THE FIRST MULTI-SIDED REGULATORY CONTRACTS ON GAS SUPPLY TO REGIONS ARE SIGNED

The documents are signed by Governors of the Rostov and Tyumen regions and subsidiaries of “Gazprom” PJSC

On 9 September, Head of FAS Igor Artemiev; Governor of the Rostov region, Vasily Golybev; Governor of the Tyumen region, Alexander Moor; General Director of “Gazprom Gazoraspedelenie Rostov-on-Don” JSC, “Gazprom Mezhregiongaz Rostov-on-Don” Ltd., Vladimir Revenko; General Director of “Gazprom Gazoraspedelenie Sever” JSC, “Gazprom Mezhregiongaz Sever” Ltd., Sergey Skornyakov signed regulatory contracts for gas supply in the regions aimed at gas infrastructure development.

Deputy Head of FAS Anatoly Golomolzin; Department Head, “Gazprom” PJSC, Vitaly Khat’kov; Deputy General Director of “Gazprom Mezhregiongaz” Ltd. for work with the authorities and regions,  Yuri Pakhomovsky also took part in the signing ceremony.

The main goals of the contracts include:

• Using additional funds from tariff gains by regulatory organizations (due to reduced operational costs) to develop gas infrastructure in towns and rural settlements;

• Formalizing and implementing all basic FAS principles in tariff regulation: applying long-term tariffs (no less than five years), “inflation minus”, using benchmarking to justify cost elements, excluding non-biding expenses, analyzing whether procurement comply with the Federal Law “On procurement of goods, works, services by particular types of legal entities” (No.223-FZ Federal Law);

• Pursuing the “one-window” principle in work with consumers;

• Decreasing the costs and the time period for connecting consumers to gas distribution networks.

Regulatory contracts provide for additional sources of financing, apart from special surcharges to tariff on gas transportation via gas-distribution networks to gas delivery in regions. These sources are determined in the course of approving the tariff for the next long-term period regulatory period (2019 - 2023 inclusive).

Igor Artemiev pointed out: “Tariff law allows special tariff surcharges so that this money can be spent under control by Governors to bring gas to towns and rural settlements. “Gazprom” has built a big pipeline to the communities’ boundaries, and there are situations now when pipelines have “plugs” because municipalities do not have money to design and pipe routing to houses, simply none. Regulatory contracts help solve the issue”.

He added: “We are opening a new page in tariff regulation because the new tariff law, for example, the Law on the fundamental principles of tariff regulation, which is submitted to the Government, provides for such contracts not only for gas but also network assets in the electric power industry, water supply and water drainage. All this enables regions to solve their social issues”.

5-year regulatory contracts in the Rostov region will help attract additional financing – 2.2 billion RUB for construction and reconstruction of 443 km of gas networks to deliver gas to around 13,000 households and 170 social facilities in 37 populated areas in the region.

Vasily Golybev emphasized that “today the Rostov region in general has a good gasification level – around 88%, but gasification in the region continues. The regulatory contracts bring gas “to the population”. The President has set the task, particularly, to “Gazprom” to undertake serious steps to complete this work. It is obvious, that in the Don area the agreement will bring particular results and benefits pretty quickly”.

In the Tyumen region, regulatory contracts will attract additional financing - 1.35 billion RUB in five years for construction and reconstruction of 1103 km of gas networks.

“The Tyumen region is sufficiently gasified but it still remains very important for our municipalities. In my opinion, trilateral agreements not only resolve some remaining issues but also create a precedent, formalize a modern, efficient gasification practice, which will be used in other regions. As a result of the signed trilateral agreement, the gasification level in the Tyumen region will reach 98%”, highlighted Alexander Moor.

Vitaly Khat’kov reminded about the National Competition Development Plan approved by an order of the President of the Russian Federation, which provides, in particular, for developing the gas market in Russia and said that “for “Gazprom” PJSC joint work with FAS and Governors of regions help us to additionally develop and have a new angle on regional balances. For us it is an opportunity to improve pricing, implement technologies with on-exchange trade scope. The project will start a new vector of gas market development and find this practice very positive and will propose to develop it in other regions”.

FAS proposals to conclude regulatory contracts in order to increase gasification rates are forwarded to all regions of the Russian Federation.