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Yesterday, behind the closed doors at Kaunas City Municipality representatives of the Russian concern GAZPROM, municipality and the National Control Commission for Prices and Energy (NCCPE) held a one-hour discussion on the future district heat price to Kaunas residents. Fearing for price rocketing, the meeting was initiated by the government of the city.

“Meeting was held in a friendly atmosphere. All of us are concerned to look for compromise. We will negotiate on that the heat prices for residents would increase as less as possible, however, we must consider investor’s interests too”, said Kaunas Mayors Andrius Kupčinskas.

It was agreed to form a special working group from the representatives of GAZPROM, municipality and the NCCPE. Within two weeks the working group intends to agree on the future district heat price for Kaunas residents and prepare the plan for investment into Kaunas Heat and Power Plant. According to the Mayor, intentions of GAZPROM representatives are benevolent. Concern GAZPROM is concerned with a decision making the heat price for Kaunas residents increase as less as possible. Currently, Kaunas inhabitants pay 14.67 cents per kilowatt-hour (excluding value-added tax) for district heating. Last week Council of Kaunas City decided to leave this price in force until the 1^st of December. Municipality representatives make estimates that at worst the heat price for the population of the city would grow more than twice, i.e. up to 30 cents per kilowatt-hour.

 

 

Yesterday Denis Fiodorov, the Chairman of the Board of Energetics Development, could not give the answer to what district heat prices could be expected before the upcoming heating season. He emphasised that his arrival to Kaunas was because of deliberations on the new heat prices and the construction of the new power plant. According to Mr Fiodorov, Kaunas Heat and Power Plant could have increased the heat price earlier, but failed to exercise this right.

 

“It is high time we reviewed the prices. Now solution must be looked for, because, following the formula defined in 2003, the price would make a really marked increase”, he observed. On the initiative of KAUNO ENERGIJA itself, the long-term investment agreement, signed five years ago, defined that since the spring of 2008 the price would be established according to the formula related with the changes in the prices of petroleum products in the European markets.

Mr Fiodorov is confident that the decision of the Seimas to amend the Law on Heat Sector, defining that the NCCPE should determine the price of heat, sold to KAUNO ENERGIJA, cannot be applied in this case due to an earlier valid agreement with KAUNO ENERGIJA.

“It has been for five years that KAUNO ENERGIJA has received heat at lower prices than those of the market. Consequently, heat prices to Kaunas residents had been one of the lowest in Lithuania. Thus, surprisingly now it is aimed at changing the rules of the game to the investor, who is meeting his obligations in good faith”, stressed Mr Fiodorov.

 

 

Coming yesterday from Vilnius to the meeting at Kaunas City Municipality, Virgilijus Poderys, the Chairman of the National Control Commission for Prices and Energy, notices that the role of the Commission in these negotiations is limited.

“We will take the role of an assistant in the working group as we cannot make any decision. We will do our best to help the municipality and GAZPROM resolve this problem and agree on the price that would not shock the residents”, spoke Mr Poderys. As of 2003 Kaunas Heat and Power Plant belongs to the Russian gas monopoly GAZPROM. The Russian company was committed not to raise heat prices for five years, however, this term expired.

“Situation of today is complicated; we are in the need for a quick solution for the time is running relentlessly. For now everyone, i.e. Kaunas residents, investor and municipality, remain in uncertainty”, Mr Poderys spoke of necessity to approve the new heat price as soon as possible.

 

 

 

Russian consortium GAZPROM acquired Kaunas Heat and Power Plant from KAUNO ENERGIJA at the end of March of 2003.

The contract laid down that upon the failure to meet the contractual terms and conditions the new owners may be inflicted a fine or be deprived of the power plant. Russian gas giant undertook the obligation to invest 400 million litas into the power plant up to 2018. Up to 2008 investment into the power plant amounts to 61.8 million litas.

GAZPROM plans to construct another power plant, valued at around one billion litas. The new power plant would come into operation in 2011.

Currently, capacities of Kaunas Heat and Power Plant amount to 170 megawatts, whereas the power and heat capacity of the new block of the combined cycle power plant would make up 350 megawatts. It would use natural gas, diesel being the reserve fuel.

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