1300 Pennsylvania Ave N W Su~te550 Madbox 142 Washmgton DC 20004 3022 Tel (202) 3 12 1230 Fax (202)682 1682 United States Energy Assoc~ation UTILITY PARTNERSHIP PROGRAM For CENTRAL AND EASTERN EUROPE FINAL REPORT 1991-1998 Cooperative Agreement Number EUR-0030-A-00-1085-00 USAID Project Officer: \ Robert F. Ichord, Jr. ChleJ Energy and Infrastructure Division Bureau for Eastern Europe and NIS Submitted by: Barry Worthington, Executive Director, USEA Ruth Cherenson, Program Manager, USEA 1300 Pennsylvan~aAve N W Sulte 550 Mallbox 142 Washington DC 20004 3022 Tel (202) 3 12 1230 Fax (202) 682 1682 ~nltedStates Energy Assoclatlon UTILITY PARTNERSHIP PROGRAM FIlVAL REPORT 1991-1998 TABLE OF CONTENTS 1 Executtve Summary of the Cooperattve Agreement's Tab I Accompfrshmentsor Fazltngs A UPP Accompf~shments B UPP Fazltngs & 2 Descrtptton of the Cooperattve Agreement's Tab II Acttvtttes From Its Inceptzon 3 Stgn tficance Of These Actzvtttes Tab IZI A Integratton wtth Western Europe B Commerctaltzatzon C Envtronmentaf Management D Uttlzly Operatzons E Regtonal Cooperatzon 4 Comments and Recommendattons Tab fV A Independent Assessment of U S Industry Contrtbutcon to the CEE Power Sector B Conttnue Partnershtp Acttvtttes tn Romanta and Bulgarta C Conttnue Regulatory Acttvcttes to Include Regulatory Partnershtps D Expand Regtonal Acttvtttes to Include New Independent States Of the Former Sovzet Unron E Expand Mechanzsms to Leverage USAZD Funds tn Strategtc Areas 5 Frscal Report Tab V TABLE OF CONTENTS 6 Utzlziy Partn ersh zp Program A clzvztzes Tab VI Appendzx A 7 US Industry and Government Contrzbutzon Tab VII Appendzx B 8 Central & East European Organzzatzons Tab I411 Appendzx C 9 Internatzonal and Nun-Governmental Organzzatzons Tab IX Appends D * * I0 Evaluation of UPP Actzvztzes zn Poland Tab X a Appendu: E I1 UPP Partzczpants Tab XI Appendu: F UPP Final Report for 1991-1998 Page 1 1. EXECUTIVE SUMMARY OF THE COOPERATIVE AGREEMENT'S ACCOMPLISHMENTS OR FAILINGS A. UPP Accompl~shments From 1991-1998, the Uruted States Energy Association conducted the Utility Partnershp Program (UPP) for Central and Eastern Europe Ths penod of tune revealed dramatic changes in the electnc power sector in each of the ten countnes where the UPP was active Poland, Hungary, Czech Republic, Slovak Repubhc, Bulgma, Romama, Former Yugoslav Republic of Macedoma, Latvia, ~ithuam8,and Estorua Through executive exchange visits and internshps in the U S ,and seminars and workshops i5Eastern Europe, senlor level managers gamed new shlls and information whlch has ass~stedthem to transition then compames to operating in a market economy Bilateral partnershps were completed in Bulgana, Czech Republic, Hungary, Latvia, Lithuama, Poland, Romama, and Slovalua, lasting from three to five years, to discuss top~cssuch as utility corporate and strategic management, finance and accounting, regulation an rate malung, customer service and public relations, energy efficiency and environmental management, and system operations for generabon, transm~ssion,and distribution, among others In total, the program brought close to 3,500 CEE semor managers to the U S to view first hand utility-related and management practices in the U S electnc power sector In the reglon itself, the UPP tramed at least 7,500 semor level managers in ten countnes, bnnging the total reach of the UPP to close to 11,000 over the life of the program, involving over 190 CEE organizat~onsThis includes semor mimstry and regulatory representatives who participated pnmmly in the UPP's Regional Program encompassing environmental, regulatory and system reliability-related activit~esabroad and in the U S From the U S , over 1,800 partrcipants from both electric utilities and other energy-related orgamzations such as law fims, arch~tectand englneenng compames, equipment manufacturers and suppliers, and government and regulatory agencies participated in the program Through their pro bono participation, more than 200 companies representing a broad spectrum of the U S energy industry, contnbuted roughly $20,000,000 to the program, in addition to the total USAID obligation over the l~feof the program of $16,411,156 Selected highlights of the program's accomplishments include o Establishment of a customer service department in Latvenergo, with plans for seven regional centers throughout the country Development of a filly trained human resources management department in the Pol& Power Grzd Company, wth a new procedures and polic~esmanual for senior managers Transfer of least cost planning capability to the Natzonai Electrzc Company of Bulgarza, to include the requisite software and training and hands-on experience for senior level planners Establishment of a company-wide environmental management system in Slovenske Electrarne to ensure compliance with new clean air legislation Implementation of a new accounting system in CEZ which conforms to international standards, enabling the company to obtain a BBB rating from Standard and Poor's and international finance for plant improvements Development of a public relations policy to better inform the public regarding strategic developments, and the es!ablishment of a corporate comm~cationsdepartment in Lzetuvos Energya, significantly improving morale and product~vity Restructuring of RENEL, creating separate generation and distnbution companies, with plans for CONEL to provide transmission services and related system operator and power marketing tasks Development by MVM Rt of a new model of power system operation proposed, based on the U S experience wrth third party access and pricing methodologies, power pooling, independent system operators, and power marketing Section 2 provides a detailed review of these and other program accomplishments UPP Fmol Remwt for 1991-1991 Pane 3 B UPP Failmgs Clearly, the UPP has been successful in its pnmary mission to assist in preparing the CEE electnc utility sector for entry into a market-based economy Other accomplishments relate to the UPP's regional program in the areas of system reliability, regulation, and the environment However, there have been instances where the program could have achieved a greater measure of success had conditions been more favorable For example, in Slovakia, Slovenkse Electrarne (now SE, then, SEP), partnered with Southern Electnc International (now Southern Energy Inc ), conducted activities in general management, finance, least cost planning and public relations, among others, from 1992-1996 When it became clear in 1995 that the newly elected Slovak government embraced non-democratic and non-market onented reforms, the partnership ceased bilateral activities, as it was determined that further investments in a partnership program would have limited impact However, SE remained a strong participant in regional environment and system reliability-related programs, working wth other Centre1 countnes to acheve regional accomplishments One partnership that did not materialize, despite repeated efforts, was that with the Electnc Company of Macedoma (ESM) USEA suspects that this has less to do with either ESM or USEA, rather, the perceived political climate in the Balkan regon Throughout the duration of the UPP, U S troops were stationed in the Former Yugoslav Republic of Macedonia, which for many compames, was a sufficient reason to dismiss outnght a partnership wth ESM Nevertheless, USEA and the Edison Electnc Institute contacted over 80 companies selectively and through an industry-wde petition for expressions of interest Many compames expressed that their policy is not to operate in any of the countnes of the Former Yugoslavia Others simply would not consider workmg in a country with whlch they were not farmliar These efforts occurred over a four-year penod, from 1993-1997 With only one year of the program remamng, USEA ceased its search for a partner utility, as opportumties for sustained benefits would be limited ESM continued to be active in the program, participating in all relevant multi- country and regional activities throughout the life of the program Fmally, the UPP did not implement a partnership in Estonia, with EESTI Energia (EE) While EE participated in all relevant multi-country and regional activities, the government of Estonia declined to accept U S bilateral assistance in the energy sector 2. A DESCRIPTION OF THE COOPERATIVE AGREEMENT'S ACTIVITIES FROM ITS INCEPTION The pnmary focus of the UPP was to assist the electric power sector in Central and Eastern Europe as it accomplished the transformation of ~tsoperational procedures and long-term business strategies to function effectively ~na market economy Through exposure of senior level managers to U S business practices, a number of changes have taken place in each utility where the UPP was active A number of these changes are easily measured and are descr~bed below Other, more qualitative accomplishments are more difficult to measure, such as openness towards change and the development of innovative approaches to problem solving These results are more cultural rather thmprocedural m nature, but are equally sigmficant accomplishments of the program 3 The eight partnersbps conducted under the UPP are llsted below Polish Power Gnd Company Commonwealth Edison Slovenske Elektrarne Southern Electnc International MVM Rt New England Electric System Czech Power Works Houston Lighting & Power National Elecmc Company of Bulgar~a Central Mane Power RENEL (CONEL) Boston Edison Mississippi Power Company Latvenergo Central Vermont Public Service Lietuvos Energija