ARMENIA: OBA SCHEME FOR PROVISION OF GAS AND HEATING Washington D.C. March 8, 2006 Energy Week

Armenia: OBA Scheme for Heating and Gas Sector Background Tangible achievements in the energy sector: power sector reforms, intensive restoration of gas supply Slower progress in heating sector: use of inefficient, polluting and unsafe heating technologies Government committed to facilitate access to efficient, clean, safe and affordable heating services:  Urban Heating Strategy adopted in 2002  WB Urban Heating Project and various donor initiatives structured around the Strategy Access to gas and heating picking up

Armenia: OBA Scheme for Heating and Gas Sector Context Gas supply regulated by an independent regulator Local heating tariffs de-regulated Gas transmission and distribution network owned and operated by monopoly gas company Gas Supply and Usage rules stipulate the “one-stop- shop” concept with gas company responsible for:  Qualifying gas installation contractors  Identifying appropriate technical solutions  Inspecting and certifying the design and installation work carried out by contractors  Inspecting and maintaining the gas system within apartments

Armenia: OBA Scheme for Heating and Gas Access to Gas and Heating: the Poor Access to gas and heating low  15% without any type of heating Reliance on electricity and wood  Heating making 50% of h/h budget  Detrimental impact on the health  Environmental hazard Connection costs  Recurrent costs affordable if metered and regulated

Armenia: OBA Scheme for Heating and Gas The Proposed OBA Scheme Nature Capital subsidies for the connection of poor to: Individual gas-fire solutions local heating solutions Eligibility Building connected to gas network  Mandatory cash contributions of $30 Approach Demand driven Targeting most vulnerable households enrolled in the Poverty Family Benefit Program

Armenia: OBA Scheme for Heating and Gas Accountability of Service Providers Individual gas-fire solution: payments to the gas company:  90% upon commencement of gas supply  10% after 12 months of satisfactory gas supply Local heating solution: payments to the heat suppliers:  90% upon commencement of heat supply  10% after 12 months of satisfactory heat supply Payments linked to adequate service delivery

Armenia: OBA Scheme for Heating and Gas Financing Leveraged IDA Credit $3 million Government co-financing $530,000 GPOBA Grant $3 million Renewable Energy and Energy Efficiency Fund Individual gas- fire based solution Local heating solution Beneficiaries Mandatory Contributions $510,000 Heat supply companies Gas company

Armenia: OBA Scheme for Heating and Gas Key Challenges Affordability  Heating expenditure account for up to 50% of the expenditure of the poor  Gas based heating is the least cost heating alternative  Consumption will be metered and controlled Replicability  Scheme will cover less than 12% of the poor  Central government and municipality involvement  Documentation and dissemination of lessons learnt

Armenia: OBA Scheme for Heating and Gas Thank you