RUSSIAN GOVERNMENT PASSED A DECREE TO IMPROVE TARIFF REGULATION OVER WASTE TREATMENT

The FAS-drafted acts is another step to improving the tariff law and increasing the quality of regulation

№ 1386 Decree of the Government of the Russian Federation of 29 October 2019 is a logical continuation of FAS efforts to decrease the tariff burden, particularly, to reduce payments for adverse impact on the environment [1].

The act will enable balanced tariff-reducing decisions. Tariffs will go down because the estimated profit margin will be based on a narrower basis, excluding profit tax and the environmental impact fee.

The Governmental Decree specifies that the size of the payroll budget must be determined in accord with the planned and (or) actual level of the payroll budget and official statistical data about the average wages and salaries in a region for particular types of economic operations in view of the forecasted consumer price index.

The Decree clarified approaches to calculating depreciation of fixed assets and intangible assets of regulated entities for the purposes of tariff setting. Depreciation will be determined based on the maximum useful life of fixed assets (similarly to the electric power industry regulation).

A new procedure for payback on capital maintenance (amortization)) is put in effect. For the facilities built with budgetary funds, such payback shall be included in the tariffs only win case of targeted allocation of the funds for constructing new facilities or modernizing the existing ones. The new procedure will stimulate investments in the fixed assets of regulated entities.

Deputy Head of FAS Vitaly Korolev commented the Decree: “The Governmental act will increase the quality of tariff regulation, make it more transparent and predictable. FAS expects that the measures specified in the Decree will decrease the tariff burden upon consumers already in the near future”.

Background:

Housing-and-utilities tariffs were decreased in some regions of Russia by FAS orders.

For example, FAS ordered a regional tariff regulator to remove unreasonable costs form the tariffs in the Sverdlovsk region.

FAS also emphasized increased heating- and water supply tariffs for the residents of several localities in the Omsk regions. The Regional Energy Commission failed to set reduced charges in 2018 for heating energy supplies in the rural areas, breaching the ban for exceeding tariffs in H1.

[1] № 255 of the Government of the Russian Federation of 03.03.2017 (the version of 29.06.2018) "On calculating and charging the environmental impact fee" (together with the Rules for  calculating and charging the environmental impact fee)