Fighting for light: battle over electricity tariff lost

Fighting for light: battle over electricity tariff lost

YEREVAN, July 2. /ARKA/. Armenia’s Public Services Regulatory Commission (PSRC) considered increase of energy tariffs for population and economic entities at its meeting on Tuesday July 1. Discussions over the issue started one month before the critical meeting; parliament hearings were held and activists were protesting against the increase. The frenzy over the issue is natural: tariffs are raised to make up for the financial gap of 20 billion drams in the energy sector as no other means could be found.


‘Morning’ activists
Since early morning on July 1, activists had been gathering outside the PSRC’s building to protest against the increase. Large police contingent arrived at the place. Reporters had to go through a double control before getting into the meeting hall.

The meeting hall was packed to the last seat, having hosted not only the PSRC members and representatives of energy companies, but also parliament deputies from five factions, human rights and consumer rights activists and representatives from over 40 mass media outlets. Activists kept whistling and bawling outside the building, chanting ‘shame’ and trying to catch the ear of the audience in the hall.


Decisions and justifications
The commission started considering the matters on the agenda amid shouts from the crowd. The head of monitoring over licensed operations and investments programs at the PSRC Abgar Budaghyan presented the permissible limits of losses within the network suffered by Electric Networks of Armenia. In particular, the commission proposed to reduce these limits from the current 12.4% to 11.2%. The company makes no targeted investments in the network to ensure the reduction of losses and directs main investments to maintenance and technical replacements, which has an indirect impact on loss levels. Yet, Budaghyan said, losses (17% in 2003) reduced substantially.

The next issue on the agenda was raising the tariffs for consumers. Head of tariff policies at the commission Garegin Baghramyan said the companies had a financial gap of 20 billion drams, and the electricity tariff for population should be increased by an average of 3.85 drams to fill the gap caused by the long-lasting standstill of the Armenian Nuclear Power Plant due to repairs, by a dry year leading to lower (by 200 mln kwt-hours) energy production at Vorotan and Sevan hydro power plants. Apart from this, Yerevan Thermal Power Plant needs an overhaul scheduled for 2014-2016 and loan funds used for construction of a modern steam-gas power unit should be paid back. Apart from this, deep boreholes should be construction and additional measures taken for meeting the nuclear safety rules at the nuclear power plant.

Finally, the PSRC raised the tariffs for consumers for electricity produced by Electric Networks of Armenia to 41.85 drams per kilowatt-hour in daytime (from 7:00 to 23:00) compared to the current 38 drams, and 31.85 drams per kilowatt-hour at nights, compared to the current 28 drams. The decision comes into effect on August 1, 2014.


Which country has the highest energy tariff?  
The studies by the PSRC showed the electricity tariff for consumers in Armenia will be 38.5drams per kilowatt-hour (including VAT) after the increase. At the same time, the electricity price now is 39.06drams per kW-hour in Georgia, 48.75drams per kW-hour in Moldova, 65.13 drams per kW-hour in Turkey.

Electricity tariffs for non-household customers in these countries are still higher than the new tariffs in Armenia. In particular, the tariff for economic entities is equivalent of 36.35drams per kW-hour in Georgia, 55 drams in Moldova, 52 drams in Turkey, 70 drams in Lithuania, 75.71 drams in Estonia. It will be, on average, 35 drams per kW-hour in Armenia after the increase.


What do companies in the sector think?
Yevgeniy Bibin, general director of Electric Networks of Armenia was the only one to speak up on the issue. He said the company was guided by its license and was monitored by the regulatory commission on a constant basis. He said he was aware that about 11% of customers received poor energy supply due to lack of investments.

There are no sufficient resources for investments requirement for enhancement of the quality and reliability of energy supply, Bibin said. He refuted allegations about the company’s staff receiving unreasonable high salaries adding the pay is calculated by the regulator and used in the tariff formula. The average salary included in the tariff today is 200,000 drams, which is not very high bearing in mind the field the company is engaged in, Bibin said. He said the company is going to make an upward revision of pay.  

The opinion of politicians and activists
The representatives of five parliament factions at the meeting have expressed their concerned over the increase of electricity tariffs. Each of parliament deputies urged the PSRC to postpone the vote on the draft decision and let additional time for further studies.
Member of parliament from Prosperous Armenia Mickael Melkonyan said the PSRC should have prevented the financial gap and should have revised the tariffs in advance. At the same time, the government who owns the Armenian Nuclear Power Plant and the Yerevan Thermal Power Plant should have found alternative financial sources to ease burden on consumers. No doubt, the authorities may simply ‘put pressure’, but a reasonable solution should be found instead, he said.
Member of parliament from the Armenian National Congress (ANC) Aram Manukyan said the increase is not justified due to low solvency of the population and high poverty line. According to the deputy, the tariff increase will lead to reduction in number of subscribers, poverty rising even higher, problems in demography and security of the country.
Member of Orinats Yerkir faction Hovhannes Margaryan said the tariff hike will lead to increase in prices for other services, including water.
The chairman of the PSRC Robert Nazaryan suggested inviting the civil society activists to the hall to avoid extreme tense between them and the police outside the commission building. The protesters invited into the hall said the energy companies set a dangerous precedent of using any excuse for raising tariffs.


PSRC’s stand
Members of the commission voted for the tariff hike unanimously. In summarizing views expressed, the head of the commission Robert Nazaryan said himself he opposed the increase, yet, he said, ‘every public servant should perform his duties’, and that is what the commission had done. PSRC has studied the matter thoroughly and made a decision to raise the tariff.
Nazaryan said if the tariff remained unchanged, the losses in Armenia’s energy system would be 1.5 billion drams every month, and a final decision was required. It is the first big debt in the energy system over the last 11 years, and loss reports started arriving in the commission from the companies back in December 2013. Nazaryan also expressed concerns that energy tariff hike will lead to increase in prices for commodities.
The PSRC has no tools to mitigate the increase for the population, but the energy system may collapse if the tariff is not increased. The latter is of higher importance to the commission than the social burden which needs to be dealt with by the respective agencies, Nazaryan said.
According to Nazaryan, the PSRC had no powers to seek alternative sources to fill the financial gap, but did its best to deliver the message to the parliament and the government.
The head of the commission also said the PSRC will be ready to revise the tariffs before August 1, if the respective bodies found the required means. ($1 – 407.28 драма). N.V. –0--

14:39 04.07.2014

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