Russian State Duma approves law on regulatory contracts in gas supply

MOSCOW. Dec 17 (Interfax) - The State Duma has approved a law at its third reading that enshrines the practice of concluding regulatory contracts between government authorities and gas distribution organizations in the law on gas supply in the Russian Federation.

The document (no. 508638-8) was introduced to parliament by senators Andrei Kutepov and Ivan Evstifeyev in December 2023.

According to the adopted law, tariff regulation for gas transportation services through gas distribution networks can be carried out on the basis of regulatory contracts. The procedure for concluding these contracts will be determined by the Russian government. The contract is concluded between the federal executive body responsible for tariff regulation, the highest executive body of a Russian constituent entity and the gas distribution organization. The contract's duration is to be no less than three years and no more than ten years.

Regulatory contracts are already provided for in Russian legislation for the electricity supply, water supply and wastewater sectors.

A regulatory contract in current legislative practice is an agreement between a government body and a regulated organization, in which the regulatory framework for tariff formation is fixed for the entire contract term in exchange for investment by the regulated entity.

It became possible to conclude regulatory contracts in gas supply from September 2021, when government resolution no. 1549 of 13.09.2021 was issued, which removed the stipulation that the Federal Antimonopoly Service (FAS) should not consider costs related to constructing gas transportation and distribution network facilities, as well as expenses for implementing interregional and regional gas infrastructure development programs for housing and utilities, industrial and other organizations, when setting regulated tariffs for gas transportation services.

"Since 2019, agreements (regulatory contracts) have been concluded in the field of gas supply between the FAS, the heads of more than ten Russian constituent entities and gas distribution organizations (including in the Vladimir, Tyumen and Rostov regions, Perm Territory and the republics of Bashkortostan and Tatarstan)," the explanatory note said.

"The introduction of regulatory contracts in the gas supply sector will allow for regions' faster gas infrastructure development by attracting additional sources of financing for regional gas infrastructure development programs and ensure regions' socio-economic development and the efficient functioning and development of the economy by expanding gas distribution and consumption networks, increase gas supply volumes while ensuring established reliability and quality service parameters and balance supply and demand," the document's authors said.

The law will come into force on September 1, 2025.