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. Last Updated: 07/27/2016

Krasnoyarsk Cuts Power Tariffs

The Krasnoyarsk region has slashed household electricity bills by 15 percent in what it said was an attempt to ease the burden of utility bills once subsidies to consumers are all but phased out next year.

The cut, which fulfills a campaign promise made by new Krasnoyarsk Governor Alexander Khloponin, will cost regional power supplier Krasnoyarskenergo about 150 million rubles ($4.7 million) per month, national power grid Unified Energy Systems said. UES owns 51 percent of Krasnoyarskenergo.

"It is a clearly political decision; we understand that he [Khloponin] made promises," UES spokesman Andrei Yegorov said Tuesday.

"However, 150 million rubles of losses a month is a significant amount for Krasnoyarskenergo," he added.

The Krasnoyarsk regional energy commission, which sets tariffs on heat and electricity and is de facto subordinated to the governor, ordered that household rates be cut from 0.54 rubles per kilowatt hour to 0.46 rubles per kwh starting last Friday.

Tariffs for industrial customers and state-funded enterprises remain unchanged.

"While we are following a strict budget, regional power suppliers should share the responsibility of social welfare," the Krasnoyarsk administration said in a statement.

Khloponin, whose election as governor was upheld by the Supreme Court on Tuesday, inherited a region with 11 billion rubles ($3.5 million) in debt -- 2 billion rubles of which is owed to Krasnoyarskenergo. About 2,500 companies are in different stages of bankruptcy and teachers and doctors have not been paid for months.

"The region is in an economic and political crisis," Khloponin said shortly after his election in late September.

Khloponin declared on the pre-election campaign trail that residents were being overcharged for electricity, and he promised to reduce the tariffs.

Last week, he proposed an economic rejuvenation program tied to a strict regional budget for next year. The program included plans to cut subsidies on household utility bills from 60 percent to 10 percent in 2003.

The Krasnoyarsk administration said reducing electricity tariffs would help cushion the impact of the higher utility expenses.

The rate deduction is only the second in Russia since the 1998 financial crisis. In 2000, Irkutskenergo cut tariffs for industrial customers by 40 percent.

Renaissance Capital said Tuesday that the cut is bad news for Krasnoyarskenergo. Norilsk Nickel, the largest company in Krasnoyarsk, recently become a large Krasnoyarskenergo shareholder by snapping up shares on the open market. Analysts say Norilsk Nickel may have accumulated up to a 40 percent stake.

"The decision of the REC [regional energy commission] seems to be a signal that after the recent appointment of ex-Norilsk Nickel CEO Alexander Khloponin as governor of the Krasnoyarsk region, the energo has become particularly vulnerable to political pressure from the regional government," Renaissance said.