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More than 60 percent of households in Belarus receive their heat and hot water through centralized, state-owned district heating systems that were mostly built during the 1970s and 1980s.  The combined heat-and-power plants and boiler houses that Belarus relies on are fueled mainly by imported natural gas, a dependence that exposes Belarus to energy-price volatility and supply disruption risks.

The Government of Belarus heavily subsidizes energy and the rates paid by households can be as low as 10 percent of the price required for utilities to recover their costs. In 2012, it was estimated that these subsidies cost the country $1 billion, or 1.6 percent of its GDP.

To address this problem, the government announced in 2010 a strategy which set targets to reduce the country’s dependence on imported energy and to promote the efficient use of energy resources over the next decade. As part of this strategy, household heating charges would gradually be brought to cost-recovery levels as subsidies are phased out.

As this process got underway, two questions arose: How to explain the rationale for these reforms to the public in order to reduce opposition, and how to protect poor and vulnerable households from the impact of higher heating prices?

In September 2013 the Government of Belarus requested World Bank assistance to assess the potential social impacts of tariff increases and to recommend mitigation measures to protect the poor.  With ESMAP support, a study was conducted on the likely impact of the reforms and how they could best be implemented.

The resulting report outlines strategies to increase public awareness about the reform program and to implement it without jeopardizing the country’s poorest families.

The report lays out three approaches for a successful reform process:

1. Improve outreach to customers and citizens on a range of energy-related topics;

2. Improve national social protection mechanisms and ensure that citizens are fully aware of the protection measures available to them; and

3. Encourage investments in energy efficiency, from both the supply and demand side. 

Among the specific recommendations are a number of social assistance measures, including refined housing benefits, an expansion of the existing Public Targeted Social Assistance Program, and energy efficiency grants for low-income households.

The report emphasized that when price increases and mitigation measures are properly sequenced and coordinated with improved public communications, reform would become more socially acceptable.

Since the presentation of the report to the government in July 2014, the government has taken steps to improve communications on the reform program, beginning with a new billing system.  As a result, households in Belarus are finding a new set of columns on the heat bills they receive from their utility companies each month. Two of the columns, labeled “Full Cost Recovery Tariffs” and “Tariffs Subsidized,” outline the actual amount it costs to generate and deliver heat to households as compared to the highly subsidized amount a consumer is required to pay.