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What is the Price of Cheap Electricity Produced by Cuciurgan Power Plant?

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Even if the negotiated price is only 5.7 percent lower than the old one, and electricity will be supplied by a plant whose privatization is surrounded by secret and suspicious transactions. The fact that the Russian company Inter RAO EES, the owner of the Cuciurgan plant, accepted to reduce prices seems, at first, to be a surprise, given the fact that is has been repeatedly stated that the price offered so far was on the profitability limit.

Deputy Prime Minister, Valeriu Lazar, Minister of Economy and Trade, stated in a press conference that the new contract is also the result of a political dialogue initiated in October 2009 with the Russian party. "We used all available instruments, including discussions with certain parties," said Deputy Prime Minister Lazar, without providing details about the party they negotiated with. On the other hand, Carina Turcan, Chairman of the Administration Board of Cuciurgan ,said that the contract is very important for the plant and an essential factor in reducing the cost of delivery of electricity to the right bank of Nistru River was the result of the meeting of the joint Moldovan-Russian Government Commission, recently held in Chisinau. At the same time, Turcan said that the price reduction was possible by lowering business costs included in the company's business plan and by using, if necessary, of other types of fuel than natural gas.

Many questions remain unanswered throughout this story of the reduction of electricity supply prices. For example, how come that while purchasing (at least that is the official information from Gazprom reports) gas at virtually the same price like CET (Electric and Thermal Plant) from Chisinau, the energy generated by the Cuciurgan Plant is twice as expensive? The representative from Cuciurgan Plant refused to provide precise data on the price the company pays for Russian gas, invoking confidentiality clauses. According to its statements the Plant allegedly has a contract with the company Tiraspoltransgaz from the Transdniestrian region, not with Moldovagaz. However, Tiraspoltransgaz receives gas from Gazprom via Moldovagaz, meaning that Moldovan authorities should know the price paid for gas.

An elementary calculation shows that a price of 5.5 cents / kWh for electricity delivery can be obtained only by receiving gas at a price of around 120 USD per thousand cubic meters, i.e. two times less than the price currently paid by Moldova from the right bank of Nistru River. The formula is simple. From a cubic meter of gas the plant generates 3 kWh of electricity. At a price of 120 USD per thousand cubic meters, only the cost of gas purchased to generate a kilowatt is 4 cents, plus processing costs about one cent of this gas. But there are other costs, thus the real cost of one kilowatt is 5,1-5,2 U.S. cents / kWh. The difference of up to 5.5 U.S. cents is the profit of the Cuciurgan Plant. In other words, the owners of the Plant agreed to reduce their profit.

According to preliminary calculations, only form supplies to the right bank of Nistru River, Cuciurgan generated in 2009, which is a profit of 14-15 million. But the profits the Cuciurgan Plants obtains do not concern us. More important is how much we are all going to pay for the lower price, and especially where the money paid for gas go. Given that in 2009 the Plant generated 4.87 billion. KWh, it means that it used over one billion cubic meters of gas, for which it was supposed to pay at least 120 million. If the company paid this amount, the question is where did the money end up? It did not get to Gazprom yet. For example, in 9 months of 2009, Transdniestria accumulated new debts for gas of 330 million USD, paying for gas less than 10 percent of its value. Did the money stay in the Transdniestrian region, or did it disappear in an unknown direction? And since it is announced everywhere that Gazprom has a supply contract only with Moldovagaz, then the debt of the Transdniestrian region is formally ours as well. It seems that by paying currency to purchase electric power from Cuciurgan we actually settle more in the debt to Gazprom.

I have nothing against a contract with the Cuciurgan Plant. On the contrary. It is beneficial that the company operates and supplies cheap energy. However, things should be clarified once and for all in this story with energy price and debt for gas,. We cannot continue like this forever. Deputy Prime Minister Valeriu Lazar promised that soon Moldovagaz and Gazprom will present a restructuring plan of debts for gas. We shall live and see what it means. Beyond all this, it is clear that Inter RAO EES, as owner of the Cuciurgan Plant has major interests in Moldova and in the region. However, even if it does have certain interests and these are promoted by Russian Deputy Prime Minister, Igor Secin and Minister of Energetics, Sergei Shmatko, the Moldovan authorities should insist that the company's transactions be more transparent and be conducted in accordance with our legislation. Until then there will still be suspicions of influence trafficking, privatization and shady deals, corruption etc.