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48 billion rubles overpay for electricity Russian consumers in the interests of the Far East next year - EastRussia |

Irkutsk
Ulan-Ude

Blagoveshchensk
Chita
Yakutsk

Birobidzhan
Vladivostok
Khabarovsk

Magadan
Yuzhno-Sakhalinsk

Anadyr
Petropavlovsk-
Kamchatsky
Moscow

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Tariffs for someone else's account

48 billion rubles will overpay for electricity Russian consumers in the interests of the Far East next year

The mechanism of interterritorial subsidies, designed to reduce tariffs in the FEFD, was the subject of heated discussions among consumers, RusHydro and relevant departments immediately after its launch in the 2017 year. The degree of disputes has increased this year - in the period of the formation of a new modernization program for Far Eastern thermal power plants. She suggests that business from other regions of Russia will pay more than 1,4 billion rubles for 300 gigawatts of new capacity in the Far East. to 2035 g. Especially for EastRussia, Nikolay Posypanko, senior consultant at VYGON Consulting, analyzes the situation.

Tariffs for someone else's account
Photo: shutterstock.com

Nikolay Posypanko

VYGON Consulting Senior Consultant
Since 2017, electricity consumers in the European part of Russia, the Urals and Siberia have been paying extra for tariff reductions for DFO businesses. The share in the final price for energy for the “West” is about 1,5%, and this mark-up has provided almost 60 billion in tariff support for the Far East in 2017 - 2018. The decrease in tariffs in the Far Eastern Federal District averaged 3,6 rubles / kWh, which, according to the Government’s plan, should contribute to the growth of investment attractiveness and the priority development of the macroregion.

So far, the technologically isolated territorial energy systems of the FEFD have been subsidized: such as the Kamchatka Territory, Chukotka, Sakhalin and the Magadan Region. Support was also received by industrial consumers of Yakutia, which is a part of the non-price zone of the wholesale market. But if, for example, in the Primorsky Territory or the Amur Region, the average regulated tariff will be at a level above the average Russian, the subsidy will be paid to these regions.


WANTED AS BETTER ...

Economically justified energy tariffs in subsidized territories, where there are practically no alternatives to diesel generation and expensive imported fuel, can exceed 100 rubles / kWh, and on average amount to about 20 rubles / kWh.

Such levels are obviously incompatible with economic development, since even the smallest enterprise in the 21 century cannot be imagined without the consumption of energy and heat. The benefits here look justified, but the implementation of the subsidy mechanism raises questions.

The adopted configuration of the interterritorial subsidy does not ensure targeting; all consumers receive support regardless of the share of energy costs and the value of the final tariff. Only 13% subsidies (3,1 billion rubles) in 2017 were aimed at reducing reasonably high (7,3 –100 rubles / kWh) tariffs in isolated areas to the level of 7,2 rubles / kWh. This value corresponds to the maximum price of energy in the price zones of the WECM. The bulk of the funds spent on the reduction of tariffs below the level of marginal prices in the European part of the Russian Federation.

Another weak point of the subsidy mechanism is that the tariff support for the Far Eastern territories, although it is targeted, but not all of it reaches the final consumers. Tariffs for the business of the Far East decreased once - in 2017, and since then they have been growing at a national rate. The subsidy for the DFO in 2018 increased almost in 1,5 times (from 24 to 35 billion rubles), and in 2019 it could reach 48 billion rubles. (+ 37%).



The increase in subsidies is not due to the dynamics of energy consumption, but, above all, to the rising costs of Far Eastern energy companies. So, for example, only by the end of 2017, the RusHydro Group increased fuel purchase costs by 15% (+ 7,4 billion rubles).

The rise in fuel prices is not always economically justified, and FAS of individual regions of the Far East are already forced to initiate cases on suspicion of anti-market collusion in the amount of hundreds of millions of rubles.

Another direction in the use of targeted subsidies for the wholesale market has been the replenishment of regional budgets. The WECM subsidy has in fact reduced the burden on regional budgets for 8 billion rubles.



Thus, in 2018, no more than 60% of the funds collected on the WECM actually went to the reduction of tariffs from the levels in force until the start of the support mechanism.



NOT AVAILABLE NETWORKS

The purpose of the mechanism of tariff subsidies in the FEFD is to increase the investment attractiveness of the region. But in practice, a temporary tariff benefit is primarily useful for an already operating business and regional energy companies. Large-scale construction projects or the expansion of energy-intensive industries are more important conditions and timing of access to the power grid infrastructure.

To join the centralized power supply, businesses today have to either independently build hundreds of kilometers of electrical networks to the locked capacities of the Far Eastern hydroelectric power plants, or wait for years to include the necessary power lines in federal targeted programs. Technological connection can cost up to 50 thousand rubles / kWh and take at least 2 – 3 years. At the same time, the investments of the operating energy companies, including RusHydro, are directed primarily to the southern regions of the Far East, where the infrastructure is more developed and no subsidies are yet required.

In such conditions, the choice of autonomous power supply becomes justified, and it is the development of the centralized energy system of the Far East that is the key to reducing the total cost of electricity.

For the advanced development of the energy sector in the region, it is necessary to simultaneously solve two problems: attract private investment and reduce energy prices. In the Far East, this can be done by creating an attractive public-private partnership mechanism for building infrastructure. Increasing the coverage by the power grids of the colossal territories of the FEFD will make it possible to replace part of the expensive diesel output, use almost 1 GW of unclaimed capacities of Magadan hydropower plants and increase the useful supply of energy through the accession to the networks of new enterprises.

TARIFF FRONT

If in the Far East electricity tariffs are fully regulated by the state, then the rest of Russia has a competitive wholesale market infrastructure (WECM). Large generators and wholesale buyers on the WECM submit counter orders for the sale and purchase of energy and power, and prices are formed on the basis of the principle of equilibrium of supply and demand.

In such a competitive power system, payment for the Far East, although it is mandatory, is perceived by individual consumers as a non-market and unfair mark-up. Therefore, it is important to pay special attention to the effectiveness of the tariff equalization mechanism and its transparency. The funds that can be accumulated at the expense of the national wholesale market are limited and should not stimulate local energy companies to inflate costs, but be spent targeted at effective and most important projects for the development of the region that will reduce the cost of energy. Only in such conditions, the Far East of the recipient of subsidies can turn into a driver of growth of the Russian economy.

A full study of VYGON Consulting on the situation with Far Eastern tariffs can be viewed. link.