Vitaly Korolev: introducing references for the costs of electric power suppliers will save 12.6 billion RUB

A draft Decree is already submitted to the Government of the Russian Federation

Recently the Economic Policy Committee of the Federation Council of the Russian Federation organized a Round Table to discuss improvements in regulating tariffs for electric and heat power.

As emphasized at the Round Table, lately a lot of efforts have been undertaken to create a favourable environment for consumers, and many regulatory acts have been assed to improve doing business.

In the first part of his presentation, Vitaly Korolev touched the issue of introducing cost references to set sales mark-ups for electric power providers of last resort. He explained that providers of last resort sell electric power directly to consumers, particularly, the population. “The main item of their expenses is operational costs: leasing premises, cost of labour, transportation, etc. FAS proposes to set the norms for the costs of production of such services and make sure that non-efficient costs are not included in the tariff. At the same time, it is expected that regional specifics should be factored in, for instance, remoteness of the service points”.

“In our estimates, introducing the reference method should generate a cumulative effect at around 12.6 billion RUB as reduced consumer costs for paying sales mark-ups”, continued Vitaly Korolev. “It will certainly concern, first of all, those regions where they were overrated significantly for a long period of time. For the regions where the mark-ups were very low, the model provides for increasing them and bringing them up to the average Russian level within a certain period of time, so that the situation is truly leveled and become comparable across different regions in Russia. At the same time smooth changing of the sales mark-ups, without sharp fluctuations, should be supported”.

Deputy Head of the Antimonopoly Service pointed out that the “difference in mark-ups across Russian regions currently reaches up to ten times: from six kopeks in Dagestan to 61 kopeks, for instance, in the Republic of Marii El. Evidently, such a differentiation prevents establishing any unified economic space”.

“In 2017 it is also planned to develop a mechanism of introducing reference costs  for the power grid complex, where the tariff difference is even more dramatic – up to 12 times”, added Deputy Head of FAS. “The impact of sales mark-up in the final price for consumers rarely exceeds single percentage points, but the network element equals to roughly half of the final payment. Therefore, changing regulation in this field has important consequences – enhancing the industry efficiency”.

FAS continuously controls and monitors the decisions made in the regions.

“For instance, through inspections FAS exposed pricing violations in 17 constituent territories* of the Russian Federation. Based on the inspections, the relevant tariff decisions were abolished”, stated Vitaly Korolev.

Deputy Head of the Antimonopoly Service also mentioned that 9 decisions on mark-ups for the companies – members of “TSN Energo” PJSC group of persons were abolished. In some cases the mark-ups for such organizations were considerably higher than in comparable regions of the Russian Federation.

Vitaly Korolev discussed FAS work in tariff regulation. In 2016 the Board of the Antimonopoly Service held 47 meetings where 8230 tariff decisions were made. Deputy Head of FAS pointed out that 7943 such decisions were made in the field of electric power industry.

Finally, Vitaly Korolev emphasized that considering the issues of developing heating supply and electric power industry plays an important role, especially, in view of FAS legislative initiatives.

“A broad discussion of FAS initiatives in the field of tariff regulation, especially on such a professional platform as the Federation Council of the Russian Federation, enables receiving valuable feedbacks from market participants as well as legislators. It becomes of special importance in light of a FAS-devised draft Federal Law on tariff regulation”, concluded Vitaly Korolev.

* The Republics of Dagestan, Khakassia, Maii El, Buryatia, Chechnya, and the Perm, Samara, Belgorod, Bryansk, Ryazan, Tula, Pskov, Murmansk, Kurgan, Volgograd, Kemerovo and Altai regions