Energy plans cross circuits as concerns await reform

Opposition politicians are taking aim at seemingly contradictory emerging energy strategies that they say pit reforms for European Union accession against lucrative privatization revenue for the nation's cash-starved budget. "The views and proposals of the Treasury and Economy Ministries are inconsistent, and MPs seem to think there is little communication between both," said Adam Szejnfeld, MP with the opposition Civic Platform (PO) and the Sejm's Economic Committee chairman. "(The ministries) were not able to assure us of a program," he added. Szejnfeld's comments followed a joint meeting last week of the Sejm's economic and treasury committees, during which representatives of the respective ministries laid out wish lists for the future of Polish energy. Two views that Szejnfeld called competing priorities have emerged: The Treasury Ministry - rapped for slowing privatization in other sectors of the economy - is now pushing selloffs of key energy assets for budget revenues, while the Economy Ministry looks to whip power distributors into shape in time for the full opening of the domestic market planned for 2005. Plans adopted earlier this month call for the privatization of key power generators while breaking up regional monopolies on distribution. Some 33 distributors - now controlling both power transmission and sales - will have their power grid assets spun off.

Five groups Five regional distributors would be created: a company group near Lublin; a Southern concern grouping from Kraków, Tarnów and Rzeszów; an Eastern concern covering Białystok, Warsaw and Łódź; a fourth group covering the West from Szczecin to Zielona Góra; and a final concern grouped to the Southwest near Wrocław. Following consolidation - a process Treasury Minister Wiesław Kaczmarek wants to complete by the end of 2003 - officials said sell-offs would follow. But Kaczmarek's stated intention to keep the nation's most lucrative distributor groups out of any consolidation process - the northern G-8 group and Warsaw-based STOEN - has raised raised eyebrows. The sale - started under the previous Solidarity Election Action (AWS) government - could yield zl. 6 billion-zł. 7 billion ($1.5 billion-$1.75 billion) in revenue this year as the nation's budget deficit approaches 5% of gross domestic product (GDP). Critics worry about an uneven playing field, and eye a potentially skewed market with STOEN and G-8 still able to trade and distribute power, as their five future peers await privatization under different conditions. "It's clear the budget needs money from privatization but we must first provide stable grounds," Szejnfeld said. "(G-8 and STOEN) are the best in the sector and when sold separately, the value of the remaining companies will be lowered."

Unions ready to fight Foreign energy interests looking at the Polish market are cautious on the planned reforms but point to numerous legislative hurdles in the Sejm, complicated by labor unions ready for a fight. With unemployment at 18.1% and expected to rise, the government's package calls for significant job shedding at power distributors and generators to meet EU standards of one utility employee per 500 end-users. Polish energy now employs at a ratio of 1:200. "We're not advised on changes to existing companies," said Jan Kowalski, deputy president of the Energy Labor Unions Association. "People are getting anxious and if we are not consulted on the changes we will organize protests across the country." The labor situation is just one pitfall in the sector. "The changes are like 'patches' for computer software," said one specialist with a foreign-energy concern, who asked not to be named. "Every time a problem appears a 'patch' is released - it fixes one problem but contributes to two others. It may be too late to restructure the sector."