THE ELECTRIC POWER INDUSTRY AND THE HOUSING-AND-UTILITIES SECTOR USE THE MOST BREAKTHROUGH METHODS OF REGULATION

The conclusion was reached by the tariff regulation workshop that took place in the Moscow region on 5-6 March

The event was opened by Head of FAS Department for Regulating the Electric Power Industry, Dmitry Vasiliev. He pointed out that this industry is a “locomotive of transformations and reforms” among all sectors of the economy.

“To start with, the benchmarking principle will become a game-changing mid-term regulatory method. From July 2018 tariffs for power suppliers will be based on this mechanism. Staring from 2019, we expect that references will also apply to the integrated power grid”, said Dmitry Vasiliev. “But we do not intend to stop there. By 2021 the benchmarking principle will begin working for the electric power producers”.

Then he discussed improvements of consolidated balance forecast. Dmitry Vasiliev highlighted a “communications” problem: a company sends its offers to a regional tariff body, and later it does not have feedback about the status of its application. He added that a possible solution, covering, in particular, the above issue, is digitalization, which will enable to align liaison procedures between organizations and executive bodies of the Russian Federation on state tariff regulation.

Regulatory contracts will become another area of FAS work in the field of the electric power industry. “The parties to such contracts will undertake certain obligations: companies will assume to invest, and regions – to set long-term tariffs. If an agreement is not executed, each party will be held liable. In future it should become a priority method of regulation. If a contract is not concluded, tariffs for organizations should be determined on the basis of references”, explained Dmitry Vasiliev.

Another speaker was Alexei Matyukhin, Head of FAS Department for Regulating the Housing-and-Utilities Sector.

“FAS has defined the main areas of the national policy in the Housing-and-Utilities Sector, including: unified approaches in tariff regulation, optimizing expenses under a limited growth of  payments from physical persons, increasing transparency of natural monopolies and control over investment programmes”, underlined Alexei Matyukhin.

He gave examples of exceeding the maximum payment indices for physical persons and reminded the staff of regional tariff bodies that exceeding the maximum index is possible only in exceptional circumstances.

“Regional authorities should submit information about cases when indices can be exceeded and substantiate such cases to FAS in advance. We continue controlling the work of tariff bodies in the subjects of the Russian Federation and prevent violations”, confirmed Alexei Matyukhin.

The final report at the plenary session was given by Yulia Yudina, Head of FAS Department for Regional Tariff Regulation. She outlined the results of the control-and-supervision efforts by the Department.

“14 inspections were carried out, 4 of which were scheduled. Exercising our powers, we checked over 3600 tariffs. It should be noted that following the inspections FAS revealed that more than 7.5 billion RUB were put in tariffs of regulated organizations without economic justification”, reported Yulia Yudina. “In the tariffs for 2018, 3.9 billion RUB are already excluded from the necessary gross revenue of the regulated organizations”.

As for tariff disputes and disagreements, the heating supply sector is the “flagman” (95 petitions have been considered), the electric power industry – 71, water supply and drainage – 68 petitions.

Yulia Yudina discussed the draft Decree of the Government of the Russian Federation on unification and harmonization of investigation of pre-Court disputes and disagreements on tariffs. “The document is submitted to the Government and, hopefully, will be adopted in the near future”.

FAS representative also drew attention to the Findings of the Plenum of the Supreme Court of the Russian Federation. “The Plenum Findings apply to judicial disputes on paying for resources if a regulatory act fixing a regulated price is invalidated. The position of the Supreme Court is that when a regulatory act is invalidated due to an overrated tariff, a consumer, who paid the costs to the resource supplier in good faith, can act to collect the excess payment from the suppliers, particularly, covering the period, for which the Court recognized the regulatory act invalid”.

“Besides, it stems from the judicial practice of the Supreme Court that FAS can reverse decisions of regional tariff bodies from the beginning of the regulatory period, during which an unlawful regulatory act was in force. Thus, in March 2018 we can abolish a decision, for instance, on fixing a sales mark-up for the provider of last resort from 1 January 2018”, concluded Yulia Yudina.