DHInfrastructure wrote a policy note in 2013 evaluating the most important technical, financial, and policy-related challenges in the Kyrgyz Republic’s energy sector and recommending how best to address those challenges. DHInfrastructure provided two previous updates to this note, with company-specific and sector data from 2016 and 2017. The World Bank wanted another update of this policy note, to reflect 2018 data. The update informed the evaluation of options for the tariff path considered by the regulator and informed dialog with government and regulator on policy changes, including risk mitigation methods for revenue variations caused by cyclical hydrologic conditions.
DHInfrastructure updated cost of service models for the electricity and heating sectors to reflect current data and incorporated the true future cost of service if necessary CAPEX investments are made to address rehabilitation and additional capacity needs. We used these models to project cost-recovery tariffs through 2023 and the sector deficit under a baseline scenario and several tariff path scenarios. We assessed tariff path options, including lowering the lifeline threshold and gradually reducing cross-subsidies to residential customers. We also provided recommendations on policies for mitigating hydrologic risk, including tariff adjustments, cash reserves, a stabilization fund, contingency loans, and weather insurance.