The controversy over energy payments in IDP cottage settlements

23 February, 2010

Since the New Year, TI Georgia has heard a number of reports from civil society and media organizations claiming that IDPs in the new cottage settlements were unfairly required to pay large electricity and gas bills in January, and that many had lost their services altogether because they were unable to pay. We have also spoken ourselves with a number of IDP households who had very high energy bills – some were able to pay, while others were not. Three families in three different settlements said they were surprised when they were asked to pay bills dating back to October. The accumulated bills (after the government’s subsidy) in these cases varied from GEL 215 to 500 to 850 for a three-month period. To put that into perspective, an IDP family of four living in a new cottage gets a monthly allowance of GEL 102, and opportunities for IDPs to earn income from other sources are rare. We have been following the story of IDPs in the new settlements as part of our aid monitoring project, and emphasizing the need for better communication of policy decisions and accountability to the beneficiaries of aid programs. Naturally, we were curious to investigate what is happening with the energy payments in the cottage settlements. Did IDPs receive fair warning of their new responsibility to pay their energy bills? How extensive is this problem, and is it something that we should be genuinely concerned about or has it been overblown? So far we don’t have clear answers to all these questions, but this post will lay out the situation and we will continue to update you through this blog. We also have a few preliminary recommendations. One is that home energy efficiency should be a focus of future donor and government investments into the infrastructure of the cottage settlements. This would go a long way towards reducing the payment burden on IDPs and helping them to mobilize their scarce resources in more productive ways. Another preliminary recommendation is to consider restructuring the government’s energy subsidies to better fit the specific energy needs of each cottage settlement, since the demand on gas versus electricity varies quite a bit across the settlements. Lastly, we think there needs to be a better system for communicating with IDPs about new policies and explaining their benefit packages. So what’s the story? The new caseload of IDPs has not paid a single tetri for gas or electricity since they were displaced (in fact, even before the war they received heavily subsidized energy from Tskhinvali, with bills under GEL 10 a month). Since they were displaced, their full gas and electricity costs were paid through a combination of state funds and grants from USAID (and possibly other donors who provided direct budgetary support), but that payment scheme is not sustainable. Indications that IDPs would eventually have to pay their bills came early in the spring of 2009 when individual electricity meters were installed at each cottage. Still, for six months between the installation of the meters and October 2009, no bills arrived and the electricity and gas continued to flow freely. Starting October 1, the Ministry of Refugees and Accommodation (MRA) introduced a program modeled on the energy subsidies that they provide to first wave of IDPs from the early 1990s: each month, families living in a new cottage get the first GEL 100 of gas for free, and they also get 100 free kilowatt hours of electricity per family member – equivalent to GEL 12.98 per person. A family of four would therefore get the equivalent of GEL 100 in gas and GEL 51.92 in electricity subsidies. I took a look at my own energy costs to get a sense of what these numbers mean. We are two living in a moderately sized apartment, with one large living room heated by a gas unit, and we are careful about our energy consumption. Over the last few winter months, our gas bills have averaged about GEL 110 each month in winter. The highest demand on our electricity bill probably comes from the hot water heater, and our bill averages about GEL 90 per month. Assuming that an apartment is generally much more energy efficient than a free-standing house, we can do a bit of non-scientific extrapolation and conclude that the energy subsidies for IDPs in cottage settlements will not cover their full needs in winter months. (Let me be clear that we are not advocating for the government to pay 100 percent of IDP energy costs. Aside from the drain on state resources, this kind of scheme destroys the potential for economic incentives to promote energy conservation.) Each IDP that we spoke to has a slightly different version of what happened (which confirms our suspicion that communication of the new policy was not effective). One woman in Tserovani settlement explained that the first time they received a bill from an energy company was in December 2009, by which time they had accumulated debt because they continued to consume energy as though it was free during October and November. Rumors of the change in policy circulated throughout the settlement before December, but she could not remember exactly how she was warned or through what medium. Initially everyone refused to believe the rumors and when the bills came, everyone refused to pay too. When services were cut off, most families caved in; only a small number of families in her community are still left without electricity today. Her household of two people had gas and electricity bills totaling GEL 45 and 170 for the Oct-Nov-Dec period. Tserovani settlement is equipped with gas heating units, so total energy costs would likely be lower than in other places such as Karaleti and Tsmindatskali, which are heated by electric units. A family we met in Khurvaleti, a rural IDP cottage settlement very close to the administrative border with South Ossetia, had lost their electricity in early January due to non-payment (the settlement is not hooked up to gas lines so the gas subsidies are irrelevant). A free supply of firewood is delivered regularly by the local municipality so they were still able to heat their homes. However, this family’s relatives from Karaleti, an IDP cottage settlement in the town of Gori, had also lost their electricity due to high bills. These two families owed approximately GEL 500 a piece in electricity dues. Because heating in Karaleti is powered by electricity, which is far more costly than gas, the Karaleti relatives moved from their own cottage to live with their extended family in Khurvaleti for the winter. Some would call this a round of displacement within displacement. “If we had known that we had to pay, we would not have used the electric heaters in each bedroom,” another IDP facing energy payment issues from Karaleti told us. A family in Tsmindatskali settlement, which is located in Gori next to Karaleti, owed GEL 850 in gas and electricity after accounting for the government subsidy. Tsmindatskali is equipped with electric heaters. It seems that energy companies tried to negotiate a plan in which those who owed money would be able to roll forward their debt and pay over several months in the future, but the details of these offers are still unclear to us. The issue is receiving increased political attention. IDPs in Khurvaleti, Karaleti and Tsmindatskali protested by blocking the main East-West highway in early January, although the incidents received very little media attention. Some IDPs told us they think the issue is not receiving television coverage because of upcoming local elections (most major TV stations are considered to be under the control of the ruling party), but just last week opposition political parties had publicly taken up the cause of electricity issues in Teliani cottage settlement. The MRA attempts to negotiate compromise solutions between energy companies and IDPs, but often this is a difficult task. “We were communicating between a private company and IDPs [living in a collective center in Tbilisi], taking responsibility that IDPs would pay the debt gradually over three months. But then they watched on TV that the new IDPs [living in cottage settlements] are protesting and refuse to pay, so [the IDPs in the collective center] did not pay a pence and the private company cut the electricity again.” (Collective centers generally have communal meters, which further complicates negotiations compared to the cottage settlements.) Remarkably, at a recent presentation by the MRA before the Parliamentary Committee on Human Rights, not a single opposition party member or person in the audience asked about electricity payment issues. There are some unconfirmed suggestions from the MRA that summer time energy subsidies can be saved and applied to winter consumption, but we don’t know anything more about how this process might work. Since government subsidies started in the fall, we assume this savings plan could only be applied to the upcoming winter’s energy consumption. How concerned should we be? The biggest question hanging over these issues is how much warning IDPs had about their newly acquired share of responsibility to pay energy bills. We asked the MRA for clarification about when and how IDPs were warned and were told that IDPs received notification of the new energy subsidy program in October, but we did not receive a response to our follow-up question about the communication mechanism that was used to issue the warning. We also don’t know how widespread the problem is – how many families have been affected by loss of electricity or gas services? Are there higher rates of energy cut-offs in settlements that depend on electricity for heat? The fact that most families do not appear to have energy payment problems would suggest that the majority understood their responsibilities, or if they did not, then at least they were able to cover their expenses. Differences in the energy dependency of each settlement are important. Some are equipped with gas heaters (such as Tserovai), some with electric heaters (such as Karaleti) and others with wood stoves (Skra and Khurvaleti, for example). We would expect that cottages heated by electric units would have the highest costs and be in the worst position, while IDPs receiving free wood fuel would be best off. A few preliminary recommendations The situation highlights questions about the quality of cottage construction and design. Gaps in the floors and the persistence of problems with moisture buildup on interior walls – both widespread issues in the cottage settlements that are associated with the construction quality – suggest that the cottages are quite poor in energy efficiency. With big investments in the donor pipeline in 2010 (especially from the European Commission and USAID) to fix cottage defects and improve the settlements, attention to energy efficiency issues would go a long way towards reducing IDP dependence on state assistance and helping IDPs to strategically invest rather then spend their limited resources. A second preliminary recommendation to the MRA is to re-evaluate the energy subsidy scheme, which appears to have been designed for IDPs living in collective centers (large apartment blocks). The energy consumption profile of a free-standing house is much different. Lastly, in our limited number of conversations with IDPs, it is clear that many are still confused about the details of the government’s subsidy program, even those who have been able pay their bills and maintain their services. A stronger communication strategy to convey IDP benefits and obligations is essential. ------------------------- A NOTE ON IDP TERMINOLOGY When we talk about IDPs in Georgia, there is often a lot of confusion because of the many different categories of IDPs. Practitioners know the difference, but often they fail to clearly distinguish which group they are writing or talking about. This post is about one segment of the “new” or “second wave” IDPs – those who were displaced in 2008 and who now live in cottage settlements. A sub-category of the “new” IDPs is those living in renovated apartment blocks. Together, the apartments and cottages that were built for the new IDPs are collectively referred to as “settlements” because IDPs own their living space. A second major category of IDPs is the “old” or “first wave” IDPs who were displaced from Abkhazia and South Ossetia during the wars of the early 1990s. According to the Ministry of Refugees and Accommodation, 42 percent of this second group live in collective centers (a collective center is different from an apartment block settlement because IDPs do not own their living space, and most collective centers are overcrowded and in dire physical condition); 58 percent of the old IDPs live in so-called “private accommodation,” which means they are living with relatives, or they rent or own their own apartments and houses. It is generally assumed that those living in private accommodation face similar hardships in relation to the physical state of their living spaces.

Author: Caitlin Ryan