Reforms implemented in the fuel and energy sector over the past decade have primarily focused on expanding the industry’s investment and production capacity. The renewal of the regulatory framework and the opening of the market to private companies and foreign investors accelerated the state’s transition from the role of a direct operator towards a model based on regulation and investment facilitation.
Legal guarantees for investors and targeted support for major projects helped attract USD 23 billion in foreign investment to the sector. Power plants with a combined capacity of 9.5 gigawatts were commissioned across the regions. As a result, generation capacity sufficient to fully cover the country’s domestic electricity demand was created.
The second pillar of the investment policy was the modernisation of existing infrastructure. In recent years, UZS 30 trillion has been allocated to upgrading electricity and gas networks, substations, transformers and gas distribution equipment. This is six times more than the amount invested in energy infrastructure during the previous 25 years.
At the same time, the analysis presented at the meeting showed that investment and new generation facilities alone cannot ensure a stable energy supply for households and businesses. Although new capacity has been commissioned, management, metering, maintenance and demand forecasting systems throughout the chain from generation to the final consumer have not been modernised at the same pace.
The first stage of energy reform expanded generation capacity and addressed the shortage of investment resources. The next stage must focus on improving the use of existing assets, increasing network reliability and enhancing the quality of supply to final consumers.
The scale of investment and the availability of sufficient generation capacity indicate that financing is no longer the sector’s main constraint. The central challenge lies in management quality, implementation discipline, local planning and the failure of accountability systems to keep pace with investment growth.
Although the technical condition of electricity and gas networks is broadly similar across regions, the frequency of accidents and the quality of supply differ considerably. These differences are linked less to the physical infrastructure itself than to the quality of local supervision, planning and implementation discipline.
Approximately 4,000 accidents occurred in electricity networks in June and July alone. In some cases, households and businesses remained without electricity for up to 8–10 hours. Recurrent summer and winter failures at dozens of substations and the loss of hundreds of transformers show that preparation for seasonal peaks remains predominantly reactive.
Over the past five years, electricity consumption in the city of Shirin and in the Yangihayot, Yakkasaray and Akhangaran districts increased by more than two times. However, the ability of the networks to accommodate this increase was not assessed in advance. When new residential areas, industrial facilities and service-sector capacity were commissioned, their energy needs were not integrated into local infrastructure plans.
This resulted in a widening gap between economic growth and urbanisation on the one hand, and the development of distribution infrastructure on the other. In the absence of territorial energy balances, resources were directed mainly towards temporary repairs rather than towards locations with the highest structural demand.
The economic cost of electricity outages for businesses, industrial production and regional economies was also not calculated systematically. Consequently, the cost of accidents was not incorporated into the performance assessment of responsible managers.
Electricity losses in the national network amount to 17.2%. Over the past six months, 4.8 billion kilowatt-hours of electricity were lost.
Losses exceed 25% in the city of Andijan and in the Asaka, Yangiabad, Koson, Kukdala, Baysun, Altynsay, Kushtepa, Tashlak, Kushrabat and Samarkand districts. The substantial variation across territories points not only to technical losses but also to illegal connections, malfunctioning meters and insufficient oversight.
Although the ASKUE and ASKUG systems were introduced more than four years ago, 300,000 gas meters and 234,000 electricity meters installed in households do not transmit data to the network. Because digital metering is not fully operational, discrepancies persist between actual consumption, billing and outstanding debt.
In several regions, accounts receivable are rising rather than declining. Installing a meter therefore does not in itself constitute digitalisation. Each device must be connected to a unified information system, data transmission must be continuous and suspicious changes in consumption must be identified automatically.
Many managers continue to interpret energy efficiency mainly as the installation of solar panels. However, if heat losses, insulation quality and the efficiency of heating and cooling systems are not assessed, the impact of such investment remains limited.
Energy efficiency should be understood not merely as replacing the source of generation, but as reducing the total energy consumption of buildings, equipment and production processes. Otherwise, even additional generation capacity will not reduce pressure on the networks because inefficient consumption will continue to increase.
The site selected for a combined-cycle gas power plant in Surkhandarya Region was poorly chosen, creating the need to spend an additional USD 300 million to deliver gas to the facility.
Insufficient analysis of the contract with the project sponsor has also created the risk of additional financial obligations. This case demonstrates that major energy projects should be assessed not only in terms of investment volume and generation capacity, but also in terms of fuel logistics, grid connection costs, long-term tariff commitments and contingent liabilities for the state.
Yangiyul District has 1,400 kilometres of electricity networks and 422 transformers. Over the past five years, household electricity consumption increased from 68 million to 102 million kilowatt-hours, or by 1.5 times.
During the same period, only 60 transformers and 240 kilometres of networks were upgraded. As infrastructure development lagged behind consumption growth, electricity losses since the beginning of the year reached 30 million kilowatt-hours, while 37 accidents occurred in the network.
Weak payment discipline pushed accounts receivable to UZS 43 billion, of which UZS 9.4 billion represents non-recoverable or unsupported debt that is not linked to confirmed consumption or valid obligations.
In the district, 829 meters are incompatible with the ASKUE system and another 2,000 meters do not transmit data. At the same time, 48 enterprises that submitted zero tax reports consumed 871,000 kilowatt-hours of electricity over six months.
The gas supply system shows similar weaknesses. More than 5,000 gas meters do not transmit data, contributing to outstanding debt of UZS 188 billion. These figures point to the absence of automatic cross-checking between energy consumption data, tax reporting and the actual economic activity of enterprises.
“Regional Electricity Networks” employs 25,000 people, while “Hududgaz” employs 16,000 people. However, employees’ daily assignments, movements and completed work are not managed through a digital system.
As a result, labour productivity is 1.5–2 times lower than in comparable countries, while accident response takes 3–4 times longer. A large workforce therefore does not translate into high-quality service. The problem lies in the absence of standardised processes, automated resource allocation and results-based performance evaluation.
Currently, 3.7 million households use liquefied gas. Although the system has been digitalised, timely delivery has not yet been fully ensured.
In Andijan Region, 41,000 tonnes of liquefied gas were delivered over six months, compared with a planned 48,000 tonnes. Supply is behind schedule in 318 mahallas. At the same time, the private sector has imported 157,000 tonnes of liquefied gas since the beginning of the year.
This indicates that additional gas resources are available, but the delivery chain to households remains insufficiently open and competitive.
The use of standard 20-kilogram cylinders for all households also fails to reflect differences in demand. Some households require only 5–6 kilograms per month, whereas others need cylinders holding 30–40 kilograms. A uniform standard increases logistics costs and reduces the efficiency of resource allocation.
At present, 25 technical universities train 5,500 specialists in fuel and energy disciplines each year. However, because academic education is insufficiently linked to practice, graduates require 2–3 years to become fully effective in the workplace.
This reflects a gap between university curricula, laboratory facilities and the technologies used by energy companies. Over the next 2–3 years, demand is expected to rise for thousands of specialists in solar and wind generation, electric vehicle charging equipment and other emerging fields, requiring a rapid overhaul of the skills development system.
The Minister of Energy and the head of “Regional Electricity Networks” were dismissed because of serious systemic shortcomings. The heads of “National Electricity Networks”, “Thermal Power Plants”, “Transgaz” and “Hududgaz” were placed on probation until the end of the year.
The new Minister of Energy, Sherzod Khodjayev, the new head of “Regional Electricity Networks”, Sardor Isakulov, and the new head of the Energy Inspectorate, Akhad Isokjonov, were instructed to introduce a new operating model.
This decision signals a shift away from evaluating performance on the basis of expenditure and completed construction towards indicators such as the number of accidents, the duration of outages, network losses, outstanding debt and consumer satisfaction.
The role of regional and district governors will also change. They will be expected to take responsibility for territorial energy balances and the timely development of energy infrastructure, rather than treating energy supply as solely the responsibility of sectoral agencies.
A special task force will be established in Yangiyul District to ensure a stable electricity and gas supply for households and businesses. It will be headed by Minister of Energy Sherzod Khodjayev, with District Governor San’at Jumaniyozov serving as deputy head.
Within two weeks, the responsible authorities will assess the monthly, quarterly and annual energy needs of households and businesses in all 51 mahallas of the district. On this basis, a unified energy consumption balance will be prepared.
The balance will make it possible to compare actual demand in each mahalla with the capacity of existing transformers, electricity networks and gas distribution equipment. This will identify precisely where transformers need to be replaced, new lines constructed or gas distribution units upgraded.
Meters that are incompatible with ASKUE and ASKUG will be replaced, and continuous connectivity will be restored for devices that do not transmit data. This will integrate consumption, billing and payment information into a single digital chain.
A separate programme will be developed to reduce electricity and gas losses by two times. It will clearly define the share of funding to be provided by energy companies and the share to be financed through additional local budget revenues.
Large industrial consumers will undergo energy audits. Banks will provide financing for the introduction of energy-saving technologies. Stronger regulatory oversight will therefore be accompanied by financial support for technological modernisation.
Energy consumption in all kindergartens, schools, technical colleges, hospitals and clinics will be analysed and the facilities will be classified by consumption level. Heating systems in apartment buildings will undergo technical diagnostics.
Street-by-street work will be undertaken to reduce outstanding debt. All measures are to be completed by 1 October, after which Yangiyul is expected to become a model district for electricity and gas supply.
The management system piloted in Yangiyul will be introduced in all districts and cities of the country. Senior energy-sector executives will be personally assigned to one of the most problematic districts in each region.
Together with local governors, they will prepare an energy consumption balance, an infrastructure development programme and a loss-reduction plan for the assigned territory by the end of the year.
Members of the reform task force, Deputy Prime Ministers, ministers, executives of sector companies and bank managers will visit the regions to assess the electricity and gas problems faced by households and businesses.
For each territory, the government will specify the work to be completed by the end of the current year and during the following year, together with implementation deadlines and funding sources. This approach is intended to convert general instructions into practical programmes linked to a specific territory, asset, deadline and accountable official.
A Centre for the Digitalisation of the Fuel and Energy Sector and the Introduction of Artificial Intelligence will be established within the Ministry of Energy.
The Centre will conduct a stress audit of the entire generation – transmission – distribution – delivery chain, as well as the supply systems for coal, liquefied gas and fuel oil. Several development scenarios for the sector will be prepared on the basis of this assessment.
Scenario planning will allow the authorities to assess in advance the risks associated with rising consumption, extreme temperatures, fuel supply disruptions and the temporary shutdown of major generation facilities.
A system will be created to manage the daily work of every employee through a digital algorithm. This will make it possible to allocate emergency teams automatically, verify completed work and track maintenance activities.
ASKUE and ASKUG data will be analysed using artificial intelligence. The platform will automatically identify unusual changes in consumption, meter failures, illegal connections and discrepancies in reporting.
A total of 10 core KPIs will be introduced for 106,000 employees across the energy system. These will include emergency and planned outages, energy losses, accounts receivable, reserve capacity and implementation of maintenance programmes.
Employees will therefore be assessed not by the number of tasks formally completed, but by the impact of their work on supply reliability and economic efficiency.
There are currently 1,916 mahallas where the delivery of natural gas is difficult. The responsible authorities were instructed to calculate within three months the infrastructure and additional electricity required to convert heating systems in these areas to electricity.
A separate programme will be prepared for mahallas requiring priority financing.
This approach makes it possible to select the most technically and economically appropriate energy source for each territory instead of extending gas networks mechanically. However, electrification must be implemented together with new transformers, network capacity and generation reserves; otherwise, it could place additional pressure on the existing electricity system.
A pilot project involving private companies in liquefied gas delivery will be launched in Andijan Region.
Entrepreneurs will be allowed to supply households and businesses with liquefied gas that they import directly or purchase through the commodity exchange. Families included in the Social Registry will receive subsidies for liquefied gas purchases.
The mechanism is intended to expand competition while protecting vulnerable households from higher costs through targeted subsidies.
An “Andijan model” is to be established by the end of the year. Liquefied gas production is to be increased from the planned 520,000 tonnes to 606,000 tonnes.
The system for transporting, storing and distributing liquefied gas will be reviewed within one month on the basis of international experience and global standards. The use of cylinders of different sizes should align supply with actual household demand and reduce logistics costs.
University programmes in fuel and energy disciplines are to be fully updated within one month. Modernisation of laboratories and training facilities in line with new technological requirements will begin by 1 September.
From the new academic year, dual education will cover half of all third-year students and all fourth-year students. Participation in industrial processes during university education is expected to substantially reduce the current 2–3-year period required for graduates to adapt to the workplace.
Saudi Arabia’s ACWA company has equipped the Shirin Energy Technical College and trains 220 young people each year in new occupations. From the new academic year, this model will be introduced in one technical college each in Karakalpakstan, Bukhara and Navoi.
This mechanism broadens the role of investors beyond the construction of generation facilities by involving them in local skills development and the transfer of technological capabilities.
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