Government's response helped mitigate the direct impact of rising energy prices - WB.
According to a World Bank expert study on energy access in Moldova, the government's main program to counteract energy price shock, the Energy Vulnerability Reduction Facility (EVRF), conditions energy subsidies on the perceived energy vulnerability of households. In response to the first round of energy price spikes during the 2021/2022 heating season, the government introduced untargeted subsidies for gas, heating and electricity, and increased both the participation threshold and the amount of compensation under the income-based scheme. To counteract energy price shocks in the 2022/2023 heating season following Russia's invasion of Ukraine, the government created the EVRF, a mechanism to better link financial compensation to the estimated energy vulnerability of households based on 5 categories: very high, high, medium, low and no vulnerability. In the run-up to the 2023/2024 heating season, the government revised the EVRF program by creating 2 new energy vulnerability categories to cover low-income households: very high or extreme energy vulnerability. These households received a fixed allowance of 800 lei (about $45) per month during the heating period and could also qualify for utility bill rebates, although these were capped at a lower level than those who received rebates solely on utility bills. Qualifying thresholds for existing energy vulnerability and utility bill subsidy categories were also revised in line with falling energy prices. Although the EVRF reduced the below-market energy prices faced by most households, they remained high compared to pre-crisis levels. Compensations were paid in stages, depending on the energy vulnerability category. Initially, the EVRF was paid through energy suppliers, which meant that only households with utility connections could benefit. Households in the most vulnerable categories received the highest unit subsidies for gas and heating. Only households in the 2nd highest electricity vulnerability categories and households that used electricity as their primary heating source were eligible to receive electricity compensation. Households classified as having no energy vulnerability received no energy compensation, while households with low energy vulnerability received modest energy subsidies. The revised EVRF for the 2023/2024 heating season continued to offer utility rebates with nominal transfers for those in the Primary and Low categories, and introduced a flat fee of 800 lei for households that heat with solid fuels if certain additional requirements are met. This fixed benefit was reserved for those in the high, very high and extreme vulnerability categories. Households in the three categories with the highest energy vulnerability received a relatively high share of benefits and had high coverage rates. Modeling based on the Household Budget Survey shows that households in the very high and extreme energy vulnerability categories receive a larger share of benefits compared to their share of total households. The favorable distribution of benefits is due to the fact that some households in these categories may receive both a fixed benefit and a utility rebate, the latter being particularly significant for these categories. Households in the very high category received a proportional share of benefits relative to their household share. Like very high and extreme energy vulnerable households, some high energy vulnerable households were able to qualify for both fixed benefits and utility bill reductions, but the proportion of these types of households is lower, and the utility bill reductions were smaller for high energy vulnerable households. Meanwhile, the modeling shows that households with medium, low, and primary energy vulnerability received a proportionately smaller share of benefits compared to their share of total households. At the same time, modeling of households in the high, very high, and extreme energy vulnerability categories shows high coverage rates of 62%, 72%, and 76%, respectively. In contrast, only 30% of households in the primary energy vulnerability category are modeled for EVRF benefits. Modeled coverage levels are largely consistent with estimated coverage levels for eligible beneficiaries, with the exception of the primary category. Although the simulations show that almost all households in the primary category can benefit from the scheme, under EVRF regulations, they were not eligible for gas bill subsidies. However, they can still benefit from discounts on heating bills and, in some cases, electricity subsidies. As a result, those in the primary category who did not have a heating connection or did not primarily use electricity for heating were not eligible for any benefits, resulting in low coverage rates for this group. // 16.05.2024 - InfoMarket.
