Anatoly Golomolzin: how to form efficient market and improve the tariff policy, solving the current problems
Deputy Head of FAS discussed in detail methods of tariff regulation and listed the preconditions for deregulating some sectoral markets.
Anatoly Golomolzin believes that telecommunications is an example of the best tariff regulation practice, flexible tariff plans, development of competition in long-distance communications and preconditions for deregulating landline communications in general.
He pointed out that seaport deregulation encouraged the growth of transshipment and competitive ability of Russian companies in comparison with the neighbouring countries. Deregulating airports of Moscow hub did not hamper two-digit annual increase of air carriage in the past several years. Deputy Head of FAS thinks that in this field perhaps it’s worth to have a new approach as to who should be considered natural monopolies. Rather than seaport and airport operators, they can be owners (operators) of infrastructure facilities, and accordingly, mooring berths and runways.
Anatoly Golomolzin also trusts that deregulation should be accompanied by changes in contractual relations between airports and airlines, seaports and users of their services. Tariff decisions should be made on the basis of negotiations and long in advance of the forthcoming navigation period to enable changing suppliers of deregulated services. Reliable and correct information about prices in adjacent markets is also very important. FAS studies on representative airfare quoting on comparable routes once again are in demand.
Deregulating passenger railway transport facilitated investments in new rolling stock, developing new services with use of “Sapsan”, “Lastochka” trains, and luxurious trains. Dynamic pricing contributed to the annual 10-11% increase of passenger flow in the past three years. In ten years following deregulation of the car supply services, one third of the freight fleet is modernized, more than 1 billion RUB investments were attracted, and development of railway machine-building was supported.
Deputy Head of FAS points out that rather than targeted support for particular car manufacturers or restricting car service life, the achievements can be reinforced by developing the business-model, introducing regular freight traffic, creating a platform for on-exchange trading for the carriage services and rolling stock provision, establishing a Market Council on railway transportation.
“FAS has done a lot to break the vicious circle of increasing expenses, reducing gas supply volumes and gas transportation services and increasing tariffs. On the wholesale market prices change under the “inflation minus” principle, and on the regional markets after reviewing the tariffs the question now is already about cutting down the tariffs for gas-distributing organizations and sales mark-ups by 5-10%. At the same time, objective on- and off-exchange quotations are formed as well as gas indicators on comparable foreign markets. Success of the long-term tariff policy will be formalized under the frame of regulatory contracts, possibility of which is now under discussion with a number of regions (Tyumen, Perm, Rostov-on-Don, Crimea and Sebastopol, etc.), informed Anatoly Golomolzin.
In the electric power industry commercial infrastructure (the “Council Market” NPO and its subsidiaries and affiliates: “ATS” OJSC and “TsFR” OJSC) is formed only on the competitive wholesale market. It covers only operations of 300 wholesale market participants. The main part – 3.4 million entities – electric power is not covered by competitive relations. A major inefficiency is formed in investments. The share of costs for networks is two times higher than similar figures for developed countries. More than 40 000 MW are kept on balance and paid by consumers (30-40% over the required reserve) of electric capacity, part of which is forced generation. The costs of building up electric power capacity in Russia has increased twofold and is twice as high as the costs of construction in developed countries.
Anatoly Golomolzin criticized the initiatives of the Ministry of Energy on the mechanisms of creating new generating capacities. Head of FAS Methodological Council believes that the choice should be not only between generation projects but also between networks and consumers. The latter are already choosing to the benefit of distributed generation that is developing faster that the “big” energy. It is the shortcomings of the current market model that do not allow engaging the efficiency potential of power-and-heat supply.
Anatoly Golomolzin believes that providers of last resort and forced generation are market rudiments. Not only and not so much selling electric power, providers of last resort exercise rather the functions of commercial infrastructure. Under the normal rules of the game on organized markets, this is the function of a goods delivery operator involved in market accounting and balancing. Part of those functions can be exercised by networks, as an element of commercial infrastructure.
“Earlier, based on the discussions at the field session of FAS Methodological Council on Tariff Regulation in Nizhny Novgorod a decision was made to form a joint project office to draft proposals on developing competitive relations and improving investment activities in the electric power industry and heat supplies. The Conference once again confirmed the interest towards joint work and expanding the range of participants. The task is to be able to form efficient market and tariff policy, solving out the current issues in the electric power industry”, summed up Anatoly Golomolzin.