Innovations in the electricity payment system: lawyer Krokhin frightened with a forecast for tariff growth

The government and the Federal Antimonopoly Service (FAS) have turned their attention to the unreasonably low cost of electricity for the population. The municipal authorities were given an ultimatum: either you raise tariffs for citizens who consume large amounts of the resource, or you will have to subsidize the missing amount from your own budgets. Now small and medium-sized businesses are doing this. What will local managers do? How much will electricity prices increase? According to experts, in any case, people need to be prepared for a 15–16% rise in prices for utility bills in 2024.

In Russia, they are going to tie electricity tariffs for the population to consumption volumes, and this is expected to be done from January 2024, this was announced by the Federal Antimonopoly Service (FAS).

The authorities believe that such an innovation will help reduce cross-subsidization and the volume of gray mining. Let us recall that cross-subsidization appeared in Russia in the 1990s, during the period of economic crisis. The measure was intended to help the population, which had become unable to pay utility bills in full on their own. It was then that in our country electricity tariffs for citizens were reduced, while electricity fees for businesses were increased. The result was price discrimination: the resource supplier compensated for the money lost from the population at the expense of industry.

Later the system was changed. Small and medium-sized businesses (SMEs) were required to pay extra for ordinary citizens (read: work according to the rules of cross-subsidization). Large industry received preferences, left the scheme, and tariffs for it became minimal.

Now the government wants to shift the differentiation of rates to the regions. Those of them who agree to take such a step will be able to continue to exceed the maximum amount of cross-subsidization (additional payment by businesses for lower tariffs). If regional authorities decide not to touch tariffs for citizens, then they will have to subsidize them at their own expense.

It should be noted that in 2023, the volume of cross-subsidies, according to HSE estimates, jumped by 18%, to 294 billion rubles. This is how much business pays instead of the population for electricity. The amount increased by RUB 44 billion, or 18% year on year.

According to the managing partner of the communication agency B&C Agency Ivan Samoilenko, differentiation of tariffs for the population depending on the volume of consumption is a measure that the government has been proposing to introduce for several years.

“The problem is that cross-subsidization requires more and more money from businesses. After all, in order to maintain low tariffs for the population, tariffs for production are increased, and funds are allocated from the budget to compensate part of the costs for commercial enterprises. As you know, the Russian budget this year and in the next three years will be in deficit, which means that the need to increase tariffs is necessary,” notes Samoilenko.

Popular Front expert, member of the Public Council of the federal project “School of Literate Consumers” Pavel Sklyanchuk believes that the mechanism proposed by the government may be relevant for a number of regions where gray cryptocurrency mining is thriving: Krasnoyarsk, Irkutsk, Sverdlovsk region, Murmansk.

“At tariffs for the population, energy-intensive business is conducted, which is unfair in relation to other sectors of the economy. However, such a decision will not particularly affect the problem of cross-subsidization, he believes. — For the population, electricity tariffs will remain low, and the cash gaps that arise from guaranteed suppliers will be distributed among budgetary institutions, industry and SMEs. The problem can be solved through the development of microgeneration and renewable energy sources (RES).”

Chairman of the Housing Union, member of the housing and communal services committee of the RF Chamber of Commerce and Industry, lawyer Konstantin Krokhin linked the government’s proposal with a recent statement by the Ministry of Construction, which warned the regions against artificially restraining housing and communal services tariffs. According to the head of the ministry, Irek Fayzullin, “a region that, thanks also to populism, does not raise tariffs is leading its territory to disaster.”

“Now the FAS proposes to implement an initiative to increase tariffs for Russians who consume large volumes of electricity,” says MK’s interlocutor. — Regional authorities were asked to choose from two non-ideal options. Increasing utility tariffs is the responsibility of regions that prefer not to use this option. The measure is unpopular. But now, if local authorities do not do this, ordinary citizens will have to pay extra from the regional budget.”

Meanwhile, the State Duma opposed tying electricity tariffs for the population to consumption volumes. This could hit vulnerable categories of citizens, says Svetlana Razvorotneva, Deputy Chairman of the State Duma Committee on Construction and Housing and Public Utilities.

“If tariffs rise, people will begin to save, consume less energy, and the standard of living will begin to fall. Now the amount of support for citizens should be increased, not decreased,” continues Krokhin.

One of the reasons why the government decided to introduce a new electricity payment system is to reduce cross-subsidization. But what if the regions increase tariffs for citizens without reducing the amount of subsidies?

“This is quite likely,” says the expert. — The “kitchen” of cross-subsidization is not in the public domain. We roughly understand how the system works, but we don’t know the details. It is unknown what will happen in reality. There really are contradictions.”

At the same time, the Ministry of Economic Development announced that tariffs for housing and communal services will increase by 9% in 2024. However, according to Konstantin Krokhin, we should not forget the precedent of 2022, when tariffs were indexed twice in a year.

“I think the final increase in housing and communal services tariffs next year will be close to real inflation. Now it is about 7%, and the Central Bank rate is 15%. People need to be prepared for the price of utilities to rise by 15–16%,” he concluded.