March 2015—“When we took office, we didn’t just have an energy problem, we had an ‘energy corpse,’” said Albania’s Minister of Energy and Industry Damian Gjiknuri. “In the distribution sector, there was a total lack of investments and the system operator had accumulated $1.1 billion in debt. We knew we had to do something and we knew we needed outside support.”

In September 2013, Gjiknuri contacted USAID and other donor organizations working in the energy sector and asked for specific support on three main priorities of the ministry: finalizing the legal and regulatory framework; energy strategic planning; and addressing the critical financial and operational crisis at its new electricity provider, OSHEE, a now state-owned utility company.

The country’s former distribution system operator was ČEZ Shperndarje. Nine months earlier, Albania had removed ČEZ’s license to operate in Albania, seized its assets and forced the company out of the country, following years of disputes over tariffs, taxes, losses and investments. As a result, ČEZ initiated international arbitration proceedings against Albania.

With continued power outages, high-cost electricity imports, energy theft and losses, Albania’s energy sector could not be in more of a crisis.

In December 2013, Prime Minister Edi Rama announced the formation of the interministerial Energy Task Force chaired by Deputy Prime Minister Niko Peleshi, vowing that the state would no longer turn a blind eye to power thieves.

In early 2014, USAID mobilized an advisory team to support the task force. The team performed a rapid assessment and found that the primary cause of the crisis was the poor performance of the distribution utility. The company was not able to bill and to collect the money necessary for meeting its operational and capital requirements, or pay for electricity import, generation and transmission.

The assessment also concluded that the magnitude and complexity of the problem was not well understood at the ministry and within the government, or even by new management of the utility. In fact, the government was confident that after firing corrupt managers inside the distribution utility, the situation would automatically improve.

USAID’s advisory team clarified sector priorities, important components of the problem, and the government’s role in resolving them.

More concretely, by March 2014, the advisory team handed the government a report identifying 14 priority actions, each with a specific time frame and responsible parties. Over the spring and summer months, the team worked closely with OSHEE management to develop and introduce a performance evaluation system, which included monthly, quarterly and annual targets for losses and collections, and revised OSHEE’s business procedures.

As of September 2014, the government had implemented fully most of the 14 priorities and achieved significant progress in all. The distribution utility received pronounced support in all directions, from necessary regulatory changes to unprecedented law enforcement support during the government’s anti-theft and anti-corruption campaign.

These measures have yielded encouraging and fast results with financial benefits for the company. Since reducing losses and increasing collections following USAID’s recommendations to reform OSHEE’s business model and introduce performance evaluations, revenue has increased an additional $90 million compared to the same period in fiscal year 2013. By registering 3,300 illegal consumers, out of more than 15,000 identified, OSHEE revenue is expected to increase by more than $5.3 million annually.

Despite initial success, OSHEE’s performance is still far from adequate. Efforts by the utility and the government to crack down on energy theft requires sustained efforts and continued leadership.

“The Albania case has been very special; a dire situation in the DSO [distribution system operator], but an unprecedented support from the government side to the company. The challenge has been for the DSO to meet expectations and there is still work to be done. Whatever progress has been made so far, it needs to be sustained and deepened,” said Givi Jgarkava, head of USAID’s advisory team.

“USAID was the first to offer assistance in the beleaguered distribution sector, with practical expertise from people and countries that have gone to similar painful transition,” says Gjiknuri. “They provided work with local teams on practical matters and complex issues. This assistance definitely improved performance and business processes within the DSO, thus planting the seeds for the future success and internal accountability.”

The project was part of USAID's Europe & Eurasia Low Emissions and Clean Energy Development Regional Program, which ran from 2011 to 2014. The assistance to Albania was designed to help the government secure the country's energy supply and reform the energy sector. 

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