IRP applied to district heating in Eastern Europe Page: 4 of 14
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[Bull - 81]
availability and cost of materials and equipment, and (3) inexperience in program administration and
monitoring of installations.
- New accounting systems. There have been massive changes in accounting practices to meet international
standards. These are a substantial challenge for the cities to implement at this time, and it creates
discontinuities in the financial record for doing IRP.
- Lack of expertise. Although there is adequate technical expertise for running the utility, there is a general lack
of trained specialists in financial, legal, and utility planning matters. This requires "bootstrapping" to try to
catch up, often creating dependency on foreign advisors.
Institutional Limitations
- New energy laws. The basic organic law for the energy sector is currently under development. This hamstrings
the utility because it does not know what its authorities and responsibilities are. There is a general lack of
understanding and/or caution about importing legal frameworks from developed countries which may not be
suitable for the redeveloping economies.
- New regulatory law. Regulatory policy and authority awaits parliamentary action. Meanwhile the anti-
monopoly and price control agencies continue to play their "traditional" roles. This limits the utilities' ability
to formulate business plans which are credible to financial markets.
- Metering and billing. In large apartment blocks there is no apartment-level metering, and billing periods are
often for extended periods of time. Consumers often pay a pro-rated bill based on floor area.
- PrivatizationDelays in the staging of government privatization of state-owned utilities can impede progress of
utility strategic planning until it's complete and well understood.
Financial Limitations
Limited domestic capital markets. Even four years after the revolution, capital markets are severely limited.
Also foreign and. multi-national lending institutions concentrate on assisting private firms, not municipal
utilities.
Environmental requirements. Western European emission standards have been imposed in an effort to move
towards integration with the West. These place large capital demands just to keep the existing systems
operating over the next five years.
Equipment replacements. The capital stock is often worn out or obsolete. Energy production was emphasized
in the communist era at the expense of efficiency in production, distribution and use.
Uncertain Markets
Self generation or bypass. It is not clear that the utility's status as a natural monopoly can be sustained as
industrial and private owners move off the system.
Gas competition. Gas has been priced low for residential users, and many are converting to gas. This
undercuts the utility's rate base for financing capital improvements.
Loss of consumer subsidies. Governments are eliminating means-tested, consumer subsidies in the residential
sector. The loss threatens the reliability of future revenue flows as a significant proportion of consumers face
rate hikes.
Fuel prices. There is pressure to raise fuel prices to international levels. Also liquid fuels are still imported
from Russia, and the predictability of supplies and prices is uncertain.
Electricity price. It is not clear what price the utility can negotiate for cogenerated electricity from local
distribution companies.
Industrial survival. The stability of industrial demands is uncertain due to the state of the economy and
continuing trade barriers for industrial exports.
Many of these impediments can be seen to require an IRP approach in order to search for robust solutions to these
problems. These studies, though limited, are first attempts to support the demonstration of practical solutions to
these problems using IRP principles.2
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Bull, M.; Secrest, T.; Zeman, J. & Popelka, A. IRP applied to district heating in Eastern Europe, article, August 1, 1994; Richland, Washington. (https://digital.library.unt.edu/ark:/67531/metadc671055/m1/4/: accessed April 25, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.