Heating main plan for a brighter future – Newspaper Kommersant No. 21 (7466) of 02/06/2023

The Ministry of Economy proposes to regulate more strictly the need to develop investment programs in heat and water supply, fixing their obligatory nature in cases where the resource supply organization (RSO) is a guarantee, implements a concession or depreciation of its fixed assets is above 50%. At the same time, the targeted use of depreciation funds is introduced. Market participants and experts believe that this could exacerbate the problems of unprofitable RNOs – instead, economic incentives for investment are needed.

The Ministry of Economy has prepared a bill tightening the regulation of investments in water and heat supply. Now, the department notes, the law does not establish a direct obligation for the North Ossetia and regions to develop and approve investment programs – as a result, according to the Ministry of Economy, only 6% of organizations in heat supply, 4% in water disposal and 2.5% in water supply have them. The project introduces a list of situations when the presence of an investment program is mandatory for suppliers of communal resources: within the framework of the implementation of heat or water supply schemes, if the RSO has the status of a supplier of last resort, when implementing concessions or when the accumulated depreciation of fixed assets is more than 50% (then the implementation of measures without an investment program is allowed only in emergencies or accidents). Control over the implementation of investment programs will also be strengthened. The need for this is connected with plans to modernize housing and communal services with a significant lack of investment in the industry and high wear and tear of networks (in water supply – about 40%, and in heat supply – about 30%).

The use of the depreciation included in the tariffs is planned to be targeted – with a closed list of possible expenses. According to the Ministry of Economy, now about 50% of depreciation is not directed to finance investment programs – according to the project, these funds can be spent on the investment program, the return of external investments, the repair of fixed assets with wear and tear of more than 80% and the elimination of accidents. Taking into account the risks of cash gaps due to consumer debts, it is allowed to use up to 10% of depreciation to create a reserve for unforeseen expenses.

Elena Dovlatova, Executive Director of the Russian Water Supply Association (RAWW), believes that the authorities are “trying to regulate” issues that do not require it – “almost all self-respecting water supply organizations” have approved investment programs, the question is rather in their quality and execution, and the use of depreciation is already regulated Tax code and legislation on accounting. More useful, she believes, would be to extend the accelerated depreciation and property tax benefits for new facilities in the early years. Sergey Polyantsev, deputy head of the Council of Energy Producers Association, believes that the project “will not provide the industry with additional sources of return on investment and will increase administrative pressure” – the lack of investment programs is mainly due to the refusal of the regions to approve them due to unaffordable tariffs for consumers. “We need to improve the quality of heat supply schemes that justify investment measures, create economic incentives to attract investment in the industry, and remove contradictions between industry and housing legislation that generate losses,” he says.

According to Alexander Dolgov, Head of the Infrastructure and PPP Practice at Best Choice JSC, the housing and communal services sector is one of the most overregulated, but often the activities of operators are not transparent, and changes can contribute to the display of investment tasks. As Ilya Dolmatov, director of the Institute for Economics and Regulation of Infrastructure Industries at the National Research University Higher School of Economics, notes, “without analyzing the reasons for the low percentage of approved programs, innovation can aggravate the situation in the industry.” Now, he explains, about 40% of enterprises in heat and water supply are unprofitable – it is problematic to take on obligations under the investment program that they risk not fulfilling, and the introduction of targeted use of depreciation is unlikely to support the investment attractiveness of the industry.

Evgenia Kryuchkova