban respondents seemed to be more communication and information exchange, and informed about social assistance programs, meager amounts of assistance all contribute eligibility, and application requirements, and to high levels of mistrust and a perception of have greater access to such information. unfairness. 125 28. While the list of categories under which people 29. Respondents do not associate recent benefit may qualify for social assistance is quite extensive “top-ups”—which have been instituted to help the (and people’s eligibility often overlaps between population cope with energy price increases— categories), respondents believe it does not target with increases in tariffs. Respondents who used all those in need. Stricter as well as shifting eligibility to pay reduced utility tariffs recognized that requirements disqualify a number of applicants they currently pay the full amount, but they do who previously received social assistance. not associate that with increases in their social Respondents note that young families with small assistance payments. The increases were children are in most need yet are ineligible for attributed to the indexation of social assistance any type of assistance or housing subsidy. These payments. Respondents state that the new families often lack stable employment and struggle payment amounts remain rather low. to pay their utility bills. The elderly population also finds it hard to manage energy payments on their “Usually women receive small pensions. The amount of assistance they the benefits, because they receive in addition to their pension does not meet are not working. For men their actual need. there are more reasons to reject the claim because they “In 2006 there were about are able to work.” 800 beneficiaries in this village; nowadays it is less MALE FGD PARTICIPANT LOW-INCOME, URBAN than 300. More than 600 people were deprived of the 30. Women tend to apply for social assistance benefits. At first, those more often than men. This may be indicative who had a color TV and a of the fact that (i) women require greater fridge in the house were social assistance; and (ii) women are more likely to qualify due to cultural expectations denied social assistance. and gender norms. Respondents explain Now even families with that it is more common for women to not pensioners will be denied work, and consequently they have better social assistance or other grounds to qualify for social assistance. At benefits. Also, young the same time, respondents revealed that families are unable to gender norms make it acceptable for women receive assigned benefits to receive help from the government, but not because officials will reject men. There is shame and stigma associated with men receiving social assistance. These their claims. Potential norms often prevent men from applying, even beneficiaries are told to if they qualify. As the main providers, men ask their parents and are expected to have gainful employment/ relatives for support.” steady income. Men in urban areas are even less likely to apply for social assistance due MALE FGD PARTICIPANT, RURAL 126 to the belief that there are more employment how consumers evaluate the quality of service. opportunities in the city. A controller’s responsibilities include collecting fees, ensuring proper service provision, and RELATIONSHIP WITH ENERGY PROVIDERS providing information about services to customers. Controllers are the first and often 31. The quality of energy service and energy the only person with whom customers interact company operations was assessed as average/ regarding questions or complaints. Respondents good, despite complaints about poor quality of evaluated energy providers poorly in cases where service and provider responsiveness. Almost there is no or a poor relationship with the provider, half of the respondents rated energy provider and higher where there are well-established performance (both for electricity and district relationships. In smaller communities, mostly in heating) as a 3 (on a 5-point scale), and one- rural areas where the population tends to know third rated them as a 4. Respondents recognize each other, the relationship with the controller there have been some improvements in energy is much better. Rural respondents state that provision, especially in electricity, and there are their controller tends to be more understanding fewer illegal connections compared to even just and lenient when it comes to late payments. In a few years ago. Although the availability of urban areas, on the other hand, controllers do services improved, the quality of such services not usually know the customers they serve. They leaves much to be desired. There are frequent tend to be much stricter with late payments and service interruptions and voltage fluctuations immediate disconnection. Lack of familiarity that often damage electrical equipment, and the with a controller also creates opportunities heat output of district heating is unsatisfactory. for fraudulent activities. For example, some Respondents complained that service providers respondents described situations when a refuse to take responsibility and compensate controller collected fees and later disappeared for damages. Additionally, rural residents with the money, leaving residents with unpaid complained about a lack of clarity in billing debt. and slow repair efforts when service suffers interruptions. Residents of multistory buildings ACCEPTIBILITY OF ENERGY REFORMS in cities stated they have limited or no access to 33. The population demonstrates a high level of their meters and have no way to check that their awareness of upcoming energy tariff increases, bill is accurate. Bill formats are inconsistent yet displays little support for such government across the country; in urban areas bills tend to actions. Respondents stated that they learn be more comprehensive and provide information about upcoming reforms from mass media— on usage and tariffs, while in rural areas bills mostly television and newspapers, less so provide limited information and are sometimes from radio or the Internet. About 30 percent of handwritten. respondents agreed to the idea of paying up to 30 32. Controllers are key mediators between percent more, but only 2 percent said they would providers and consumers. Controllers tend to pay if tariffs grow by more than 30 percent. Most be the face of the energy company. The quality of the latter are middle-income urban dwellers. of relationship with the controller determines Consumers regard the Kyrgyz Republic as an 127 energy producing country, where energy should they are too busy with their household chores be available to residents at low or no cost. and do not have time to follow and understand Some respondents indicated that an increase in the reforms and their implications. In rural employment numbers should accompany any areas, women are less likely to interact with a increase in tariffs. The respondents worried that controller, because they are not responsible for an increase in energy tariffs would also trigger making payments. The fact that women rated spikes in prices for other goods and services, energy company performance higher than men leading to inflation. was attributed to their low level of awareness of the reforms. When asked who is more likely 34. The level of support for reforms mirrors to contact an energy provider, however, the population income levels and the urban majority of respondents said women. and rural divide. Middle-income and urban residents demonstrate greater support for and 36. Respondents believe that they have no impact understanding of the need for changes in both on the decision-making process as related electricity and district/central heating sectors. to energy sector reform. Poor relations with Rural residents stated that they would not service providers and ineffective communication be able to afford any additional or increased and grievance redress mechanisms foster the energy payments, particularly for electricity. population’s negative views of providers. The Such differences may be attributed to a number harsh treatment of late payments and a lack of of factors. First, urban and middle-income established relations with controllers generate a residents consume more electricity, and, lack of trust in providers and low support for the consequently, depend more on quality of service. reforms. Frequent interruptions and voltage fluctuations 37. Across the Kyrgyz Republic there is a strong result in equipment failure and significant perception of unfairness regarding the amount financial losses. Since district/central heating of utility payments. Middle and low-income is available predominantly in urban centers, consumers believe that the payment burden rural residents consume less electricity and do lies largely on them, while rich consumers avoid not depend on it for heating. Moreover, district payments and enjoy high consumption levels. or central heating is largely unavailable in The respondents stated that rich consumers rural areas. Second, urban residents are more and business owners use their power, privileged informed about consumer rights and expect the positions, and connections to get out of paying better service provisions that come with greater their utility bills. The perception that these investments. groups are exempt from payment reinforces a 35. Women demonstrated a lower interest in sense of social injustice and a lack of trust in and awareness of energy sector reforms, yet the government and reform initiatives. are more likely to contact energy providers for information or to address a claim. All respondents admitted that men show more Section III: Recommendations interest in the reforms and follow the news on 38. The qualitative assessment results lead to the TV, radio, or newspaper. Women stated that following conclusions and recommendations: 128 nn Increased prices of electricity are likely to nn Complaints about the lack of clarity of bills result in increased use of coal among the also lead to mistrust of the energy sector. poor. Many in this group already use coal It is important to simplify bills and clarify for heating. The price of coal is likely to rise how these are calculated. It should be easy together with an increase in energy tariffs. for households to determine how much Tariff setting should consider the compound energy they can afford to consume. It could impacts of increases in all sources of energy, be necessary to work with controllers and including ones in which prices are not set by build their capacity to provide services and the government. explain energy billing to consumers. nn Rising electricity prices are also likely to lead nn Some consumers cannot afford to pay to discontent among the middle class. This their bills during the heating season, and group largely uses electricity to power their fall into debt to avoid late payment. Energy appliances, and the use of these appliances companies could put in place a system of is not seen as optional. This group, however, tariffs that allows consumers to pay for could respond positively to improved their winter heating expenses during other services. A communications campaign seasons, helping households avoid debt. and social accountability activities could nn Grievances against the energy sector are make it possible for the middle class to see also related to delays in repairs or lack of how higher tariffs result in better services, clarity over who is responsible for making which could improve the acceptability of the repairs to appliances, networks, and so on. reform. Communications activities could clarify the nn Because different regions rely on different different roles and responsibilities of energy energy sources, increases in the cost of sector providers. It would also be useful specific energy sources will have different to create a system for informing energy impacts, potentially causing grievances providers of needed repairs that can be among different social groups. If certain tracked by consumers. This system could measures affect specific groups more than allow companies and consumers to monitor others, there may be a need to adjust the the time needed to make repairs. measures or to design communications nn Lower-income households resort to the campaigns to explain the reasoning for use of wood and coal for heating when specific decisions. electricity and gas are unavailable or nn Much of the discontent around energy unaffordable. One form of assistance prices is based on the perception that for these households could be activities higher-income individuals do not pay their to help them buy in bulk in order to save fair share of energy costs. Reforms must money. This could be done through support ensure that higher income brackets pay to community-based businesses that sell their fair share of energy bills. Increasing coal and wood at the local level in harder- the transparency of billing and payment to-reach rural areas. Urban residents who may help achieve this outcome. use these sources of energy could also be 129 supported by the community warehousing them design and pay for energy-saving of wood and coal purchased in bulk by interventions. residents. nn The effectiveness of social assistance nn Energy-efficiency measures are limited as a mitigation measure is limited by because they are unaffordable. Efforts the complexity of applying for and to support the efficient use of energy by receiving benefits. Consumers also do finding ways to make insulation, plastic not link increased benefits and tariffs. windows, and other measures affordable, Communications mechanisms can be used perhaps through targeted credit programs, to explain the process and eligibility for could increase energy efficiency. Energy- receiving benefits and to link increases in efficiency activities in multiapartment benefits with increasing prices of energy. buildings could be supported by creating In addition, it may be useful to simplify the residents’ associations and helping process for applying for social assistance. 130 ANNEX 2. RESEARCH SAMPLE This research was conducted in eight ECA In-depth interviews (IDIs) were conducted states in which the World Bank has engaged with key informants to gather their opinions in energy policy dialogue through analytical or on the same topics and balance the views of lending projects. Comprehensive poverty and citizens with those of relevant institutions. social analysis of energy subsidy reforms has Key informants included energy utilities, been conducted in these countries, including social assistance workers, local government quantitative and qualitative research. A representatives and, where relevant, informal qualitative study was implemented in each local leaders and civil society respondents. state to examine citizens’ perspectives on Ethnographic interviews (EIs) were conducted the social impacts of reforms, as well as their in 3–4 households in each country to better knowledge of and attitude toward the reforms. illustrate the issues pertaining to managing This report distills findings from these energy costs; these were further illuminated qualitative studies. through personal stories and photos. Respondents for ethnographic interviews in The FGD guides included questions along four each state were selected to represent typical general themes: but different household situations; for example, low/middle-income households using district (i) access to energy sources and heating, solid fuels, and electricity for heating. patterns of energy use within the household; A local research firm conducted field research in each country. While the same discussion guide (ii) coping with rising energy costs, was applied in all states, some modifications including applying energy efficiency were introduced after the methodology was mechanisms or using alternative pilot tested to ensure that the questions were energy sources; understood by respondents and were sensitive (iii) perceptions of and experience with to the local context. social assistance and other support Country samples were selected in cooperation programs; and with local research teams and World Bank (iv) knowledge of and attitude toward staff involved in energy sector reforms from the reforms. other practices to include a variety of energy 131 consumers. All country samples included minorities; and low- and middle-income group groups in a large city, a small town, and rural respondents. Low-income respondents were locations; groups with households using recruited to represent roughly the bottom two different types of energy as a main heating quintiles, and middle-income ones to represent source (such as district heating, wood or coal, the third quintile (in the Kyrgyz Republic, the gas, electricity); and households in different third and fourth quintiles). A detailed structure geographic locations and/or climate areas, such of FG and interview samples by country is as mountainous or valley regions. In order to available in the full country background reports, capture the views of specific groups of interest, and can also be found as an annex in World sample categories were further segregated to Bank (2015) Toward Gender-Informed Energy include beneficiaries and non-beneficiaries of Subsidy Reforms: Findings from Qualitative social assistance; representatives of ethnic Studies in Eight ECA States. SUMMARY SAMPLE FOR QUALITATIVE RESEARCH: COUNTRY # FGDS FG MAIN CATEGORIES # IDIS # EIS Armenia 30 - 15 urban, 15 rural 12 - - 26 low-income, 4 middle-income - 8 recipients, 22 non-recipients of family benefits - 14 employed, 16 unemployed - 17 with, 13 without gas supply - 16 women, 11 men, 3 mixed Belarus 18 - covering 6 development regions and the capital 11 3 - 12 urban, 6 rural - 12 low-income, 6 middle-income - 4 recipients, 8 non-recipients of social assistance, 6 mixed - 15 district heating, 3 gas or wood as main heating source - 3 women, 3 men, 12 mixed Bulgaria 29 - covering 6 development regions and the capital 10 3 - 12 big city, 8 small town, 9 rural - 15 low-income, 8 middle-income, 6 mixed - 5 district heating, 14 wood/coal, 3 electricity, 1 gas, 6 mixed - 3 Roma - 13 women, 10 men, 6 mixed 132 COUNTRY # FGDS FG MAIN CATEGORIES # IDIS # EIS Croatia 20 - covering north, central, eastern, and Adriatic Coast 9 3 regions, and capital - 15 urban, 5 rural - 12 low-income, 8 middle-income - 4 recipients of social assistance, 16 mixed - 5 district heating, 4 gas, 8 wood, 3 electricity as main heating source - 2 Roma - 10 women, 10 men Kyrgyz 37 - covering all 7 districts and the capital - - Republic - 18 urban, 19 rural - 28 low-income, 9 middle-income - 12 recipients, 12 non-recipients of energy compensation, 13 mixed - 15 women, 15 men, 7 mixed Romania 32 - covering all 7 development regions and the capital 12 3 - 11 big city, 11 small town, 10 rural - 14 low-income, 8 middle-income -10 recipients, 13 non-recipients of heating benefits, 9 mixed - 10 district heating, 9 gas, 11 wood/coal, 2 other as main heating source - 3 Roma - 16 women, 16 men Tajikistan 28 - covering all 4 districts and the capital 11 4 - 14 urban, 14 rural - 7 apartment, 17 house residents - 14 men, 14 women Turkey 16 - all in southeastern Anatolia region 41 - - 8 urban, 8 rural - 6 low-income, 4 middle-income, 6 businesses, students, local leaders - 5 women, 5 men, 6 mixed 133