FAS, GOVERNMENT OF BASHKORTOSTAN AND GAS SUPPLIERS CONCLUDED NEW REGULATORY CONTRACT

Agreement on the conditions of regulated activities is designed to attract additional financing to fulfill regional gasification programmes to accelerate them

The 5-year regulatory contract will help Bashkortostan to attract additional financing - 318 million RUB to construct and re-construct 127 km of gas networks for future gasification of 3000 households.

“FAS continues its efforts to conclude regulatory contracts with regions. In our opinion, contracts are a universal tool for the purposes of efficient gasification; they ensure interaction of gas companies with consumers under the “one-window” model and create incentives to decrease costs. It is essential that these issues are solved in line with the “inflation minus” principle of tariff regulation”, emphasized Head of FAS Department for regulating the Fuel-and-Energy Complex and the Chemical Industry, Dmitry Makhonin.

Background:

Regulatory contract provides for use additional financing sources, determined for the next long-term regulatory period (in 2019 - 2023 inclusive) apart from a special mark-up to the tariff for gas transportation via gas-distribution networks to gasify regions.

The main contract goals are:

• Allocating additional funds from tariff revenue by regulators (due to reduction of operation costs) for gasification of cities, towns and villages;

• Formalizing and implementing all basic FAS principles in tariff regulation: long-term tariffs (no less than 5 years), the “inflation minus” principle, benchmarking of costs elements, excluding non-binding costs, analyzing whether procurements comply with № 223-FZ Federal Law “On procurement of goods, works, services by particular types of legal entities”;

• Introducing the “one-window” principle working with consumers;

• Decreasing the costs and timeline for connecting consumers to gas-distribution networks.