“Azergas”: Back to the future

Gas supply in the house stopped. This often happens in the suburbs of Baku. Usually, this is  explained by repair or maintenance work. This time the interruption of the gas supply was accompanied by a knock on the door. Neighbors called for help. On the street I saw a man  with tools wearing a combination of different types of clothing, but not a  uniform, as it should be. "What's the matter?" I asked.  “We are changing the 20-inch pipes that supply gas from the gas pipeline to the gas-meter, and we are also taking the gas-meters for verification,” he said.

According to the legislation and the model agreement between the consumer and Azerigaz software of the state oil company SOCAR all preliminary actions: turning off the gas, replacing equipment, are notified in advance, and the removal, replacement, installation of gas-meters should be done with the participation of the subscriber and Act  should be drawn up. In practice, this is not the case. I called “Azerigaz.” They admitted that the contracting company violated the rules and complained that this happens often. I asked the neighbors, but  no one was notified.

My gas-meter was returned to its place, the neighboring smart-meter was replaced with a mechanical one. The unjustified campaign to replace pipes and smart meters with mechanical ones is in full swing and will ultimately lead “Azerigaz” to collapse, for which, in the end, the people will have to pay for state-scale machinations. We've been through this many times before.

To the history of the issue

In 2004, frequent stops of gas supply, poor quality of blue fuel, imposing debts on consumers, registration and write-off by the state of unjustified receivables of “Azergiz” and other similar organizations, was the norm and a  place for profit for many subjects that were in power.

At that time, gas consumption by the population and the volume of debts were excessively inflated. The mechanism was very simple. Gas was supplied to consumers in accordance with the standards at the rate of 30 cubic meters per person. There were no meters, and therefore it was difficult to prove whether such a volume of gas was actually consumed. This made it possible for “Azerigaz” to overestimate the volume of deliveries, based on the standard, and not in fact, as well as to impose  on debts on population. At that time, there were over a million subscribers in the country, but only 780,000  could hardly receive gas, of which more than 400,000 were in Baku. The debts of the population reached several hundred million dollars. In 2013, the government wrote off  the  debts of  population to “Azerigaz” in the amount of $500 million.

In the late 1990s, 45,000 gas meters were installed in Baku as a pilot project by the EBRD. Further, the project was not developed, since it was not profitable for gas suppliers, since the meters provided accurate data on gas consumption.

I analyzed the situation. It turned out that in apartment buildings, subscribers with meters consumed by five  times less gas than expected by the standards. “Azerigaz” overestimated the volume of gas supplies to the population within the limits of 3 billion cubic meters per year. My calculations showed that real consumption does not exceed 900 million cubic meters. That is, about 2 billion cubic meters were imposed  on the population as debts, and at the same time they could illegally go to Georgia and Russia (I can’t vouch for Armenia, although statements about this were made), where gas was supplied.

That's when we formed a coalition to protect consumer rights and began to fight for the installation of meters for all subscribers. An analysis of the situation was presented in an article published by a number of media outlets. The coalition turned to President Ilham Aliyev for support. To be honest, I did not expect a positive reaction from him, since I considered him as part of the system. Surprisingly, he reacted, and even more categorically and harshly. For example, the then head of “Azerigaz” Alikhan Melikov, in response to the president's demand to install counters everywhere, asked for eight years for this. Then I contacted the chief engineer of “Azerigaz” and asked him how long it takes to install one meter by two fitters?  He answered that it will take  half an hour. It turned out that the installation of 1 million meters per year will require 1000 locksmiths.

The President first demanded to install meters for three years, and then reduced this period to two years. Thus, Azerbaijan became the first country in the CIS, which completely began to pay for gas by meters.

The introduction of meters has led to a sharp reduction in consumption figures. Today, there are about 2.5 million subscribers in the country from the "population" category, who consume about 3.8 billion cubic meters of gas per year. That is, this confirmed our statement from 2004 that consumption was greatly overestimated (2004. 780,000 subscribers. Consumption of 3 billion).

Today SOCAR's attempts to take everything back are obvious, or rather the mine was laid by the former management of the state company in charge of “Azerigaz”. Here are two important problems that open the way to abuse:

1. A system of sub-contractors was created to carry out repair and installation work, including the installation and maintenance of meters. There are over hundreds of them. Gasification issues are delegated to them, while “Azerigaz” itself could do it directly. In this way, hundreds of firms with directors, accountants, foremen, workers arise. This increases the cost of the work. In fact, in “Azerigaz” this should be done by one department, which is expedient from the point of view of efficiency, profitability, and control.

2. “Azerigaz” launched a campaign to switch from smart meters to mechanical ones under various unjustified pretexts.

What relapses will the replacement of smart meters with mechanical ones lead to?

Smart meters count gas consumption on a prepaid basis: paid - received. Mechanical counters work on the principle: received - paid. And this will lead to the fact that subscribers will use gas, in many cases they will evade payment due to lack of money or pay for services partially. Thus, a lump of debts will inevitably grow. At the same time, it should be taken into account that with mechanical meters, the influence of the human factor is high. There are no guarantees that an employee of a certain “Azerigaz” subcontractor company will reduce the meter readings by mechanical intervention for a certain fee. We have already gone through this. This is excluded from prepayment. Moreover, when paying in advance, subscribers lend to “Azerigaz”, for example, I paid 100 manats for gas in the spring and still have not spent all the funds.

In connection with the current negative situation in the “Azerigaz” Production Association, I suggest:

1. Cancel the subcontracting system in “Azerigaz”.

2. To use only smart-meters.

3. Strengthen control over the execution of works in “Azerigaz”, their expediency, and budget.

Riddle: The replaced pipe is black on the left counter. On the right counter, the white pipe was not replaced. How to justify the replacement of the pipe?

GAS ATTACK

BAKU/23.12.04/TURAN: As during previous years on the eve of winter season closed-type joint stock company Azerigas has delivered an attack on population. The company"s principle is "Best Defense is Attack" and it uses it year by year. It accuses citizens of refusal to pay for gas supply and shifts responsibility for poor gas supply on the population. Azerigas successfully beats back attack of Azeri citizens dissatisfied with lack of gas in their houses and apartments. According to official information of Azerigas, there are 780,000 consumers in Azerbaijan, which are supplied with gas. But majority of them are either nor supplied with gas, or have a low gas pressure, so they are unable even to fry eggs. Observations proved that gas supply has worsened, though gas prices more than doubled from November 2, 2004 up to 81 manat per cub.m.

Speaking gently, Azerigas plays hanky-panky with population accusing it of non-payment. The company claims that from January to October 2004 population paid 87.8% of cost of gas supply totaling 1 billion 676 million cub.m. This is a record figure during the past ten years, considering that during the past years citizens paid only for 48-52% of gas supply.

It is unclear what officials mean by saying that population does not pay for gas supply. May be they mean nonpayment for non-supplied gas? In November Alikhan Melikov, Azerigas President, said that gas deliveries from Russia allowed Azerbaijan to increase gas supplies to population from 55 to 80%. Therefore, he admitted that 45% of population was not supplied with gas. He also said that every year gas import totals 4 billion cub.m., of which 300 million cub.m. is supplied to population and the remaining part to electric stations. Melikov added that the whole volume of gas of 4 billion cub.m. produced in the country is supplied. Therefore, considering volume of imported gas, population is supplied with 4.3 billion cub.m. of gas. According to Melikov, Azerigas supplies all consumers, including physical and juridical persons, with 8 billion cub.m. of gas a year. But his statement differs from information presented by Nazim Samedzade, Vice- President of Azerigas, who claims that every day the company receives 27 million cub.m. of gas, of which 11.5 million is supplied by SOCAR and 15.5 million cub.m. by open-type JSC Gasexport. During a year the company receives 9 billion 855 million cub.m. of gas. Where is in this case 1.8 billion cub.m. of gas? It is also unclear how much gas is supplied to population. Alikhanov calls the figure of 4.3 billion cub.m., while according to statistics, a total of 1 billion 676 million cub.m. of gas was supplied during 10 months and by end of the year this figure could be at best more than 2 billion cub.m. Where is the remaining volume of gas?

On the other side, many citizens complain of gas supply troubles and gas pressure that is lower than Azerigas states. According to gas meters that have been installed in various Baku regions, in average one subscriber (family of 4-5 members) consumes almost 300-500 cub.m. of gas year, this is four times less than Azerigas calculates. Until now the company uses Soviet standard norm of gas consumption. According to the norm, about 500 cub.m. of gas a year is supplied per capita. Therefore, Azerigas collects money not for supplied gas, but for the gas norm. One can state that in real situation population overpays for "virtual" gas.

As we have already written, considering imperfect control and calculation of gas supply to consumers, rise in gas prices was not the best decision. The many-years practice shows that the current system of gas supplies calculation gives incorrect information about gas supply to the consumer and its consumption by population. Instead of elimination of the problem and introduction of just and civilized form of relationships between the gas supplier and consumer, the government aggravates the situation. The government is unwilling to ensure transparency in this field. Azeri Premier Artur Rasizade said the government has no resources to supply population with gas meters. But the Premier himself has a gas meter and as he told he pays ten times less against the norm. Correct calculation of gas supplies and consumption will be possible only after installation of gas meters. Each consumer will pay for really consumed gas, but not for the average standard norm. Only 66,000 gas meters have been installed by present in the country. Almost $30 million is needed to install gas meters to all consumers. This figure includes cost of one Chinese gas meter that costs about $27 (the Russian one is five times expensive) and total number of consumers, including those that are not supplied with gas, of 1,200,000. For operative installation of gas meters the government should carry into life the program similar to that in Uzbekistan. Uzbekistan has adopted the state program of housing gasification to distribute gas meters among population for the period from 2002 to 2004. A total of 3,601 million gas meters have been installed during this period and the program is being successfully implemented. The gas meters deliveries are funded from the credit of Chinese Eximbank. The credit has been allotted for 10 years period at 3% interest per annum, including four years soft period. The government cannot refer to lack of funds for supply all consumers with gas meters, if it is the matter of constitutional rights of citizens, transparency and control over state and national resources. Otherwise, we would rather refuse of electric meters, cash registers and meters on petrol stations and transfer to the system of goods exchange used by our forefathers. Until every consumer is supplied with gas meter, the government should revise standard norms of gas supplies to the population. The basis of standard norm of gas supplies per capita must be an average index of gas meters. This will mean reduction of the standard norm and collection of gas fees from population three or fourfold. In this case virtual demand of population, which is estimated at 3-4 billion cub.m., will be real and will not exceed 1 billion cub.m. --0--

AZERBAIJAN NEEDS SHORT-TERM PROGRAM OF IMPLEMENTING GAS METERS

BAKU/03.02.04/TURAN: The BakGaz Gas Distribution Enterprise has stated that it will collect the due fees for the natural gas supplied in cooperation with law enforcers from 1 March on. Nusrat Gasimov, Vice-Chief of BakGaz, told TURAN that the debtor debt was AZM 400 billion, AZM 140 billion being the debt of the population. The population only pays 50% of the due fees (12% in Baku"s villages).

The non-payment problem is serious, but the principle of the calculation is imperfect and based on the former Soviet experience. I.e., the Azerigaz JSC has calculated the natural gas utilization standard as 30 cubic meters a month or 360 cubic meters a year per capita. That means 1,800 cubic meters per family of 5 people a year. Taking different heating devices using gas into account, they arrived at the annual utilization index of 2,283.7 million cubic meters. But our sociological research among the users having gas meters has proved that an average family only uses 500 cubic meters a year, i.e. 4 times less than Azerigaz thinks it should.

Another thing is that the pressure of gas supplied to the people is different. Some people receive it under very low pressure, so they should not pay for it as much as those who receive larger volumes at a higher pressure. But they actually pay the same amount. The standard of the pressure is 0.1-0.2 atmospheres, so a family of 4 receives 50-60 cubic meters a month in places, where the standard is followed, in winter. But the pressure is very low (0.002 atmospheres) in several districts, so an average family of 4 receives 8-10 cubic meters a month there. That means that Azerigaz collects equal fees from customers receiving unequal volumes of natural gas and having no meters. The company calculates it as 30 cubic meters per capita and therefore violates the rights of the consumers toughly.

The government states it buys gas for the population from Russia. But our research proves the internal resources can supply enough gas and light to our people. According to the official data, Azerbaijan extracted 5,167.5 cubic meters of gas in 2003. The real demand can be 500-700 million cubic meters a year. The need for fuel to make 10.5 billion KWT of electric power a year (the supply officially reported in 2003) is 2 billion cubic meters of gas and 80,000 tons of black oil. Truly, the investigation of electric power meters shows that the standards of the utilization of electric power and therefore the utilization of fuel to produce this power are overstated. But it is a subject for another investigation.

It is necessary to install gas meters at all the customers to expose the total volume of natural gas utilized by the population of Azerbaijan. Only 43,000 meters have been installed so far. Some $30 million is needed to supply all the consumers with meters. This index come from the calculation that 1 gas meter produced in China costs $27, and the total number of the customers, including those who don"t receive any gas, reaches 1,120,000. Meters produced in Russia are $5 dearer. A special program should be accepted to implement gas meters promptly in the way Uzbekistan has done. This country decided to install gas meters in apartment buildings in 2002-2004. A total of 3.601 million gas meters will be installed there. The program succeeds. The supply is funded by the loan of Eximbank, China. The loan has been given for 10 years, including a 4-year grace period, under annual 3%.

The volume of the gas supply will be unclear unless meters are installed everywhere soon. According to the official data, Azerigaz sold 4,167.1 million cubic meters of natural gas in Azerbaijan in 2003. That exceeded the index of 2002 by 10.1%. The amount of 2,283.7 million cubic meters totaling AZM 81,207.8 million was sold to the population. Despite these tremendous figures, the people face a lack of natural gas in many places. It is not supplied at all, or it is supplied under such a low pressure that people cannot use it normally. But Azerigaz accuses the population of non-payment. Azerigaz had to receive AZM 337,953.1 billion ($67.6 million) from selling gas in 2003. But the company says it managed to collect AZM 180,560.8 million ($36.1 million), i.e. 53.4% of the value of the utilized gas. Azerigaz says the people only paid 52.4% of the due amount, i.e. AZM 42,542.7 million in 2003. Only meters could refute or confirm these indices. E.g., the meter of Arthur Rasizade, Prime Minister, has already refuted the calculation of Azerigaz. The Premier told reporters he had been paying 10 times less than usual for natural gas since he had a gas meter installed in his flat. --0--