August 10

Brian Murray

Beyond the Grid – Connecting the Roma in Bulgaria

This post was contributed by Sarah Perrine on the ground in Bulgaria and Brian Murray (bio below) in New York.

Guest blogger Sarah Perrine has been involved with Bulgaria’s Roma community for ten years, first as a Peace Corps Volunteer, and later in a variety of professional and academic capacities. She has an undergraduate degree from Mount Holyoke College and a dual Master’s in Public Policy and East European Studies from the University of Michigan. After working in Washington, DC with USAID and the Department of State, she returned to Bulgaria to serve as Director of Programs for the Disadvantaged with the America for Bulgaria Foundation.

In 2004 a colleague tried entering a café in Pazardjik, a Bulgarian town located on the old Orient Express train line between Istanbul and Sofia. As an American whose family originally hailed from India, she didn’t have time to say a word before the proprietor shuttled her out the door. It was a case of mistaken identity—the owner thought our friend was Roma, not American.

This scene plays out daily all over Eastern Europe for Roma (also known as gypsy, gitano and tsigani) who are denied service at cafés, restaurants and stores. It underlines the complicated relationship—one checkered with mistrust and misunderstanding—between the Roma and many of the communities they live in.

Like its neighbors, the Bulgarian government, with the assistance of the European Union and foreign aid organizations, has made some progress in its attempts to incorporate the Roma into the mainstream economy. But it is still falling short. Moreover, traditional capital markets have failed to bring jobs and opportunities for communities on the bottom of the economic pyramid – forcing both Roma as well as ethnic Bulgarians to look abroad for work.

The importance of identifying solutions that are sustainable and replicable – either in the public or private sectors – has never been more imperative. The statistics are unsettling. The UNDP issued a comprehensive report on Roma in Central and Eastern Europe that found Roma minorities were living in “third world conditions” with Roma scoring as low on the HDI index as some countries in Sub-Saharan Africa. More than four out of 10 have no access to running water and infant mortality is high. In many Roma neighborhoods, unemployment stands at around 80-85% and at least 18% of the population is illiterate. The list goes on and on.

The bottom line is that Roma poverty has multiple and interrelated causes. It is linked to social exclusion, but is reinforced by low educational levels and limited opportunities in Bulgaria’s new, market economy.

Despite these challenges, market forces can be used to improve the lives of the Roma. For the purposes of this blog post, we will highlight an energy company’s remarkable efforts in one of Bulgaria’s largest Roma ghettos. By taking the time to learn about their customer and adapting to the community’s needs, they were able to both profit as a company as well as challenge conventional thinking about the Roma. We believe that these lessons are replicable and necessary to ensure the delivery of basic services to disadvantaged Roma communities.

In 2004 EVN, an Austrian-based electrical distribution company, purchased the electrical distribution system in Southern Bulgaria. Prior to 2000, production and distribution of electricity in Bulgaria had been managed by the State National Electric Company (NEK) and in 2000—as a result of the restructuring of NEK—seven distribution companies were established. EVN soon discovered that one of its greatest challenges would be faced in Plodiv’s Stolipinovo neighborhood. With 40,000 Roma residents, Stolipinovo resembled a small city. However, with more than half of its residences illegally and haphazardly constructed, Stolipinovo lacked the status that would have entitled it to municipal services– leaving it an isolated shanty-town on the perimeter of society.

In the context of Bulgarian society, Stolipinovo is a recent development. During Communism, public utilities were heavily subsidized and relatively inexpensive. Moreover illegal settlements such as Stolipinovo did not exist. Roma were largely housed in public housing blocks or on agricultural cooperatives. However, after democratization a resurgence of nationalism combined with soaring unemployment led many Roma to crowd into these settlements on the edge of larger cities and towns. They constructed illegally zoned houses next to legal apartment blocks. As more families crowded in from the villages, these neighborhoods quickly became ghettos.

By the year 2000, the situation in Stolipinovo had become quite volatile. A number of political parties were provoking unrest and manipulating the Roma electorate—promising free electricity for votes. Many families stopped paying based on these promises. Moreover, illegally constructed houses were unable to connect to the power grid, as they did not possess the requisite paperwork to prove their residency. So instead, they began illegally tapping into neighboring power sources.

Two women in StolipinovoThe consequence was devastating for Roma-Bulgarian relations. As the economic situation worsened many Bulgarian families, who also found it difficult to pay their monthly bills, grew bitter over reports that Roma families were getting electricity for free. Tensions rose and the amount of electricity lost in Stolipinovo grew, leading the State to decide to cut the whole settlement off. Roma families rioted, the police were brought in, and violent clashes ensued. Not knowing how to contain the situation, the State determined to regulate power supplies. They kept the electricity off during the day, but began turning it on for a few hours each night. While this helped Roma families meet their basic needs, it continued to nurture a feeling among Bulgarians that Roma families were receiving privileges and benefits that they themselves were not entitled to. Not only that, but Bulgarians complained that they were being forced to pay for Stolipinovo’s free electricity.

EVN inherited this situation. According to EVN’s General Manager Stefan Szyszkowitz, at the time they acquired the electrical distribution company they were collecting only 3% of all payments in Stolipinovo and losing 40% to technological losses, primarily due to illegal tapping. The territory they were supposed to serve in Stolipinovo was quite large—4.5 km². 5,500 families were connected to the grid, but 2,000 facilities were still unconnected. More than 56 GWh of electricity were being consumed each year. Moreover, the settlement’s 187 km of electric lines and infrastructure were in very bad condition. Finally, the residents of Stolipinovo had accumulated nearly 8.74M USD of unpaid debt.

EVN knew that it had to act. Their incentive was not only financial, though the economic loss was clear. They also knew that they needed to establish their reputation as a long-time partner in Plovdiv and that the way to do this was to meet the challenges presented by the local and state authorities head-on.

Their first step was to develop a technical solution. This took nearly two years to develop. EVN created a distant reading system to measure consumption from afar as well as a remote control, which would allow the company to switch off and on the electricity for individual residences—rather than the whole community—in response to their failure to pay bills.

Most importantly, EVN also took time to get to know its customer base. Whereas the local government was unable to clarify its aims and had never taken the time to survey its customers, EVN worked closely with the Open Society Institute and other actors well-acquainted with the Roma community to locate and address respected local leaders. They set up community meetings with these leaders, during which they discussed customer concerns and obstacles to payment. They also discovered that many families lacked the experience necessary to understand the cost and worth of electricity since this utility had been heavily subsidized by the State during Communism.

The neighborhood also lacked other public utilities—notably central heat and hot water—which meant that Roma families were over-relying on electric stoves and heaters. This resulted in significantly higher costs each month, compared to the average Bulgarian household. Roma families responded to monthly bills with a great deal of skepticism, doubt, and irritation toward the electric company. Through pamphlets, talks, and information sessions, EVN worked with local residents on strategies to reduce the consumption of energy, to improve insulation of windows and roofs, and to decrease monthly costs.

EVN also hired five local Roma residents (each chosen by a different community leader) as direct employees of EVN, tasked to maintain open channels of communication with the community. These five employees still work actively in the community, answering questions and concerns regarding bills, meter readings, etc.

A variety of challenges were identified during these community meetings. To start off with, residents initially addressed the installation of meters perched on high poles. This was a daily reminder to Roma living in Stolipinovo that the State did not trust them and had classified them all as ‘thieves’. Moreover, the meters were so high that they could not read them, so they were always unaware of how much electricity they were consuming. They asked EVN whether they might lower the meters, and after extensive discussions and commitments on the part of community leaders, EVN agreed. The Austrian-based company hired a local security team to monitor and protect the meters, but only after winning consensus from within the community that this was an acceptable option. In the three years that this program has been implemented, there has been only one attempt to break into a meter.

EVN payment officeThe next identified challenge concerned the payment of bills. Stolipinovo is located on the outskirts of Plovdiv and is isolated from the mainstream community. This means that Roma found it very time-consuming (and sometimes cost prohibitive) to utilize public transportation to pay their bills in EVN’s central offices. Residents asked whether they might have the option to pay their bills within the community, and EVN responded by opening two branch offices for the payment of bills in Stolipinovo. They conducted an aggressive recruitment campaign within EVN and located several high-performing employees who expressed interest in working in Stolipinovo and who demonstrated above-average capabilities to work in difficult situations. As a reward, these employees were granted a bonus. To date, they have been highly effective in their interaction with customers, particularly in describing to customers why their bills might appear high and in providing suggestions on how to lower their energy costs in the future.

The third and perhaps most complicated obstacle concerned legal restrictions that prevented EVN from hooking illegal homes up to the power grid. Despite the illegal status of these homes, many had been in existence for 10-20 years and housed large families with young children. Most importantly, their inability to connect with the grid was resulting in 40% of EVN’s technological losses—which was not the kind of loss the company could afford. So, it worked closely with the municipality to discuss the merits of connecting these homes to the power grid and eventually won sufficient public buy-in to utilize a minor provision in the ordinance that allowed these families to be legally connected.

The most important challenge concerned the 8.74 M USD debt that Stolipinovo had accrued over the past two decades of privatization. EVN, after internal deliberations, acknowledged that this debt paled in comparison to the anticipated impact of future losses. EVN toyed with the idea of wiping out the debt entirely and starting anew, but it soon became apparent that this path would create a great deal of tension and understandable resentment on behalf of Plovdiv’s Bulgarian residents. Discussions within the community indicated that while asking Roma families to pay off the entire debt would prove overwhelmingly prohibitive, most were willing to try to pay a small amount toward the debt each month.

So, a compromise ensued. EVN, with the help of community leaders within Stolipinovo, settled on an amount that it believed families could reasonably afford and, with the agreement of the Roma community, decided to add this amount to each monthly bill for the next five years. In this way Roma families demonstrated their desire to pay off old debts to the greater community.

Finally, the last obstacle concerned the poorest families living in Stolipinovo. In order to get initially connected to the power grid, a residence was required to pay 321 USD. However, this cost proved prohibitive for some families. In response, EVN started the realization of a pilot project together with Open Society Institute and MICROFUND, a financial institution that gives small loans to poor families to help them pay the start up cost. This loan is repaid within the course of one year.

The result of EVN’s efforts has been dramatic. While they inherited a collection rate of only 3%, they are currently collecting over 85%. Similarly, technological losses are down from 40% to 5%. Around 6,400 residences are currently connected to the grid, and 3,800 agreements are in place to pay off old debt. 17 transformer stations have been renovated, and 185 km of electric lines and infrastructure have been changed. EVN invested nearly 3 M USD in Stolipinovo, but the projected benefit far outstrips this cost.

The program has proven so successful that EVN has begun to implement it elsewhere throughout Southern Bulgaria. 26,000 customers have benefited, with an anticipated additional 4,000 in the year to come.

While this is a great example of the power of successful public-private partnerships and the commitment of one company to overcome a complex challenge, it also underlines the importance of listening to your customer – in particular in lower income communities where buy-in and cooperation is critical to success.