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WEG: Existing energy assistance schemes for the vulnerable are ineffective

By Natalia Kochiashvili
Wednesday, March 11
The study by the World Experience for Georgia (WEG), published on March 5th, 2020, concerns energy assistance. The document deals with energy tariffs and protection of vulnerable populations. It reads that the existing schemes for vulnerable populations are ineffective and contribute to increasing social inequality.

The results of the WEG study show that electricity and gas tariffs have been on the decline over the past 10 years, given inflation - electricity has fallen by 17% and gas by 20%. As for the declared incomes of the socially disadvantaged population, this figure has increased 1.8 times.

Against this background, according to research, the amount of energy tariff subsidies reaches $ 200 million a year. As a result, the organization concluded: ”Existing energy assistance schemes are ineffective and promote social inequality between Tbilisi and the regions as well as poor and affluent populations.”

The document reads that the existing social assistance system does not help a significant portion of the population (households with 65 to 100 000 rating points) who cannot fulfill the basic requirements of life.

The energy sectors’ tariff subsidy volume is estimated at $ 200 million per year, while the total amount of social assistance amounts to about $ 110 million for the number of points according to categories.

The WEG study declares the tariff subsidy to be an inefficient scheme compared to the targeted voucher or cash assistance, since it increases inequality and energy dependence, prevents the development of energy efficiency and renewable energy.

Also, the study summarizes financial information on current subsidy schemes. The research says that in Tbilisi assistance is provided from the local budget and amounts to an average of GEL 530 per year (assistance is for 5 months, amounting to GEL 106 per month), while in the regions the central government subsidizes the tariff by 3.9 tetri and the provision of monetary assistance amounts to approximately GEL 50 per year.

The gas tariff in Georgia is subsidized to the entire population. This subsidy is estimated at $ 200 million annually, while the total social assistance is equivalent to about $ 110 million, with a significant portion of the socially disadvantaged left behind (from 65,000 to 100,000 point category according to the CSS data).

The study considers that step-by-step tariffs should be set for natural gas and that seasonality should also be taken into account. Notably, several energy subsidy schemes are in place today, including for the socially disadvantaged, those living in mountainous regions, families living in conflict zones.

Judging based on the above-mentioned circumstances, WEG concluded that the new law on energy and water supply (dated December 20, 2019) will not manage to reduce the price of energy which is expected to increase. Therefore, following EU directives, in case the electricity and natural gas markets open and tariff changes, the additional assistance should be directed to vulnerable users.