The adventure of Brasov reconnecting to the heating system. Bursa. 12.02.2013

Few of the residents of Brasov, who are still connected to the central heating system, currently pay the lowests costs in the country for the termic agent: 170 RON per gigacalorie. A large amount of Brasov’s residence chose, long ago, individual heating with gas plants due to the precarious services provided by CET Brasov – high price per gigacalorie, large losses in the transport and distribution grid. Due to inefficiency, massive number of disconnects and the debt accumulated, CET faced insolvency and ceased the production of the thermic agent.

Starting from 2012, the 12.000 subscribers to the centralized heating system benefit from one of the cheapest prices, three times smaller than the tariff they used to pay to CET. Three years ago, Brasov City Hall decided to purchase the termic agent from Bepco, a local private company, which invested 33 milion euros in multiple high efficiency electric and thermic energy units.

The city hall established a new company – Tekron – which provides transport, distribution and supply services of the thermic agent to the population, institution and to the economic agents, after CET’s insolvency. Tekron decided to form a contract with Bepco, based on the attractive rates offered by the private company. In the summer of 2012, Brasov’s city hall and Bepco began working on an extensive campaign, aiming to reconnect properties, residential and economic agents, to the centralized heating system based on Brasov’s termoficaresystem.

Centralized heating system, currently cheaper than the gas plant solution.
SiminaCostan, Bepco’s general director, declared: “We have a contractual relationship with Tekron which purports to deliver the thermic agent. The contract has been formed for a period of 15 years, on a non-exclusive basis. The municipality decided to purchase thermic energy from us when we proposed an advantageous pricing offer. We have offered a selling tariff, regulated and approved by ANRE for 2011 and 2012, of 150 RON per gigacalorie.  That allowed the city hall to support lowering delivery price towards the population to 170 RON per gigacalorie. Transport and distribution costs were added to this tariff. The company’s stake for Brasov’s reconnection represents the savings made to the heating invoice, which includes those who use gas plants.”

In order to ensure that the transport, distribution and manufacturing activity remains profitable, investments towards the network reconnection and accumulation of fresh consumers – economic agents and private individuals – are necessary. The system currently has 12.000 subscribers. Tekron and Bepco’s aims to increase this number to approximately 19.000 in the following years.

SiminaCostan informed us that the winter of 2010-2011 represented the first year of termic agent delivery on behalf of Bepco. Based on the discussions with the residential associations and with the household consumers, the centralized system offered savings of approximately 40% of the individual heating plant (which charges, aside from gas, the plant’s electric energy, maintenance and standardization). Only the gas bill of a two bedroom apartment, with an individual plant, was 50 RON higher compared to a similar apartment connected to the centralized system

The first campaign which aimed to draw new consumers unwinded last summer. Bepco’s director informed us: “The easiest endeavor was attracting the economical agents, which are directly affected by the gas liberalization prices. They are more vulnerable to the accelerated increase of gas prices, which in turn, affects their budgets. The city hall also reconnected multiple schools and pre-schools to the grid. This year, we’re planning to reconnect multiple schooling units and the financial administration, the Olympic swimming pool, the sports hall, etc.”

SiminaCostan mentioned that it is rather complicated to convince the residents of Brasov to return to a centralized system after the unpleasant experience they had with CET and after they’ve spent 4-5000 RON on the gas plant installation. MrsCostan further explained that reconnecting to the centralized system does not require, from Bepco’s point of view, giving up on the “murale” plants. Bepco and Tetkron connected, free of charge, an entire residential bloc to the system, in which the residents also benefit from mounted flat centrals, which enables them to monitor heating savings. Each apartment benefits from individual counters.

MrsCostan underlined: “This winter, the residents of the mentioned association can notice the differences in costs compared to last winter, when they heated their apartments with their own centrals. We’ve noticed that people usually check only the gas bills and they don’t take into consideration the electricity, ISCIR, the obligatory revisions and check, which shouldn’t really be neglected. That is why I’ve said that the reconnection savings are high.
* Two speeds in implementing Brasov’s heating strategy
The relationship between Bepco and Tekron isn’t full proof, even though Brasov’s municipality has shown their willingless to implement a modern centralized and efficient heating system. After the contract with Tetkron has been signed, Bepco faced issues on their revenues.

SiminaCostan mentions: “In their contract, Tetkron doesn’t guarantee anything, not even payment on a certain deadline or the acquisition of a particular thermic agent. It is a standard sell-purchase conract of the thermic agent. We’ve offered a good price per gigacalorie not only due to efficient production technology, but also due to the fact that we are residents of Brasov and we are interested in participating directly in the growth of Brasov and supporting the local administration încadrulStrategiei de Termoficarepe care şi-a asumat-o.  When the first issues occurred, we realized that we ned to get involved even more, as that the transport and distribution network is outdated. Therefore, we agreata heating strategy, in which the city hall makes investments and reduces the network losses, and Bepco temporarily supports the losses from the transport network. Practically, we’ve offered a 38% discount on the bills for the thermic agent, under the condition that payments are on time and that the modernization and reconfiguration network program. This was absolutely necessary as, aside from the fact that we have initially AGREATa regulated price of 150 RON/gigacalorie, we have also offer the mentioned supplementary discount and we could not afford to risk delayed payments towards the gas manufacturer, knowing that they are strict in applying their penalties and ceasing the production.

The year of 2012 ended with outstanding payments of approximately 6.5 million RON. MrsCostan states: “We haven’t managed to synchronize with the municipality’s firm. We are currently operating with two speeds on implementing the heating strategy. We support part of the losses with Tetkron to manage to survive and to reach our target of increasing the number of subscribers. We can’t afford this discount for an eternity, especially due to the fact that we are also supporting the costs of pumping and the addition water of CET, after their insolvency.”

In order to support this discount and to undertake the pumping costs, Bepco delayed the refurbishment of a part of the equipment which is vital for the centralized system and for building the financial reserves for the payment of the capital repair. Bepco must invest in the following three or four years approximately five million euros for the pumping equipment refurbishment and also for accomplishing some of the investments on the production side.
Currently, Bepco and Brasov City Hall are holding discussions in regards to outstanding payments and implementing the network modernization and reconfiguration. A new reconnection campaign will unwind this spring.

*Over 15 milion euros for the heating network modernization
Brasov City Hall supports the reconnection campaign and they are looking at implementing an investmetprogramme next for the heating network modernization. The mayor’s councilor, RazvanPopa declared: “In the year that we have formed a contract with Bepco, we have managed to supply the thermal agent at a very good price, lower than the regulated one. The disconnections have stopped. Last year we have started he reconnection campaign and we have our first results: an increased number of economic agents and public institutions have reconnected to the centralized system. We have started, slowly, to receive demand for reconnections from private individuals. The power of example works. The three staircases from the bloc that has been reconnected free of charge will notice considerable savings to their bill, compared to the individual heating solution, after this winter.

Mr. Popa is opistimistic about the implementation of the heating strategy and in regards to paying outstanding bills to Bepco: “The thermal agent’s transport and distribution system still faces losses of over 40%. Evidently, it requires urgent investments to ensure that the reconnection will be a success. Brasov City Hall will implement a multiannual investment program of 15-20 million euros, with financing from the state’s budget, the local one, a BERD credit and with grants from the Swiss Government. The vice mayor mentioned that the partnership with Bepco worked because the company managed to offer a good price and because they supported a part of the transport losses and they undertook pumping from CET. RazvanPopa underlined the fact that this contract is not an exclusive one and thus, the city hall is free at all times to purchase the thermic agent from another manufacturer. He has also stated that this type of partnership works because it offers a cheaper alternative to the individual gas systems.

Brasov’s city hall managed to buy more thermic agent from Bepco after CET faced insolvency. The city hall still produces thermic agent, but at a price of over 200 RON per gigacalorie, in plants of CVARTAL. Their transformation into modern thermic points should follow. CET Brasov was making a loss of 30 milion RON per year, the vice mayor stated. Presently, after the CET production has ceased and after the contract formation with Bepco, the city hall covers only network losses – of 10-15 milion RON per year.

RazvanPopa stated that the production of thermic agent IN COGENERARE is an efficient solution, which protects consumers from the increased prices whch can be forseen in the liberalization program.

Alina TomaVereha

In May 2010, when Bepco finished projecting the production of energy and heating IN COGENERARE, Brasov had 20,000 apartmets connected to the heating network. Bepco projected the production capacity based on this number of subscribers. In 2011, Bepco’s first year of operation, the centralized system had approximately 12.000 connected apartments. In 2012, the number of subscribers, including institutions and economic agents, was relatively the same as people gave up on disconnections.

                The aim of Tetkron and Bepco is to reach 15000 subscribers in 2014 and 19000 in 2106. For the reconnection to be successful, the city hall must reduce the network losses and implement the individual counting system. The investments in the grid began last year. According to the latest statistical data, Brasov is considered to be on the 4th place in the country, alongside Bucharest, in the rankings for the lowest prices paid per gigacalorie (170 RON). The first three places are taken by Bacau (155 RON/gigacalorie), Ploiesti (160 RON/gigacalorie) and Cluj (165 RON/gigacalorie).
Bepco is owned by SiminaCostan and CalinCostan and it currently has four units of production and 66 employees. The company’s worth is currently estimated at over 25 milion euros. Financing the investment of 33 milion euros in producton was realized through a 10 year credit approved by BCR.

                Bepco supports the losses from the transport network up to 2016, year in which Brasov City hall should finish implementing the investments in counters and reducing the network losses.