Ministry factors RAB "reboot" into Russia's macroeconomic forecasts
MOSCOW. Sept 23 (Interfax) - The growth of the tariff revenue of IDGC Holding's interregional distribution grid companies will be restricted to 12% as of July 1, 2012, and to 10% in 2013 and 2014, according to the socioeconomic development forecast that the Cabinet approved on September 21.
The Economic Development Ministry, which drafted this forecast, proposes to "reboot" RAB (regulated asset base) regulation by recalculating the basic parameters of long-term tariffs for divisions of IDGC.
Slowing the growth of distribution grid tariffs will become the main instrument to restrain the growth of end prices for electricity, which according to the macroeconomic forecast, will rise by an average of 6.5-7.5% for all consumers in 2012, and 3% for households (including an increase of 6% on July 1).
In the subsequent two years, end prices for electricity are expected to increase by 9-11% annually, going up for households by 8-9% in 2013 and 10-12% in 2014.
Besides rebooting RAB, the ministry is proposing another three mechanisms to restrain electricity prices: eliminating investment markups for nuclear and hydro power plants; scrapping indexation of fees for capacity (for delivery to households, "forced" and the most expensive generators); and imposing a price cap on capacity in the Siberia free power transfer zone. The latter measure contradicts a previously approved government resolution concerning free prices for capacity in three free power transfer zones: Central, Ural and Siberia.
The ministry forecast states that there should be an "increase in the tariff of distribution grid companies (taking into account payment for services of OJSC FGC UES and not taking into account payment of electricity losses) of 11% as of July 1, 2012, and no more than 9-10% per year in 2013-2014."
In regard to the FGC, price curbs are not specified. The previously approved increases for the company (26.4% in 2012) will certainly not be preserved, but the overall increase is greater than the general cap for grid companies - 11%, a source at the Federal Grid Company told Interfax.
The specific amount by which FGC rates will increase on July 1, 2012 is not yet known, a source at the Economic Development Ministry said. The main change in the regulation of FGC will be calculating the investment component of the tariff based on facilities actually built and used by consumers, rather than on declared plans. Consequently the rate increase will be calculated by the Federal Tariff Service (FST) taking into account facilities that FGC commissioned in the course of the year. Based on FGC statistics on the implementation of its investment program (99.7% of planned facilities commissioned in 2010, 99.8% in the first half of 2011), this factor should not have a major impact on rates.
The ministry forecast proposes to adjust FGC's investment program to move back certain projects to a later date "in order to increase the efficiency of capital investment." FGC's investment program currently totals 954.2 billion rubles for 2010-2014 and has not been changed yet.
There are no plans to change the basic parameters for calculating the tariff for FGC.
But things will be different for interregional distribution grid companies. "For IDGC, the parameters will have to be 'rebooted.' This is a forced measure, because the initial parameters [on the basis of which RAB was calculated - ed.] are higher than they could be," the ministry source said.
As an example of inflated parameters, he said that with the existing RAB in distribution grids the debt burden of IDGC will remain zero in the period to 2015, although the tariff presupposes borrowing for grid development.
The ministry is proposing to "reboot" by "reducing the estimate of the capital base, restraining growth of operating costs, bringing loss norms in line with the targets of investment programs." In addition, there may be a review of the return factored into RAB, but only for "old" capital. The authorities are now discussing whether to make the review general or individual (for the initial period of regulation) for each region.
All this will require another resolution to change the basic principles of prices in the sector (resolution 109). The ministry source said there are plans to approve this document before the end of 2011. Then regional energy commissions (REC) will have six months to adjust the applications of distribution grid companies and approve tariffs. RECs will have the freedom to select the instruments for restricting the growth of IDGC tariffs within the bounds of the level set by the macroeconomic forecast (11% for 2012), for example, reduce operating costs while maintaining capex.
"For other regional grid organizations [not part of IDGC] the transition to RAB must be carried out taking into account similar restrictions," the forecast states. As of 2012, all of these organizations will transition to long-term regulation (including with the use of the indexation method) and the rate of increase in their tariffs is not supposed to exceed the increases for IDGC.
In addition to grids, restrictions will also be imposed for the retail sector. The regulated revenues of retail companies are expected to increase by no more than the rate of inflation: by 6% in 2012, 5.5% in 2013 and 5% in 2014. In order to restrict the ability of retail companies to inflate retail prices in future, it is necessary to amend legislation, the socioeconomic development forecast states.
