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. Last Updated: 07/27/2016

Utilities Reform Will Work

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The main goal of any reform is to improve the quality of life, and among the high-priority tasks facing us today is housing and utilities reform, now at the center of a whirlwind of rumor and conjecture. Many claim that this reform will end in disaster. Yet true disaster will strike if we keep putting it off. The quality of housing and utilities has gotten worse and worse over the years, while costing consumers more and more.

The housing and utilities sector in Russia's cities remains almost completely administered by the government, which, to be honest, has yet to prove itself an efficient manager. The low quality of service, the growing demand from consumers for improvements, and the widespread theft of money, fuel and equipment are just a few of the many well-known problems in the sector. They are aggravated by a huge number of unmanageable debts clogging the industry's financial arteries.

We need to completely change the way the sector operates. We need to hire decent management and make utilities attractive to investment by letting various companies -- first and foremost private ones -- compete. This is the goal of the reform.

All reforms demand an appropriate legal base, and a serious breakthrough in this area came last year, when a package of laws creating an affordable housing market and the new Housing Code were passed. The code, which came into effect March 1, brings order to the chaos that predominated previously. Importantly, the reform has already had a test run in 19 regions. The new regulation principles were implemented earlier in these regions, and a favorable climate for private business to enter the sector is rapidly being created there.

When writing the new code, lawmakers analyzed success stories from various post-Soviet republics and European countries, where the utilities' infrastructure was not handed over to private owners but was operated by private companies under contract with the city. These companies competed for the right to long-term management of various utilities. Contracts of this kind are possible under current Russian laws, but their term cannot exceed five years. Investors are scared off by the possibility that after five years of investment and repairs, their contracts may be terminated. A new bill in the works regulating these contracts, however, will protect entrepreneurs from arbitrary decisions while protecting residents from the dictates of utilities barons.

People often wonder why businesses would get involved in such an unprofitable industry. But housing and utilities are only unprofitable due to the current outdated system.

The sector has a lot of economic potential. Introducing market mechanisms will make investment in the sector profitable. And private business is ready and willing to start investing: The share of private companies in the industry has already reached 17 percent. There is plenty of room to lower costs by installing equipment that saves resources and by improving management in the industry. If the system is properly organized, service will improve, while the federal standards for maximum rates passed in 2004 will not allow companies to raise prices through the roof.

Russia has millions of low-income families, and utility bills put a serious dent in their household budgets. Many of them do not earn enough to allow them to pay their bills in full. If housing and utilities cost a family more than 22 percent of their income, the household receives subsidies, and the legislation passed by the Duma does not eliminate this benefit.

Under the new system that will take effect Dec. 31, these subsidies will be transferred from the state budget to individual accounts -- and not to the utilities -- before payment is due. More than 10 regions have already moved over to this system. They have tried it, and it works.

We need to reform the housing and utilities sector so that people feel some real improvement. Government officials at all levels and in all areas need to take responsibility for what decisions are made and how they are implemented. Lawmakers need to monitor officials working in the sector, while law enforcement officials need to punish those who neglect their obligations under the law.

Russians want a better housing and utilities sector. The authorities need to give it to them.

Boris Gryzlov is the speaker of the State Duma and leader of the United Russia party. He contributed this comment to Vedomosti, where it first appeared in longer form.