THE GOVERNMENT SUPPORTED FAS PROPOSALS

At the moment, resource suppliers can include the costs of transferring utility payments in estimates of some housing-and-utility tariffs

On 5 September 2019, the Government of the Russian Federation passed a Decree [1], according to which the expenses of utility service consumers for payment services, rendered by banks and other organizations under the law of the Russian Federation, when such consumers make payments for utility services, cannot be included in economically justified costs of organization involved in regulated activities.

The document is drafted by FAS to execute 2018 – 2020 Road Map for competition development [2], approved by the Government.

The ban will, first of all, exclude unreasonable advantages for particular payment organizations and create conditions for developing price competition on the market of payment services.

At the moment, reasonable costs of regulated organizations estimating some utility service tariffs can include the payment costs for transfer utility payments by consumers. 

Including these costs in financial needs, suppliers of utility services and managing organizations enter in contracts with payment companies (credit companies, federal postal service organizations and payment agents). Under such contracts, payment services are paid by the suppliers and managing organizations.

The contracts are typically concluded with a limited number of payment companies and include a provision that payees (utility service consumers) should not be charged for making payments. Accordingly, consumers of utility services approach these organizations because they do not have commissions for making utility payments.  

At the same time, the law does not require to enter into such contracts.

These conditions form the situation when consumers of utility services are forced to approach the payment company, with which a supplier of utility resources has arrangements (to save funds), which causes artificial redistribution of consumer demand adversely influencing competition.

There are incidents when resource suppliers making arrangements with a limited range of, for instance, banks, included the costs of transferring utility payments form the population in the tariffs on non-transparent and overrated prices.

For instance, FAS exposed and suppressed violations when the tariff included the commission of payment companies for up to 7% from the transferred funds. No justification of such price was given.  

Under such circumstances m the population could pay for the housing-and-utility services only in those banks, with which resource suppliers had agreements. When people paid for the housing-and-utility services in other banks, they paid commissions twice: at the bank, with which no agreements were concluded, and as part of the tariff.

Deputy Head of FAS, Andrey Kashevarov commented the Decree: “The most important objective of the regulatory changes is to protect the interests of the population by eliminating the need to pay unreasonable or double commissions for making utility payments. We are confident that developing price competition in this aspect will be a stimulating factor for banks and other payment organizations, and they will decrease commission for transferring housing-and-utility payments”.

The purpose of the transitional period for the Decree coming into effect is established to create the infrastructure by regulated organizations enabling payments for utility services without commissions and reformatting the market of payment services in the sectors where regulated organizations operate.

The decree comes into effect in a year after it was published.

 [1] No.1164 Decree of the Government of the Russian Federation “On amendments to some acts of the Government of the Russian Federation” of 05.09.2019

[2] The second paragraph Clause 8 Section XIV “Financial Markets” of 2018 – 2020 Action Plan (Road Map) for developing competition in sectors of the economy of the Russian Federation and transition of particular sectors of natural monopolies for the state of natural monopolies to the state of competitive markets, approved by No. 1697-r Decree of the Government of the Russian Federation of 16.08.2018.