Reference standard as a tariff-reduction method

28-07-2017 | 09:04

FAS continues its course towards implementing advanced methods in tariff regulation

On 21 July 2017 the Government of the Russian Federation passed a Decree1 introducing new rules of sales mark-ups of power providers of last resort using the analogue comparison method.

The main objective of the so-called “reference costs method” is to stimulate power sellers to enhance efficiency.

Deputy Head of FAS Vitaly Korolev said: “Now companies do not have incentives to buy electric power cheaper since saving leads to decreased income.  FAS has several cases when power suppliers deliberately purchased electric power more expensively. Such actions led to increased prices on the wholesale electric power market. The price for purchasing electric power on the wholesale market is directly translated upon consumers. For instance, several years ago, the antimonopoly body issued an injection for such violations to guaranteed electric power providers for transfer over 1.2 billion RUB to the federal budget. Courts supported our decision”.

“Now, the cheaper a guaranteed provider gets electric power, the more attractive its services will be for consumers. According to expert estimates, introducing the reference method will save consumers more than 12.65 billion RUB within three years on sales mark-ups”, added Deputy Head of FAS.

“New approaches proposed by FAS and approved by Russian Government estimate mark-ups for an energy supplier based on unified cost value per deliver point. They will be set in the format: kopeks per kW/k, rather than some intricate formula”, said Vitaly Korolev. “If a company continues reducing the costs against the reference, it can keep the saved funds”.

Currently the difference in sales mark-ups reaches up to ten times: from six kopeks in the Republic of Dagestan to 61 kopeks, for instance, in the Republic of Mari El. Such differentiation obviously does not support the principle of common economic space, formalized in the Constitution of the Russian Federation.

“The size of sales mark-ups will be without sharp fluctuations”, explained Vitaly Korolev. “FAS has already drafted the guidelines to calculating sales mark-ups of the guaranteed providers using the reference costs methods. In three months the methods comes into effect. Reference costs mark-ups will be set from 1 July 2018”.

In August 2017 FAS Expert Council on Electric Power Industry will discuss, jointly withy representatives if the business community, experts, consumers and the authorities the draft guidelines on calculating sales mark-ups of the guaranteed providers using the reference costs methods.


1 No. 863 Decree of the Government of the Russian Federation “On introducing changes to some Acts of the Russian Federation  on sales mark-ups of the guaranteed suppliers using the analogue comparison method and invalidating Paragraph 2 Clause 11 of No. 1178 Decree of the Government of the Russian Federation of 29 December 2011” of 21 July 2017