The process of setting up the PPP in Cherepovets involved active participation on the part of City Administration, private and public housing management companies, community and consultants.
The City Administration has initiated several meetings with private ESCO companies and MUP's in which it explained the nature of partnership and the objectives of the project. Representatives of ESCO companies actively participated in several residents' meetings, thus forming a dialogue between private service providers and consumers. However, current situation shows that this was not enough. Residents are not yet convinced that forming an ACSeP and contracting ESCO for housing management and energy service provision will bring them sizable benefits. This points to the fact that the residents are either poorly informed or do not have institutional support.
The project has not yet achieved to provide complete and comprehensive information to residents. Some aspects of the project are quite tricky for understanding by non-specialists. These and contractual aspects should have been simplified and explained in detail to residents. In general, PPP is new to residents and it is necessary to establish an open consultancy center for residents, which is not affiliated with the City Administration.
The responsibilities of the MUP's were supposed to be to subcontract functions of energy maintenance and supply of several selected buildings to private ESCO companies. Payments for the services of private companies would originate from energy savings achieved in the process of the work of private companies. These savings however would be not transferred directly from residents to ESCO companies, but would go through a highly opaque payments system before reaching ESCO. ESCO's role and responsibilities would be specified in an agreement with residents, who would form an ACSeP for these purposes.
All contracts, institutional and financial analysis was prepared by CENEf. Alternative approaches to forming PPP were also suggested by CENEf experts but were rejected by City Administration.
Currently, ESCO companies participate as a subcontractor to MUP's, and in this respect, a PPP was formed. However, financial risks for ESCO companies are high, and if energy savings have being achieved, they have not yet been reported. No agreement was signed between ESCO companies and residents. The draft agreement is hard to enforce by either side and provides few incentives for ESCO to work efficiently. Residents continue to pay for heating as they used to and do not see any direct and tangible benefits that such a partnership would bring to them.
The chosen structure of PPP is not ideal, as it does not provide for adequate share of risks, responsibilities and benefits. The main constraint is the separation of contractual obligations from cash flows. This makes it hard for private companies to claim their income and harder for residents to control the quality of service. It gives rise to situations whereby residents pay full costs of the service but do not gain any improvements in quality, as ESCO is not paid in time or in full.