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10/03/2017   Audit: Municipalities Lack Responsibility in Supervising the Rent of Thermal Equipment

An audit of the rent of thermal equipment in municipalities, carried out by the National Audit Office, has shown that municipalities responsible for the supply of heating fail to ensure appropriate supervision and management of thermal equipment rent agreements, and, upon the termination of said agreements, face problems related to the taking over of thermal equipment.

Out of the 14 municipalities that have entered into thermal equipment rent agreements in Lithuania, eight – the municipalities of the cities of Vilnius, Palanga and Alytus, and the municipalities of the  Akmenė, Biržai, Prienai, Telšiai and Trakai districts – were selected for the audit. The resulting data showed that most of the problems faced by the municipalities are related to insufficient supervision of the implementation of agreements. For this reason, municipalities find it difficult to achieve the aims related to rent and to ensure optimum benefit.

According to the auditors, municipalities fail to become sufficiently involved in the process of investment planning and coordination, thereby losing the opportunity to affect decisions related to investment, such that they would confer the most benefit to consumers. The audit has revealed a number of cases where an agreement would provide a leaseholder with the conditions necessary to become the owner of assets created by way of investment. Not enough attention is also directed at the taking over of thermal equipment as agreements draw to a close: there have been cases where assets created by way of investment were taken over without first making sure of the validity of their value, without assessing their technical condition. Even though the Law on Energy specifies that the value of assets taken over at the end of an agreement must be the same as it was at the moment of entering into said agreement, not all municipalities succeed in meeting the requirements of the law. Given these potential violations of the public interest, the National Audit Office had contacted the Prosecutor-General’s Office and the Special Investigation Service.

“The attraction of private investment into the heating sector may be beneficial both to the municipality and its residents, although, for that to happen, municipalities must take an active part in the management of thermal equipment, better represent their own interests and those of the residents, take measures to prevent their violation, and, if needed, defend them legally,” – said the audit team leader  Tadas Čiblys.

It was also noted that municipalities do not know how to organise the transfer of the control of thermal equipment, and therefore violate legal requirements when selecting the new manager. In order to ensure that the transfer of assets would be implemented without violating the relevant legislation, the National Audit Office had informed the Association of Local Authorities in Lithuania and government representatives in the districts. The Ministry of Energy has been advised to develop the process and relevant criteria for the assessment of agreements related to the heating sector.

The way a leaseholder manages thermal equipment also determines the heating price for consumers. Taking into account the case where UAB “Vilniaus Energija” had illegitimately included more than 24.3 million Euros into the heating price, the auditors also assessed the functioning of the heating price regulation system. It was determined that the system is complicated, does not ensure the validity of heating prices and the rectitude and reliability of the data submitted to the National Commission for Energy Control and Prices. The national auditors had recommended that the government consider alternative means of changing and improving the heating price control model, and initiate appropriate changes to the legislation. Vilnius city municipality was advised to work together with responsible institutions and find a way of protecting the public interest and recover the funds overpaid by the consumers of heating to UAB “Vilniaus Energija”, because otherwise, in accordance with the new heating price, consumers will be compensated for their overpaid funds only partially.

 

Responsible for the information Communication Division
Last updated on 25 April 2017

National Audit Office of Lithuania

Pamėnkalnio St 27, LT-01113 Vilnius, Phone: + 370 5 266 6793, + 370 5 266 6752, Email: nao@vkontrole.lt.