Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Tariffs Frozen; UES Issues Alert

Tariffs on natural monopolies won't rise again this year unless "emergency situations" develop, Economic Development and Trade Minister German Gref said Thursday.

"Until the end of 2001, the tariffs of natural monopolies may be changed only in emergency situations, when a serious imbalance has occurred," Gref was quoted by Interfax as saying.

Tariff increases for the so-called natural monopolies — Unified Energy Systems, Gazprom and the Railways Ministry — accounted for 38 percent of consumer price inflation, one of Russia's most difficult economic problems, Gref said Wednesday.

The ban comes just five days before the Cabinet is scheduled to hold an extraordinary session to discuss preparations for winter before it breaks for the rest of the summer.

Insuring heat and electricity throughout the winter is a daunting task for UES and an annual political time bomb for regional leaders. The governor of the Primorye region in the Far East, for example, was forced to resign after thousands of people went days without either last winter.

UES said bill arrears and artificially low tariffs left local energos without enough money to buy enough fuel.

UES deputy board chairman Mikhail Abyzov told a news conference Thursday the utility had started borrowing from banks to stockpile fuel for winter, but it couldn't provide loan guarantees sufficient to borrow the sums it needs.

He said UES had already borrowed 1.5 billion rubles ($51.46 million) from four banks, including state savings bank Sberbank, but was having trouble getting the additional 5 billion rubles it needs.

"The government will have to solve a number of problems, including introducing levers that will help to stop price rises in related industries," Abyzov said. "If the government fails to do this, it will aggravate an already critical situation."

If tariffs aren't raised, the "problem" energos, or local utilities, in the Far East will be 5 billion rubles short of what they need to purchase enough fuel to provide full services through the end of the year, he said.

Collectively, UES subsidiaries as of Aug. 1 had 12 percent more fuel stockpiled than was targeted. But the critical regions, like those in the Far East, are far behind. Vladivostok's Dalenergo — supplier to the surrounding Primorye region — has just 61 percent of the coal it was supposed to have by Aug. 1. Chelyabenergo has just 72.6 percent, Kirovenergo has 72.8 percent, Arkhenergo 76.9 percent and Amurenergo 77 percent.

Other regions are doing even worse: Vladimenergo met just 33.5 percent of its target, Kamchatskenergo 38.6 percent, Kostromenergo 35.3 percent and Penzaenergo 42.3 percent.

Abyzov called for higher tariffs, saying the main obstacle was that the "problem" energos were receiving just enough money to cover operating expenses and not enough to buy fuel reserves.

Apart from funding, the major problem in the critical regions is infrastructure. He said just 10 percent to 30 percent of the housing complexes in these areas have reliable piping and electrical systems.

The Vladivostok City Duma on Thursday called the city's preparation for winter "catastrophic," Interfax reported.

More than 600 kilometers of heating pipes and 95 percent of the area's schools and hospitals are in urgent need of repair, Vladivostok's mayor's office said.

Gosstroi, the state construction committee in charge of housing, refused to comment, saying everyone was too busy preparing for Tuesday's extraordinary Cabinet meeting.

Prime Minister Mikhail Kasyanov was quoted by Reuters as saying that the government was working on measures to make sure the economy stays healthy, including the formation of a single body to set tariffs for heat, gas, electricity and water, which are currently decided by a range of bodies.