New FAS tariff policy is the topic of the day
On 3 March 2017, at a workshop on the pressing issues of tariff regulation Deputy Head of FAS Anatoly Golomolzin made a report about “Tariff regulation: current practice and the prospects of a new tariff policy”.
Deputy Head of FAS said that in 2015 – 2016 decision-making on setting prices (tariffs) for FAS-regulated infrastructure organizations conformed to the procedure and timeframe established by the law of the Russian Federation. Among specific features of FAS work at this stage he mentioned involvement of Service Consumer Councils on the regulated sphere of activity in FAS Board meetings and launching long-term tariff policy. Establishing FAS Methodological Council on Tariff Regulation and the Exchange Committee are important for the new tariff policy. Normative legal acts on tariff regulation are boding analyzed and amended.
Anatoly Golomolzin pointed out that stability of the government tariff policy is facilitated by use of the accumulated experience of the Russian Ministry of Antimonopoly Policy on tariff regulation in the fields of communications and transport as well as the experience of FAS representatives participating in the work of the Board of the Federal Tariff Service and the Boards of the Regional Energy Commissions. The new quality of tariff policy is emerging due to the synergy effect simultaneously with employment of FAS competence in supervising observance of Nos. 44-FZ and 223-FZ Federal Laws (procurement for public needs, the needs of the companies with state participation and natural monopolies); continuous control over the Rules for non-discriminatory access (No. 135-FZ Federal Law); practice of suppressing violations of the antimonopoly law by natural (No. 135-FZ Federal Law). Traditional FAS practice of ensuring access of interested persons to information is being extrapolated to the tariff decision-making procedures; the common economic space is under development at the federal and regional levels.
The main areas of the new FAS tariff policy include state-by-stage elimination of cross-subsidies; rejecting the “costs plus” principle and a transition to market indicators using the “inflation minus” principle. Decisions on introducing, amending, terminating regulation are made on the basis of performance analysis of regulated organizations and – which is of principal importance – on the basis of market analysis. State-by-stage tariff overbalancing, with use of market indicators, comparable to the regulated and adjacent markets, takes place. A long-term tariff policy is being launched. “It is done not only in view of the existing longstanding lifecycles of infrastructure facilities”, pointed out Anatoly Golomolzin, “but what is essential, factoring in the ongoing prospective changes on the regulated and adjacent markets, based on the need to ensure a long-lasting sustainable growth of the economy in general”.
Anatoly Golomolzin said that tariff decisions made in 2016 encouraged economic development and favourable social-and-economic trends in Russia. For instance, gas prices for business did not change against the conditions on the domestic and international markets and macroeconomic restrictions; the growth for the population was 2%. The electric power prices on the wholesale market went up by 6.5% (mainly due to the capacity payment with insignificant price changes on the competitive wholesale market). The tariffs of grid companies for all consumer categories, except the population, increased by 5%. The growth index for public payments for the housing & utility services did not exceed 4%. The oil transportation services became more expensive by 5.76%. Freight railway tariffs grew up by 9% (while the effective rate was no more than 7.5%). The railway passenger tariffs went up by 4%.
The speaker gave practical examples of the long-term tariff regulation policy, applying flexible tariff decisions and deregulation in the field of communications, railway transportation, airport and seaport services, the electric power industry, developing the system of on-exchange trading on the market of oil products, gas, etc. The Transport Minister of the Moscow Government, Liksutov; a representative of St Petersburg Governor in Moscow, former Head of St Petersburg Water Supply and Waste Water Treatment Enterprise, Karmazinov; top executives of specialized FAS Departments and the regional tariff bodies also underlined the main issues and directions for improving the tariff regulation mechanisms.
Deputy Head of FAS Vitaly Korolev discussed the changes in regulating the electric power industry, the housing & utilities sector, and municipal solid waste treatment; and highlighted the issue of reference mark-up estimates. Vitaly Korolev emphasized: “In February 2017 the document on adjusting the mark-up principles based on the reference method was submitted to the Government. The work is practically finalized and it is expected that the document will be passed already in spring to be used in tariff regulation for the next period”. “In the past year FAS undertook efforts to form the regulatory framework for solid waste treatment”.
Deputy Head of FAS Sergey Puzyrevsky also commented on the concept of the new tariff regulation: “The tariff-setting procedure lowered for sub-legislative regulation and issues are raised with regard to the tariff-setting procedure in general. Tariff regulation in most fields is executed in the “manual mode” and under such an approach tariff discrimination is inevitable”.
FAS Methodological Council further discussed tariff regulation: representatives of the Regional Energy Commissions from all Russian provinces made reports and put forward proposals on the current issues and result-oriented tasks that should be solved jointly with the antimonopoly authority. “Tariff regulation has become the “topic of the year” in the annual FAS Report for 2016. The same document (a draft is published on FAS web-site) outlines the strategy of the new FAS tariff policy under discussion”, concluded зам Deputy Head of FAS Anatoly Golomolzin.