DEVELOPMENT OF REGIONAL ENERGY MARKETS IN EUROPE …

I. Executive Summary

Supporting Energy Law Reform in North

Macedonia

On January 30, the Government of North Macedonia

signed nine contracts with investors for construction

of 11 photovoltaic (PV) plants with 35 megawatts

(MW) of installed capacity on state-owned land in

two municipalities, Makedonski Brod and Sveti

Nikole. PV plant construction is expected to start in

the coming months and is projected to generate over

80 gigawatt-hours (GWh) of electricity annually.

DREM’s work on the new Energy Law and all relevant

bylaws enabled the launch and completion of the

tender for PVs on state land. Investors paid the

government 2.7 million euros for the right to use this

for construction of the plants.

On January 31, the Ministry of Economy (MoEcon)

held an electronic auction for 27 MW of PVs on

private land. A total of 41 bids were submitted from

private investors, and bidders that complied with the

tender criteria were invited to participate in the

electronic auction. DREM drafted the new Energy

Law and all the relevant bylaws that made it possible

for the tender for PVs on private land to be launched

and processed.

North Macedonia’s Minister of Economy

acknowledged USAID’s support in developing the

Energy Law as well as the entire secondary legislation

that created necessary conditions to implement the

premiums as a new renewable energy support

mechanism. The bidding procedure, a change from

negative to positive auctioning, resulted in 2.7 million

euros for the government and estimated premiums of

3-6 euros/MWh (compared to 15 euro/MWh from

negative auctions). This is a great success, since the

costs for premiums are significantly lower than

projected and will not burden the state budget.

Next month, DREM expects finalization of the

amendments to the Energy Law and finalization of the

Energy Regulatory Commission (ERC) Rules for resolving

objections and settling disputes.

Ukraine Transmission Substations Modernization

Feasibility Study

At the end of January, Ukrenergo approved seven of

12 TEOs (financial and economic assessment) and

plans to submit them to the state expert in February.

Ukrenergo reviewed the remaining five TEOs, and

DREM agreed to incorporate Ukrenergro’s 700

comments over the course of February. DREM

anticipates that once comments are incorporated,

Ukrenergo will provide timely approval because they

are under pressure from EBRD to advance matters.

Next month DREM expects the finalization of 7 of 12

TEOs followed by their submission to the state expert.

Albania OSHEE Utility Performance

Improvement

DEVELOPMENT OF REGIONAL ENERGY

MARKETS IN EUROPE AND EURASIA

MONTHLY REPORT – JANUARY 2020

Photo 1: Field verification of zero bills in Vlora region

DREM conducted extensive hands-on support

activities, monitoring customer disconnection and

inspection operations in the field and conducting

performance appraisal meetings with regional

employees in all three OSHEE regions of Shkodra,

Durres and Vlora.

On January 1, the unbundling of the OSHEE structure

took effect pursuant to Albania’s law on the energy

sector. There are now three unbundled entities

operating under the OSHEE umbrella: (i) The

Distribution System Operator, which is the only one

in Albania, is in charge of operating, maintenance,

planning and developing the distribution network;

offering access to network users; and managing meter

data, meter reading, meter dismantlement and

replacement, and all other activities related to

meters, including disconnecting or reconnecting

debtors based on supplier requests. (ii) The Universal

Service Supplier, which is licensed as a public supplier,

is responsible for supplying the regulated market. (iii)

The Free Market Supplier is a licensed trader and

supplier for unregulated customers.

In addition, implementation began of the new rule and

methodology to calculate economic damages caused

by illegal interference to the electricity network by

customers. With support from DREM, the regulation

was proposed in mid-2019 by OSHEE and approved

by the Energy Regulatory Authority (ERE). The

regulation will charge customers who have stolen

electricity to reclaim losses calculated in kWh for the

previous six months. It will be charged in Albanian Lek

based on the average price. The level of reclaim losses

is determined by kWh based on customer classes.

Implementation of this regulation will contribute

greatly to DREM’s loss reduction efforts.

Next month, DREM will replicate loss reduction activities

in the Vlora and Durres region, conducting skills

assessments of all mid-level management and field

employees and operational due diligence, including

reading and disconnection process, network conditions,

feeder meters, losses, sales and collection, for the

distribution network.

Serbia Energy Efficiency Activity

DREM is seeing significant increase in gas savings

within its partnering district heating companies

(DHC) in Nis and Cacak. After reconstruction of two

substations (Ratko Jovic and Majakovski) and

installation of SCADA for 25 DHC substations in

each DHC respectively, monitoring efforts showed

the following progress in January:

• 35% gas savings for the 25 Cacak substations

• 41% gas savings at Ratko Jovic and 10%

savings at Majakovski (total gas savings for

DHC Nis = 25% for combined Ratko Jovic

and Majakovski).

In addition, this month, DREM completed

implementation work for DHC Pancevo. This

included installation of roof insulation and fire system

modifications to comply with fire inspector

requirements. DREM expects the plant to be

operational beginning in February.

Next month, DREM will continue impact evaluation for

DHC Cacak and Nis, including site visits to monitor system

performance. DHC Pancevo – Commissioning and testing

is also planned for February. DREM plans to monitor each

DHC over the course of the heating season.

Energy Management System (EMS)

To encourage further engagement after the holiday

period, DREM re-released the request for

expressions of interest in all Western Balkan

countries. DREM successfully received 55 EOIs and

25 data sheets, primarily from Albania.

Next month, DREM will conduct a second promotional

tour (Serbia, North Macedonia, Kosovo, and Bosnia) to

further promote the EMS.

Kosovo KEK Procurement

Risk Insurance Survey

KEK incorporated all the DREM International

Advisor’s recommendations into its risk insurance

survey tender dossier. In the second week of January,

KEK conducted a closed tender inviting economic

operators for competitive negotiations without

publication of the contract notice. Negotiations took

place on January 22, and KEK awarded the tender to

a consortium comprising local firm ABC Appraisals,

Marsh EOOD and Engineering Service Sofia

(ESS). ABC Appraisals will manage administrative

issues in Kosovo, Marsh EOOD will provide reports

on KEK’s potential exposure to loss, and ESS will

evaluate KEK’s main assets. Evaluations will be

included in the tender dossier required by CG for

purchase of the insurance policies.

Solar Assessment Tender

On January 27, after a two-week delay caused by

KEK’s absent tender Project Manager and Director of

Corporate Services, KEK kickstarted tender

implementation.

Next month, DREM will continue its ongoing procurement

support to KEK and support contracting for the Risk

Insurance Survey.

Modernization Program for ESM (North

Macedonia)

After several months of inquiries and an in-country

visit by USAID and DREM leadership in December

2019 to assess their commitment, Elektrani na

Severna Makedonija (ESM) began submitting the

requested financial data in January. DREM reviewed

this initial data and asked clarifying questions.

However, questions remain unanswered and there is

still documentation needed.

In February, DREM will continue to request the

information during February until it is received. Once ESM

provides the data, DREM will complete the financial

model and update the gap analysis report. DREM is

undergoing a budget realignment for this task.

Albania-Kosovo Market Coupling

DREM launched the Market Coupling activity with

coordination meetings and stakeholder engagement

in Albania and Kosovo. The team met with key

stakeholders such as USAID, the Energy Community

Secretariat, OSHEE and KOSTT, who showed great

enthusiasm to re-engage and build on previous

market coupling efforts. These stakeholders agreed

that next steps will include DREM’s technical

assistance to establish APEX (the precondition for

market coupling) as well as a study tour to already-

coupled markets in the region (Croatia and Slovenia)

to familiarize key players with processes and daily

operations of power exchange and market coupling.

Lastly, participants agreed that DREM will train the

key players using simulations of real trading on APEX

in both Albania and Kosovo.

Northern Kosovo Electricity Supply and

Distribution Challenge

DREM received approval from the Kosovo Mission

Director to initiate the activity, upon which USAID

and DREM held a kick-off planning call to discuss

goals, risks and strategy for the first in-country

engagement planned for March 2020.

Next month, DREM will begin procuring local and

international resources in preparation for the trip, during

which team members will assess the question of who

should bear the cost of energy supplied to northern Kosovo

and related issues.

Georgia Hydro Implementation

Last quarter, DREM received USAID approval to

move forward with two priority projects – the

Kvesheti and Mieta HPPs – with the goal of advancing

both from their current pre-feasibility stage through

to commercial close. In January, DREM secured

project resources and refined the scope; the project

anticipates deployment for Phase I: Fatal Flaw

Assessment in March 2020.

III. Summary of Task Progress

ACTIVITY A. ENERGY SECTOR REFORM

Task A1. Supporting Energy Law

Reform in North Macedonia

Activity: Completing the Secondary

Legislation Foreseen by the Energy Law

DREM continued its support to the Government

of North Macedonia (GoNM) and the Ministry of

Economy (MoEcon) in drafting the remaining

secondary legislation prescribed by the 2018

Energy Law. The following were drafted:

“Decree on the terms and criteria for

declaring an electricity crisis” and

“Decree on the terms and criteria for

declaring a gas crisis.” The objective of these

decrees is to enable security of supply (with the

appropriate type of energy) and energy system

stability. The decrees lay out the terms and

criteria for determining the method of supply of

natural gas and electricity in cases of natural

disasters or other significant supply disruptions.

It also includes actions to be taken in case of

crisis and the rights and obligations for licensed

entities that conduct energy activity. Given the

intent to align with the European Union (EU), the

decrees include a procedure for notifying the

Energy Community (EnC) on the actions taken

and steps for cooperation with gas and electricity

transmission system operators from neighboring

countries.

DREM updated the draft rulebook on

conducting exams for handlers of

electrical appliances and facilities. Revisions

include clearer provisions on the composition

and mandate of the Exam Commission, type of

questions and point allocation in theoretical and

practical parts of the exam, and rights of the

candidates. DREM shared the updates with

MoEcon, but several components require further

revision before adoption.

Activity: Support for Implementation of the

Energy Legislation

In a nationwide event on January 30, the GoNM

signed nine contracts with investors for

construction of 11 PV plants with 35 MW of

installed capacity on state-owned land in

Makedonski Brod and Sveti Nikole municipalities.

PV plant construction is expected to start in the

coming months and projected to generate over

80 GWh of electricity annually. DREM’s work on

the new Energy Law and all relevant bylaws

enabled the launch and completion of the tender

for PVs on state land. The Minister of Economy,

Kreshnik Bekteshi, acknowledged USAID-

DREM’s support in developing the Energy Law

and the entire secondary legislation that created

Photo 2: Minister of Economy awards contract to PV investor

the enabling environment for implementation of

the premiums as a new renewable energy

support mechanism.

The bidding procedure, a change from negative

to positive auctioning, generated 2.7 million

euros in GoNM revenue for eight of the 11 plots.

The remaining three plots, of 1MW capacity

each, will receive estimated premiums of 3 to 6

euro/MWh. Given that premiums from the

negative (reverse) auction started at 15

euro/MWh, this is a great success. Costs for

premiums are significantly lower than projected

and will not burden the state budget.

On January 31, MoEcon conducted a negative e-

auction for the PVs with 27MW installed capacity

on privately owned land. During this auction, the

lowest premium requested was 13 euro/MWh.

Once this procedure is completed (after the

deadlines for appeals), MoEcon will sign a

contract with the most favorable investors.

DREM worked on finalizing amendments to the

Energy Law. In addition to amendments on

penalty provisions and transposition of the

Regulation on Wholesale Energy Market

Integrity and Transparency (REMIT), these

changes relate to new requirements by the EnC.

For example, the National Renewable Energy

Action Plan was replaced by the National Plan for

Energy and Climate. DREM will finalize the text

of the Draft Law for Amendments and

Addendums to the Energy Law and will submit it

to MoEcon for further processing in early

February. Adoption of this law is anticipated after

early elections and constitution of the new

parliament.

DREM met with EVN Macedonia (EVN), the

country’s biggest supplier of electricity to

households. EVN has been approached by

citizens and small consumers to conclude

prosumer contracts. DREM identified several

issues related to calculating spent/supplied

electricity, VAT and invoicing, so the team will

arrange additional meetings with the Ministry of

Finance to resolve them in order to facilitate the

prosumers concept implementation.

Activity: Support in finalization of the Energy

Efficiency (EE) Law and Drafting of

Secondary Legislation

The Energy Efficiency Law went through the

parliamentary procedure for adoption; however,

opposition members of the Parliament and

MoEcon submitted 25 amendments prior to

adoption. DREM held several working sessions

with MoEcon staff to draft some of the

amendments to make the provisions clearer and

more precise, especially those related to

connecting to and switching off the district

heating network. The second reading of the draft

was finalized on January 31 and the plenary

sessions for adoption of the law is scheduled for

February 4.

Next Steps – February 2020

• Finalization of the amendments to the Energy

Law

• Finalization of the Energy Regulatory

Commission (ERC) Rules for resolving

objections and settling disputes

• Finalization of the Decrees on gas and

electricity crises

• Finalization of the Rulebook on the manner

of conducting the exam for handlers of

electrical appliances and facilities

• Work with MoEcon and the Energy Agency

on the study and recommendations related

to guarantees of origin (green certificates)

• Work with MoEcon and other relevant

authorities to resolve the open issues related

to prosumers

Task A2. Albania Kosovo Market

Coupling

In January, DREM launched its Market Coupling

activity with coordination meetings and

stakeholder engagement in Albania and Kosovo.

The team met with key stakeholders such as

USAID, the Energy Community Secretariat,

OSHEE and KOSTT, who showed great

enthusiasm to re-engage and build on previous

market coupling efforts. These stakeholders

agreed that next steps will include DREM’s

technical assistance to establish APEX (the

precondition for market coupling) as well as a

study tour to already-coupled markets in the

region (Croatia and Slovenia) to familiarize key

players with processes and daily operations of

power exchange and market coupling. Lastly,

participants agreed that DREM will train the key

players using simulations of real trading on APEX

in both Albania and Kosovo.

In addition to the above, the Special Commission

requested DREM’s support on preparation of the

draft Shareholder Agreement. OST requested

that DREM support development of general

conditions for the Shareholders Agreement for

inclusion in the bidding documentation.


• Respond to specific requests for support by

APEX establishment Commission and

related stakeholders.

• D-REM MC Team members will organize

follow up meetings with stakeholders and

WG members in Prishtina, Kosovo Feb 5-7,

2020.

• Continue process of updating the Joint

Action Plan.

• Initiate capacity building activities, by

initiating planning for the Croatia-Slovenia

Power Exchange Study Tour scheduled for

March 2020.

ACTIVITY B. ENERGY EFFICIENCY, UTILITY MANAGEMENT, AND

ENVIRONMENTAL RESOURCE MANAGEMENT

Task B1. Ukraine Transmission

Substation Modernization

Feasibility Study

At the end of January, Ukrenergo approved

seven of 12 TEOs and plans to submit them in

February. Ukrenergo will review the remaining

five TEOs, and DREM agreed to incorporate

Ukrenergro’s 700 comments over the course of

February. DREM anticipates that once comments

are incorporated, Ukrenergo will provide timely

approval because they are under pressure from

European Bank of Reconstruction and

Development (EBRD) to advance matters.

Ukrenergro’s reasoning behind the separate

submission of the TEOs is unknown. However,

costs for submission to the state expert have

increased beyond what was originally budgeted.

A brief description of the TEOs follows:

TEOs. On June 5, DREM submitted final

versions of its TEOs for the 12 substations on

schedule (Component C). These draft TEOs

cover the 12 substations targeted for

rehabilitation: SS 330 kV Myrgorod, SS 330 kV

Tryhaty, SS 330 kV Mykolaivska, SS 330 kV

Lisova, SS 750 kV Zahidnoukrainska, SS 330 kV

Novovolynsk, SS 400 kV Mukacheve, SS 330 kV

Yavoriv, SS 330 kV Kupyansk, SS 750 kV

Donbaska, SS 330 kV Lviv Pivdenna, and SS 330

kV Grabiv.

In July, Ukrenergo submitted three sets of

comments on the TEOs covering all substations.

In September, it sent additional comments for

five substations. DREM reviewed these

comments and submitted the final TEOs to

Ukrenergo for approval in October 2019.

Task B2. Performance

Improvements for the National

Electric Distribution Network in

Albania

Improved Reading and Billing – Shkodra,

Durres and Vlora

DREM reviewed the performance of readers

from the Metering and Billing Department for the

December/January reading process and assessed

reading errors and quality of pictures provided.

In the region of Shkodra, 55 readers received

disciplinary warnings. In Durres, DREM met with

readers’ groups in all nine zones and discussed

the results of poor pictures taken during

December. Three readers received warnings and

targets were set for photo control. A minimum

of 70% of read household customers must have

visible picture quality, while 98% of commercial

customers must have visible pictures.

In cooperation with the Regional Commercial

Manager and the Metering and Billing

Department, DREM trained readers in all three

regions to improve their efficiency and increase

their reading performance. In Shkodra, readers

were trained on using their hand-held units,

identifying meter interferences and reporting

errors. In Durres and Vlora, training is provided

as part of the skills assessment exercise, which

will be followed by tailored trainings for readers

and electricians.

Revisit/Restructure Reading – Shkodra,

Durres and Vlora

In January, the reading schedule was planned for

one day too few, from January 23 to 30 instead

of January 31. This was an oversight by OSHEE

Headquarters (HQ), which corrected the issue

but only for a few regions.

DREM monitored meter reading activities across

the three regions. Of the 56 readers in Vlora, 19

(34%) were identified as underperforming,

meaning they have more than 20% incorrect

readings and poor-quality meter photos. All

readers have been spot-checked, warned of their

poor performance and informed of the

appropriate execution of their job

responsibilities.

Identify Zero Bills – Shkodra, Durres and

Vlora

Based on DREM’s zero bills analysis, the number

of bills with zero consumption decreased in

January compared to December 2019.

Shkodra - 113,511 total customers, among whom

zero bills decreased from 35,683 in December to

35,385 in January. Zone 1, Zone 3 and Zone 4

made an improvement, reducing zero bills by

approximately 1,000.

Photo 3: Monitoring LCRD activities in Vlora

Durres - 169,497 total customers, among whom


51,950 in January. This is a direct result of DREM

monitoring of the reading process.

Vlora - 83,086 total customers, among whom


20,095 in January. The substantial zero bill

decrease was because of customers returning

home from the holiday season and proper

supervision of the reading process.

Improve Revenue Protection and Control /

Institutionalize Operational Audit and

Revenue Protection Units/Strengthen

Internal Controls

In January, OSHEE announced the fifth round of

recruitment for vacant positions of controllers in

the Loss Control & Recovery Department

(LCRD). DREM was asked to assist the HR

department by testing and interviewing potential

candidates.

In January, the LCRD conducted 1,119

inspections across Albania, 746 in the three

regions where DREM engages. LCRD discovered

only 10 cases of electricity theft, of which seven

were located in DREM regions, recovering over

21,000 kWh.

In Vlora, DREM detected an electricity theft case

that had not been reported by the meter reader.

DREM recommended that the zonal coordinator

be given an immediate written warning. The case

was handed over to the LCRD team for

intervention and sent to local police for

prosecution.

In Shkodra, 35 electricity theft cases were found

by zone inspection teams and reported to law

enforcement. Most of the cases came as a result

of increased night inspections requested by

DREM.

In Zone 3, among dozens of electricity theft

cases, there were two interesting cases

discovered during night inspections. In one case

a household customer, whose meter was

relocated outside his premises in a meter box,

was found stealing electricity by connecting

through a hidden underground cable and

bypassing the meter directly to the transformer.

In a second case, a household customer in an

apartment building had hidden a cable and

connected to steal from his neighbor. Both cases

have been reported to police.

Electricity Losses (Refer to Annex A for

graphics)

Shkodra

Losses remained at the same level as January

2019 but improved slightly from December

2019, even though energy consumption

increased by 6.5% from 65 GWh to 70 GWh.

The low rate of improvement is due to 11,000

verification cases that were not reflected in the

billing system, since they had only signed reports

from readers with no picture evidence.

Durres

In Durres, January 2020 losses decreased slightly

compared to January 2019 but increased

compared to previous months’ losses. These

slow improvements were expected due to

weather conditions and the earthquake in

Durres.

Vlora

In Vlora, losses improved by almost 2%

compared to January 2019. Despite the 10%

increase in electricity usage from December

Photo 4: DREM monitoring meter inspection in Vlora

2019 to January 2020, losses continue to be

lower than in previous months.

Performance Management System

Shkodra

Due to poor performance and December’s

increase in commercial losses, DREM held a

performance appraisal meeting with zone

coordinators. The coordinators provided

insufficient justification for failure to meet key

performance indicators, so DREM

recommended that management take disciplinary

measures. A team leader in Zone 2, who was

politically connected and discouraged other

employees to improve, was terminated. This was

a significant step forward for OSHEE.

Durres

DREM met with readers’ groups in all nine zones

and discussed the results of poor pictures taken

during December. Three readers received

warnings and targets were set for photo control.

A minimum of 70% of read household customers

must have visible picture quality, while 98% of

commercial customers must have visible

pictures.

Strict Disconnections

Shkodra

Of the 8,798 customers with outstanding debt,

1,428 customers were disconnected. As a result,

the disconnection efficiency increased from 10%

to 16% from December 2019 to January 2020.

Durres

Of the 7,169 customers planned for

disconnection, 744 have been disconnected,

bringing the disconnection efficiency to 10%.

Vlora

Of the 3,744 customers planned for

disconnection, only 755 have been disconnected.

In all three regions there is a need to significantly

increase disconnection efficiency, despite

indication that there are not enough electricians

to engage both disconnections and fault clearing

activities, which are at their peak during this time

of the year.

Update Infrastructure Data

Shkodra

The mapping and data collection have been

ongoing since June 2018. The overall assessment

for OSHEE is that this effort is still behind

schedule. The reported percentage completed

varies by region and by feeder within regions. In

Shkodra, the completion rate reported remains

at 70%. It was agreed with OSHEE HQ that until

March 15, Shkodra will submit updated single

pole diagrams for all its feeders in order to be

reflected in the system.

Durres

DREM discovered that the reported losses on

several feeders was not caused by commercial

losses, but by incorrect customer enumeration

or mapping to reflect the actual distribution

network. The lack of customer enumeration of

billing data in line with the actual network

mapping in the field deeply affects the ability to

accurately account for losses on a feeder basis.

DREM has raised this issue with the regional

director and started the process of updating each

feeder in the billing system.

Photo 5: Reporting theft cases during night inspections in Zone

3, Shkodra

DREM held a working meeting with the zone

coordinator for Durres/Plazh and discussed zone

performance. During the visit, DREM found a

significant number of customers with incorrect

enumeration to the distribution transformers. A

detailed list of customers has been prepared and

submitted to the relevant department at OSHEE

HQ for data adjustment.

Improve System Access

The OSHEE billing department introduced a

workforce management module in all regions to

monitor operations and outstanding

assignments. In each region, three to four

regional employees are assigned to monitor

operations and update the workforce

management module accordingly.

Reinforce the Legal Function

Shkodra

Upon DREM instruction, Shkodra regional legal

officers submitted requests to the prosecutor’s

office to understand the status of electricity theft

cases reported to the police during 2019 in the

region. The prosecutor’s office has not yet

responded to the request.

Improve Metering Infrastructure

Only seven Distribution Transformers (DT) that

were unlocked and accessible to the public have

been locked.

Eight balance meters have been installed in DTs

to measure the total amount of electricity

distributed through those DTs.

Durres

DREM field visits found that significant

investments have been made to the network in

Durres; however, metering issues remain. For

example, meters or functional DT meters are

not available, and customer meters were deep

within customer premises and inaccessible to

OSHEE employees. DREM requested inspection

of all DTs to obtain a clear report on the number

that are metered and how many have functioning

meters.

Relocate Meter Points / Install Balance

Metering

Shkodra

In December, 478 meters were relocated to the

border of customer premises, the majority

relocated in Zone 4.

In January, 123 meters were relocated to sites

with network investments but where meters

were not relocated from customer premises.

New electronic meters replaced 132 mechanical

meters in collective boxes, and meter boxes

were cleaned and sorted to avoid illegal

connections.

DREM asked to immediately relocate meter

points to Feeder No. 13 in Shkodra’s Zone 3,

which recorded 85% losses in January 2019 with

only 30 customers in four distribution

transformers. The relocation process was

completed in April and losses decreased

significantly: in January 2020, this feeder

recorded only 35% losses.

DREM inspected ongoing work in Fushe Kruje

Zone, Feeder Borazine, No. 14. This feeder has

Photo 6: Collective meter box after clean-up and replacement

of meters.

2,300 customers and 61 distribution

transformers, and its cumulative losses for 2019

were 61%. To improve accuracy, OSHEE planned

to replace old mechanical meters and install new

electronic meters. DREM identified this as an

opportunity to initiate meter relocation, and

agreed with regional management that all meters

on the feeders will be relocated and lines

changed. In January, 210 meters in Durres were

relocated; DREM will track the relocation

progress until project close.

Cable Detection

DREM provided a draft budget justification and

estimation for cable detection devices. With the

establishment of the new LCRD, OSHEE now

needs to equip the inspection teams with proper

tools, including specialized equipment to detect

illegal cable connections.


• Conduct skills assessment of all mid-level

management and field employees in Durres

and Vlora: December 2019 to July 2020

• Implement changes in mid-level management

and feeder teams in Durres and Vlora based

on skills assessment and quarterly

performance results: March to July 2020

• Ensure alignment of positions and employee

assignment based on the new organization

structure, which mirrors the distribution

network in Durres and Vlora: December to

March 2020

• Conduct operational due diligence, including

reading and disconnection process, network

conditions, feeder meters, losses, sales and

collection, for the distribution network in

Durres and Vlora: December to January

2020

• Revise reading and billing process by

adjusting the reading graphic to be able to

reach the reading target established for

urban, semi-urban, and rural areas in Durres

and Vlora: February to April 2020

• Establish a performance management system

in Durres and Vlora, introduce new job

descriptions, review KPIs and assign targets

for each feeder team and zone, and continue

conducting monthly and quarterly

performance appraisals for all three regions:

January to December 2020

• Meet municipal and law enforcement

representatives in Durres and Vlora to

inform them about DREM advisor’s

engagement and solicit their support for

DREM initiatives: January to April 2020

• Commence relocation of customer meters

to make them accessible for OSHEE

employees in Durres and Vlora: March to

August 2020

• Implement community outreach activities in

Shkodra by meeting with municipal

representatives and communities with

feuding difficulties (those who refuse to pay

for electricity) and by meeting in locations

where OSHEE employees have no direct

access to customer meters: late March to

April 2020

• Continue relocation of electricity meters at

the border of customer premises in all areas

of Shkodra where OSHEE implemented

network investments and in small feeders

with high losses: March to June 2020

• Conduct trainings for field employees,

readers and electricians on meter inspection

for electricity theft: March to November

2020

• Complete staffing of regional units of Loss

Control & Recovery Department in Shkodra,

Durres and Vlora: December to March 2020

• Train regional units of Loss Control &

Recovery Department on work procedures

and meter inspection processes: April to

May 2020

• Work on approval and implementation of

calculation and registration of reclaim losses,

to include strengthening of regional legal

officers: March to June 2020

Task B3. Serbia Energy Efficiency Activity (SEEA)

DREM is seeing significant increase in gas savings

within its partnering district heating companies

(DHC) in Nis and Cacak. After reconstruction of

two substations (Ratko Jovic and Majakovski) and

installation of SCADA for 25 DHC substations in

each DHC respectively, monitoring efforts

showed the following progress in January:

• 35% gas savings for the 25 Cacak

substations

• 41% gas savings at Ratko Jovic and 10%

savings at Majakovski (total gas savings

for DHC is 25% for combined Ratko

Jovic and Majakovski).

DREM worked closely with Cacak Technical

Director and staff to maximize use of the

SCADA through better scheduling (optimum

start/stop). DREM implemented a scheduling

program at substation # 1560 which serves a

school building to reduce heating during holiday

periods (no occupancy) and to turn heat on 1

hour before school opening and turn off after the

school day. During January, there was a

reduction in heat supply during the first week in

January (during the holiday period), but more

importantly during the Jan 6-20 period which

reflects implementation of the daily scheduling

program. Even though the temperature during

from Jan 6-20 was colder (higher degree days),

the level of gas consumption did not increase at

the same rate as the increase in degree days,

which confirms that DHC Cacak is taking

maximum advantage of this USAID project.

In addition, this month, DREM completed

implementation work for DHC Pancevo. This

included installation of roof insulation and fire

system modifications to comply with fire

inspector requirements. DREM expects the

plant to be operational beginning in February.


DREM will continue impact evaluation for DHC

Cacak and Nis, including site visits to monitor

system performance. DHC Pancevo –

Commissioning and testing is also planned for

February. DREM plans to monitor each DHC

over the course of the heating season.

Task B4. Modernization Program

for ESM (North Macedonia)

After several months of inquiries and an in-

country visit by USAID and DREM leadership in

December 2019 to assess commitment, Elektrani

na Severna Makedonija (ESM) began submitting

the requested financial data in January. DREM

reviewed this initial data and asked additional

clarifying questions. However, questions remain

unanswered and documentation is still needed.

DREM will continue to request the information

during February until it is received. Once ESM

provides the data, DREM will be able to

complete the financial model and update the gap

analysis report. DREM is undergoing a budget

realignment for this task.

Task B5. Energy Management

Systems (EMS) Demonstration

(Western Balkans)

After December’s in-country promotional tour

for EMS and release of the Request for

Expressions of Interest, DREM re-released the

request to further increase engagement on the

EMS Partnership Opportunity. Through this

effort, in total, DREM solicited the interest of 55

companies, individuals, residential buildings, etc.,

and received 25 data sheets. From these, DREM

identified 15 high-potential EMS beneficiaries

after review of energy consumption, annual

energy costs and willingness to cost share for

installation of the EMS. DREM then contacted

them to confirm interest and coordinate a visit

during the second EMS promotional tour.

Majority of the high-potential beneficiaries came

from Albania.

In January, TIMEL met with Honeywell in Serbia

to discuss the EMS implementation strategy and

ensure understanding of Honeywell’s technical

solutions being offered through the partnership.

Given Honeywell’s time and capacity constraints,

it was agreed that TIMEL will serve as an

intermediary between Honeywell and potential

EMS beneficiaries by “selling” the system and

developing the preliminary technical design in

North Macedonia, Kosovo and Albania.

Honeywell will remain responsible for Serbia and

Bosnia, where it has an existing pipeline of

customers.


DREM is planning its second Western Balkan

promotional tour for February and will conduct

roundtable events in Kosovo, North Macedonia,

Bosnia and Serbia. DREM hopes to further excite

interest and spread the word on this opportunity

through this tour.

Task B6. Procurement Assistance

for KEK (Kosovo)

Excavator Tender

The only economic operator to bid for the

excavator tender, Fugo was disqualified for being

technically unresponsive. As a result, the

operator filed a complaint to KEK and asked for

a review of its decision. On January 3, KEK

informed the operator that its decision remained

unaltered, so the operator filed the same

complaint to the Procurement Review Body

(PRB). Procedures to republish the tender are at

a standstill until PRB decides on the merits of the

complaint. DREM monitored the process and

reviewed the documents that KEK Procurement

was asked to submit to PRB.

Solar Assessment Tender

On January 27, after a two-week delay, KEK

kickstarted the tender process. The delay was

caused by the absence of the Project Manager for

the tender and the Director of Corporate

Services at KEK. As requested by KEK, DREM

participated in the first meeting and the

International Advisor is actively supporting the

Project Manager.

Busbar Tender

The tender was annulled on January 10, as the

evaluation commission was unable to technically

or financially compare the two bids it received.

The procurement legislation is largely silent on

how negotiations should be conducted in this

procedure, except for general principles.

Consequently, the negotiations were conducted

in line with KEK Procurement’s usual practices,

whose shortcomings include a lengthy procedure

and limited expertise of the technical staff of the

evaluation committee. As a result, any decision

might have been the subject of a complaint to the

PRB, thereby extending the process even

further. As soon as the complaint deadline

passed, DREM met with the representatives

from Kosovo B and discussed next steps. KEK

management has made it clear that they intend

to use the same procedure again, with the same

operators. However, DREM proposed further

amendments to the new Tender Dossier

regarding the nature of references that the

economic operators will be required to provide.

After Kosovo B asked to move ahead with the

purchase of the Busbars, DREM wrote to

Procurement requesting that they proceed with

next steps immediately and not cause further

delays to the procurement procedure.

Risk Insurance Survey

On January 22, KEK negotiated and awarded the

tender to a consortium comprised of local firm

ABC Appraisals, Marsh EOOD and Engineering

Service Sofia (ESS). The local firm will handle

administrative issues in Kosovo, Marsh EOOD

will provide reports on KEK’s potential exposure

to loss, and ESS will evaluate KEK’s main assets.

The evaluations will be included in the tender

dossier required by Contour Global (CG) for the

purchase of the insurance policies.

DREM played an important role in this effort.

DREM’s International Advisor provided

recommendations to the Director of Corporate

Services, specifically to increase the financial

means and other legal content of the tender

dossier. In the second week of January, KEK

conducted a closed process sending invitations

to economic operators for competitive

negotiations without the publication of the

contract notice. All the International Advisor’s

recommendations were incorporated in the final

dossier, including increasing the financial means

to encourage a higher quality of the team

proposed to implement the tender.

KEK Procurement Manual

The International Advisor has shared an outline

of the Procurement Manual, which was reviewed

and approved by Tetra Tech management.

DREM has started compilation of the

procurement manual.

Task B7. Approach to Deal with

the Northern Kosovo Electricity

Supply and Distribution Challenge

In January, DREM received Mission Director

approval to begin work under this task and

coordinated a kick-off call with USAID and the

Mission to discuss project goals, risks and the

way forward.


In February, DREM will onboard both local and

international project resources to plan an in-

country trip for March 2020. The trip will assess

the options available to determine who should

bear the cost of energy supplied to northern

Kosovo and related issues. This assessment is

particularly important due to the impending

accession of KOSTT to ENTSO-E, which means

that KOSTT will be fully responsible for its

control area (Kosovo), including the cost of

energy consumed within that area. DREM

anticipates meeting with local and international

stakeholders to delineate the options available,

which may result in a staggered approach with

short-, mid-, and longer-term options.

Task B8. Develop an Investment /

Transactional Implementation Plan

to Unlock Additional Energy

Resources in Georgia

Last quarter, DREM received USAID approval to

move forward with two priority projects – the

Kvesheti and Mieta HPPs – with the goal of

advancing both projects from their current pre-

feasibility stage through to commercial close. In

January, DREM secured project resources and

refined the scope, and anticipates deployment

for Phase I: Fatal Flaw Assessment in March 2020.

ACTIVITY C. REGIONAL ENERGY PLANNING

Task C1. Countering Malign

Kremlin Influence (CMKI)

After DREM submitted its draft scope of work

for Serbia and Croatia CMKI studies, which were

based on the Georgia pilot approach,

USAID/Serbia provided clearance to proceed

with a Serbia pilot last quarter.

DREM identified and contracted the subtracting

resources to execute this work in December

2019, and in January 2020 the project completed

an inception report that will be shared with

USAID in early February.


DREM will plan an in-country visit for the

subcontractor to confirm and verify findings in

the desk research and inception report.

Task C3. Communications

In January, DREM updated several fact sheets and

developed concept notes on two

communications initiatives that will be

implemented in 2020.

Fact Sheets:

• Gas – resubmitted to USAID

• CMKI – resubmitted to USAID

• Cybersecurity – approved and finalized

by USAID

• OSHEE Electricity Theft – resubmitted

to USAID

In February, DREM plans to develop a fact sheet

on district heating in Serbia.

Concept Notes:

• Albania Electricity Theft Awareness

Campaign – this is a public awareness

campaign to reeducate consumers on

issues of electricity theft. The objective

is to discourage and prevent electricity

theft could significantly contribute to

further reduction in commercial and

collections losses at OSHEE, which will

help USAID meet its goals under DREM.

• Campaign and Regional Energy

Knowledge Survey – the objective of the

research is to understand the public's

attitude towards and awareness of

market reform efforts, the need for a

diversified energy portfolio (RES

integration), and USAID's work in this

sector


With the guidance of USAID, DREM will finalize

the fact sheets and obtain approval regarding

concept notes.

ANNEX A. OSHEE Electricity Losses - January 2020

Shkodra

Losses remained at the same level as January 2019 but improved slightly from December 2019, even though energy

consumption increased by 6.5% from 65 GWh to 70 GWh. The low rate of improvement is due to 11,000 verification

cases that were not reflected in the billing system, since they had only signed reports from readers with no picture

evidence.

Durres

In Durres, January 2020 losses decreased slightly compared to January 2019 but increased compared to previous

months’ losses. These slow improvements were expected due to weather conditions and the earthquake in Durres.

Vlora

In Vlora, losses improved by almost 2% compared to January 2019. Despite the 10% increase in electricity usage

from December 2019 to January 2020, losses continue to be lower than in previous months.

DEVELOPMENT OF REGIONAL ENERGY MARKETS IN EUROPE …

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