The Moldovan Ministry of Energy has expressed concern over the yesterday's rolling blackouts that affected more than 200 populated areas in central and southern Moldova that are supplied with electricity by regional distribution enterprises (REDs) majority-owned by Union Fenosa of Spain.

The Ministry wrote in its press release that the blackouts were due to the absence of a supply contract between Union Fenosa and the electricity producer - the Moldavskaya Power Plant [in Transnistria]. "This situation has been due to the irresponsible actions by the two companies", the Ministry stated. It demanded from Union Fenosa to undertake everything necessary for providing electricity regularly and in full amounts.

The National Energy Regulatory Agency (ANRE) told Infotag that in accordance with the license issued to Union Fenosa, the company must ensure a regular supply of power to consumers. "Nobody is raising the question of license revocation yet. However, rolling blackouts are impermissible. It is the company's duty to have a contract with energy producers and to make sure that no electricity deficit breaks out in the country", said ANRE experts.

According to the contract signed with Moldavskaya in 2001 for 5 years, Union Fenosa is supposed to purchase annually 2 billion kWh at a tariff of 2.65 US cents/kWh. In December 2003, Moldavskaya was privatized by Saint Gidon Invest Russian-Belgian company for $29 million, which is now insisting on signing a new contract and a new tariff - 3.22 US cents/kWh.

Officially, the old contract ceased to be valid from September 14, 2004, and the sides have been in negotiations on a new tariff since then. Moldavskaya director Yury Les stated earlier that the Plant would not be selling electricity to Union Fenosa for less than 3.22 cents, and that if Union Fenosa ceases buying power from Moldavskaya, the facility might be stopped for a capital repair.

In such situation, Union Fenosa could include the new electricity price into a new tariff to be imposed on ultimate consumers (currently it is 0.78 lei/kWh). However, a revision of tariffs is only possible upon ANRE's blessing, but the Agency is saying Union Fenosa has no sound grounds for pushing up the existing tariff.

The Spanish company is currently in a situation when all its appeals to Moldovan state structures - to somehow influence on Moldavskaya - are remaining without understanding or compassion. There are two serious reasons to that.

First, Moldavskaya is situated in Transnistria, and is under Tiraspol's control, which circumstance substantially complicates tariff negotiations.

Secondly, this situation arms the Moldovan authorities with extra arguments that can be used in the suspended dialog with Union Fenosa. The Communists have not yet received from UF all answers concerning its purchase in 2000 of three REDs (of the country's 5) supplying energy to Chisinau city, central and southern Moldova.

There are all grounds to presume that now, with only a few months left till parliamentary elections, the authorities will not permit to raise the electricity tariff. Therefore, the crisis can be overcome in two ways: by achieving a compromise with Moldavskaya, or by covering the Plant's new tariff at the expense of UF's own profitability, which has grown in 2004 thank to the leu's appreciation.

The tariff currently in use has been calculated proceeding from the exchange rate of MDL 14.12 : US$1, whereas this year's average rate of the national currency is going to be only slightly above MDL 12 to US$1.

The unusually warm weather that is such a rarity in early November is the Mother Nature's gift for Moldova. When the air temperature begins falling to where it should, energy consumption will inevitably grow, and the scale of rolling blackouts as well, says Igor Kuzko, the Chief Grid-Control Engineer of the Moldovan energy system.

In his words, if Union Fenosa and Moldavskaya fail to reach an accord, some populated areas will be living without electricity 24 hours a day.

"So far, 'victims' have been not very numerous - 'only' 268 populated localities de-energized on Wednesday. However, if the power deficit in the network persists, we will have to cut supply to all, including Chisinau. There exists a danger that the entire Moldova may suffer", said Mr. Kuzko.

In his words, the only way out of the crisis is through achieving a compromise between Union Fenosa and Moldavskaya. For a variant, the Spanish company may purchase electricity in Romania, but it is much more expensive there, he said. "Presently, everyone is losing. The Plant - because it is not working, Union Fenosa - because it is not receiving payments from consumers who are not receiving electricity. Besides this, many will necessarily sue the Spanish company in court, and Union Fenosa will lose the cases", said the chief controller.

He thinks it is pointless of UF to appeal to the Moldovan Government, because "this is a usual dispute between two economic entities that do no wish to meet each other halfway. I guess ANRE should interfere and help resolve the conflict. Supplying no electricity, Union Fenosa is not only violating its commitments before suppliers, but also terms of the license".