VITALY KOROLEV: FIRST ROAD MAP ON BENCHMARKING REGULATION OF HOUSING-AND-UTILITIES COMPLEX IS APPROVED

Government of the Russian Federation has approved the Action Plan on a transition of the housing-and-utilities complex to benchmarking in tariff setting

On 6 August 2019, Deputy Chairman of the Government of the Russian Federation, Vitaly Mutko, approved the Action Plan (Road Map) for a transition to tariff setting in water supply, water drainage and heating supply by the comparative method using benchmark values.

Deputy Head of FAS Vitaly Korolev said: “The housing-and-utilities complex is an essential sphere touching vital interests of the population in Russia and influencing the economy of regions. To improve the tariff-setting system and enhance transparency in the housing-and-utilities complex, a decision was made to adopt the Action Plan”.

The document was drafted upon the instructions of the President of Russia and is an important step towards implementing the benchmark costs methodin the housing-and-utilities complex.

“Adopting the document is a milestone event and the turning point for the concept of the housing-and-utilities complex to stop having a negative connotation among consumers. The measures of the Road Map, related to digitalization, openness and transparency of regulatory decisions, will help change the system radically”, explained Deputy Head of FAS.

The Road Map comprises 9 large-scale events for improving tariff regulation in the housing-and-utilities complex, with three important blocks of the work of FAS and the authorities.

The first block focuses on the methodology of applying benchmarks in the housing-and-utilities complex by developing and adopting a regulatory act, which will set the parameters for regulated organizations, the principles and the procedure of tariff setting with use of the comparative method using benchmark values (benchmarking), as well as the schedule for the document coming into effect in regions.

The second block concerns tariff estimates and use of the comparative method in setting corporate tariffs.

“It should be pointed out that the mechanism of setting tariffs based on the benchmarking principle already in place for providers of last resort. Due to benchmarking, tariff differentiation of the level of sales mark-ups by regions of Russia reduced from 10 to 2 times in 2018. Also, in July 2019 this principle was introduced for transit companies involved in water supply and drainage that own small parts of networks. In the near future, it will also be implemented in the electric gird complex. And the Road Map gives the green light for the housing-and-utilities complex”, informedDeputy Head of FAS Vitaly Korolev.

The third block is aimed at digitalization and provides for a package of measures to develop informatization of tariff regulation over the utility sector, which will make the housing-and-utilities complex open for consumers, and increase transparency and efficiency of regulatory solutions.

Deputy Head of FAS outlined: “The housing-and-utilities sector has a huge potential for digital processes, and tariff regulation is not an exception. Universal electronic profiles will be developed that regional regulators will fill in for every organization. They will contain all digital parameters of tariff solutions. These digital profiles will be analyzed automatically to search errors, potential violations or considerable deviations at the stage prior to tariff decision-making”.

“Later, elements of artificial intelligence can be added to tariff regulation over the utility complex to analyze the filed tariff applications. It can fully resolve the issue of a subjective approach in tariff regulation”, continued Deputy Head of FAS.

“The document is another step towards eliminating gaps in the pricing system in Russia. Several tariff “packages” have been drafted and adopted recently. For example, in June 2019 the Government of the Russian Federation passed Decree, which listed measures restricting a growth of payment levels for utility services. Now Heads of regions must get FAS approvals of their decisions on exceeding the maximum payment index for the population”, emphasized Vitaly Korolev. “AS for the electric power industry, on 2 August 2019 the President of the Russian Federation signed the law excluding the right of regional tariff regulators to exceed the maximum tariff levels for the services of electric power transmission services. Therefore, FAS-drafted regulatory acts are aimed at fuller protection of consumer rights and fair and reasonable service rates”.

“Now FAS, together with the authorities, continues exercising a fully-fledged set of measures towards a transition of the entire housing-and-utilities system, particularly, in water supply, water drainage and heating supply, to the benchmarking principles of tariff setting”, stressed Deputy Head of FAS.