Vitaly Korolev: FAS proposes to introduce antimonopoly control in the new heating market model

Deputy Head of FAS Vitaly Korolev outlined measures to be undertaken by FAS to develop the heat supply market, speaking at the Round Table of the “Vedomosti” newspaper on the “Future of District Heating Supply in Russia”.

To start, he explained: “The most pressing issues under discussion are tariff limitation; there is a maximum index for payment by the population that increases on average by 4% in Russia for already second consecutive year. However, if funds are required to modernize the heating networks, the index can be exceeded when municipalities make such decisions in accord with the established procedure. For instance, in 2016 approximately 2% of the population of Russia got increased tariffs”.

“The draft law on “alternative boiler-house”, devised by the Ministry of Energy, stemmed up from this situation. This method presumes possibility of deregulation in that field and determines the consumer price under the market principles”, emphasized Vitaly Korolev. “In the course of the discussion it was decided that it will be just one of the possible methods of regulation. When a subject of the Russian Federation is ready, it can shift to this method; but it is a right rather than an obligation”.

Vitaly Korolev said: “It should be noted that the method of tariff-setting for heat is based on “alternative boiler-house”, which is proposed for implementation under the frame of the heating supply reform. On the one hand, it gives possibility and means for new modernization projects, increases reliability of heating supply and construction of new facilities. On the other, we should watch whether relations within the approved heating supply scheme are formed correctly and whether prices are justified. The draft law is already adopted by the State Duma of the Russian Federation in the first reading”.

“FAS has prepared draft amendments for the second reading that establish antimonopoly control. We introduce special objects of antimonopoly control: prices and heat-load accommodation within the heat supply system”, continued Deputy Head of FAS. “FAS also proposes special control over integrated heat suppliers since they possess excessive market power. They simultaneously perform the dispatching function in the district heat-supply system, the function of integrated  buyer and the sale function.  Their dominant position on the market should be recognized. Such entities will understand that they are under special and through control. Abolishing strict tariff regulation requires strengthening market and antimonopoly control”.

Deputy Head of FAS stated: “Now we are discussing special liability upon integrated heat suppliers for breaching the law. For instance, companies should be deprived of that status after repeated antimonopoly violations”.

Vitaly Korolev concluded: “We hope that the mechanisms proposed by FAS will facilitate development of the heat supply sector and make this sector more attractive for private investments with competitive costs of services for consumers”.