The Head of FAS Igor Artemiev outlined the main directions of the intended tariff reform in Russia

The Head of the Federal Antimonopoly Service (FAS Russia) Igor Artemiev started his speech at the workshop on “Tariff regulation in 2016 and the objectives of the regulators for 2017” on 20 October 2016 in Yalta with discussing the current issues in the field of tariff regulation.

“FAS is not a novice in tariff regulation. Earlier the FAS predecessor – the Ministry of Antimonopoly Policy – dealt with it, so there is continuity”, said Igor Artemiev.

The Head of FAS stated that the basic principles of tariff regulation in Russia are being laid and FAS is drafting the Law “On the Basics of State Regulation of Prices (Tariffs) in the Russian Federation).

“Currently the tariff policy is discriminatory. One economic entity could set particular tariffs while another was allowed to set them higher. We are for full transparency and accessibility of information, everybody should understand how tariffs are formed”, pointed out Igor Artemiev.

“The difference in sales mark-ups varies by ten times across the regions, with eight-fold discrepancy in the grid costs efficiency. Why do consumers in one region pay 8 times more than in another region? It is unacceptable!”, insists the Head of FAS.

According to the Head of the antimonopoly body, it is a mistake to rely on the cost principle, the fictitious and unverifiable “tariffs from costs” principle, and it should be replaced with other methods.

“Setting the costs of billable services below the inflation level, the state uses its tariff policy to create favourable conditions for consumers and enable business development, particularly, for small and medium entities. Companies should reduce their costs and get rid of non-core assets”, stated Igor Artemiev.

The Head of FAS said that cooperation between federal and regional tariff regulators is being discussed.  “One of the ways is to subordinate the Regional Energy Commissions to FAS. We will try to persuade the Government of the Russian Federation that it is should not be done. However, accountability of the Regional Energy Commissions should be enhanced. In particular, the Heads of the Regional Energy Commissions must have specialized education, sit official examinations every five years, while FAS should have the right to abolish unlawful tariff decisions of the Regional Energy Commissions and be able to set tariffs independently in case of omissions by a the Regional Energy Commission”, believes Igor Artemiev.

Igor Artemiev raised an issue on entrepreneurial profit of regulated organizations. “Today entrepreneurial profit is put at 5% regardless of company’s performance.  We propose to reduce the guaranteed part to 1%; however, companies can reach 5% by enhancing performance efficiency, and cost saving while maintaining the quality and scope of services. Therefore, in 5-10 years the costs can be reduced and investment attractiveness of companies can be increased”, considers Igor Artemiev.

These ideas are put in the draft Law “On the Basics of the State Regulation of Prices (Tariffs) in the Russian Federation”, devised by FAS.