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Armenia: Price Of Electricity To Rise In January

By Vahan Hovhannisian

Yerevan, 19 December 1996 (RFE/RL) -- Armenians have grown accustomed to difficulties with energy supplies in the years since independence. Their country has no natural energy sources and is subject to blockades for political reasons by some neighbor states, so they are used to dealing with one fuel supply crisis after another.

But now the reform process is about to take a bite into Armenian consumers' budgets. Under an agreement signed nearly a year ago with the World Bank, the Armenian government is scheduled to implement in January steep new electricity price rises.

The aim is to create a rational economic basis for the functioning of the electricity industry, first by covering the cost of production, and secondly by financing rejuvenation of the antiquated system.

In accordance with this, prices are due to rise next month by some 30 percent to 20 dram (about 4.5 cents) per kilowatt/hour of electricity. Further steep price rises are foreseen in stages during the year.

However Armenian Prime Minister Armen Sargsian plans to hold talks with the World Bank next month with a view to moderating the terms of the original agreement. Sargsian thinks that a large section of the population will not be able to pay such a high price for electrical power.

An RFE/RL correspondent in Yerevan reports that Armenian industry would also be hard-hit by such steep price rises. He gives the example of a local factory which manufactures chloroprene caoutchouc or synthetic rubber. He says that already with the present electricity prices of 14 drams per kilowatt/hour, the energy component makes up 90 percent of the production costs.

Our correspondent reports that the planned rises have put the government in a difficult position with both industry and the public.

At the same time, large-scale investment, to the tune of $250 million, is urgently needed to reconstruct the supply system.

Some foreign credits are already to hand, such as the $57 million grant from the European Bank for Reconstruction and Development (EBRD) to build a modern block onto a conventional thermal power plant

There's been a further credit of $13.7 million from the World Bank for the renovation of some hydroelectric power stations, and Russia provided 60 million rubles to finance last year's re-starting of the controversial nuclear power station at Medzamor. At present negotiations are going ahead on gaining a credit to upgrade the safety of the nuclear plant.

In addition, the World Bank and U.S. government have joined in a program to modernize the electricity distribution system, as well as the metering system for payment purposes.

Armenian engineers were able to create in this past year a system which allows for the shutting off of electrical supplies to individual consumers who do not pay, without having to black-out an entire district or even a whole building.

Our correspondent reports that the Armenian electricity service is quietly proud of this achievement, given its reliance on the old Soviet-era equipment which did not have this requirement built-in.

With all the attention being given to a reliable electricity supply, Armenians now have the luxury of knowing they will have power at the flick of a switch -- if they pay for it, that is.