Introductory remarks by Dmitry Kozak:
Good afternoon, colleagues. Today’s agenda includes two issues – managing the utility costs and preparations for winter. We traditionally discuss these issues in mid-summer. We need to check with the schedule to see if the municipal agencies responsible for these works are entering the autumn-winter season fully prepared.
Speaking of the first issue, as you remember, the President and the Government have instructed all regional officials and agencies regulating utility rates to make sure that the total payment from each municipality does not exceed the average annual increase of 6%, or 12% starting from July 1. According to the Federal Tariff Service’s preliminary report that handles monitoring, the prevailing majority of regions and even more municipalities have tackled this and imposed restrictions on the groundless growth of utility prices.
However, there are a number of municipalities that failed to perform this task for various reasons. We will listen to the Federal Tariff Service’s detailed report to analyse the reasons and to work out the decisions that are required for the work to finish as soon as possible. As you remember, the rule that was established by a Government instruction of March 1, 2013 has exceptions. These exceptions apply to municipalities with gas and power payments prevailing in the composition of utility payments (within the 15% limit) and for under-regulated municipalities – namely military townships where utility payments are significantly different from elsewhere, sometimes by tenfold. There are also other municipalities where the payments are less than 50% of the average payments in the region.
The Government and the President keep receiving inquiries from municipalities, especially from military townships, regarding high utility tariffs. I think that when it comes to exceptions, the main focus should be on explaining the scheme to the public. Extensive work to explain thoroughly the utility rates and regulations and the operations of the entire housing and utilities services must be explained to the public to involve people in the management of the housing and utilities in residential blocks of flats. This duty has been placed on the Ministry of Regional Development, the Ministry of Mass Communications and regional officials. It is not possible to succeed in this area without the active involvement of residents.
In addition, the rights and obligations of the public regarding utility payments must be explained thoroughly. The government, including federal agencies, continue to receive requests from members of the public regarding the amount of utility payments although the law places this solely within the competency of the owners of flats in residential blocks. If required, the payment duties must be widely explained by the mass media and during meetings with residents.
Speaking of price increases against the previous rates and the general limits set by the President and the Government, I would like to give instructions to the regional executive bodies and the heads of regions, in particular to review the rates in every municipality to reveal any rates that are excessive of those set in the general requirements. A draft law has been drawn up that will regulate this at the federal level. Among others, the bill stipulates that should there be any significant deviation in the amount of utility payments in any particular municipality, the utility-related resolutions will have to be agreed upon with the local representative government bodies.
Even now, before the law has been adopted, discussions must begin with the local government of whatever municipalities have excessive utility rates. Local officials must be involved and all of the decisions must be as clear and transparent as possible. Socially active residents – commonly, they are local municipal deputies – must be involved in this explanatory work and explain why certain decisions are made. I have given instructions to the Federal Tariff Service to prepare a data report to use as background material. It will include the average utility rates across the country, in each municipality and in comparison to the entire region. Heads of regions will be able to use the data to explain why in certain cases the payments have to exceed the average regional rates (in some cases we have to take such decisions).
The next issue that I suggest we discuss today – the heads of regions connected to this teleconference, please report on the decisions made and the work completed – is how the scope of housing utility services considered as standard may be brought in accordance with the actual consumption. We discussed this issue at a State Council meeting. The documents of the State Council quote various consumption standards set by various municipalities and regions. Experience shows that more often than not, the consumption standards are significantly higher than the actual consumption of utility services. This is unacceptable. We have recently adopted Government Resolution No 344 that introduces extra fees if there are no power or water metres. These extra fees may only be applied to realistic standards of utility service consumption. If they are highly excessive, it is inadmissible to charge extra fees to motivate people to have metres installed.
My request is for the Ministry of Regional Development to make amendments to the Government resolution as soon as this September. The amendments are supposed to ensure the complete transparency of the data on the standard consumption of utility services in comparison with the actual consumption.
The report that we can see today in the reference materials and which was presented at the State Council meeting will be available to the public. I will be honest that it should not be made public today, otherwise it may cause an outrage. When the standard consumption rates are adjusted to match the actual consumption in the regions, we will introduce a rule according to which the actual consumption and tariffs will be made public for residents to know exactly what they pay for and what rates apply if there are no metres installed. This is what I have to say regarding the first issue.
Second, we need to discuss the preparations of the housing and utility systems for the winter season. In some regions, the heating will be switched on in six weeks and all of the necessary measures must be taken to make sure the facilities are fully prepared and certified to operate during the heating season and any accidents and emergencies are avoided. Unfortunately, we have to deal with them almost every year and they are not always caused by external circumstances. Following the State Council meeting on housing and utilities, the President gave an instruction to make changes. We have set a goal to reduce the number of accidents and emergencies – unless they are due to natural disasters – by over 50% within the next four years. This will be done by attracting private investments to the industry, by upgrading the infrastructure and by bringing it into the proper condition. This is a complicated task and we must use joint efforts – from the municipal, regional and federal executive bodies that are responsible for this – to resolve this issue in two years.
By 2016, the housing and utilities sector must be completely revamped. All of the necessary documents have been approved by now. In addition, this morning I received five regulations drafted pursuant to the law on water supply and wastewater disposal, which established the sufficient regulatory framework to work towards attracting investments and to improve the quality of services, to ensure their accessibility in terms of financial costs.
Now I suggest that we discuss the monitoring of utility payments.
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Dmitry Kozak answers journalists’ questions following a teleconference
Transcript
Question: Mr Kozak, is there certainty that the prices won’t rise further?
Dmitry Kozak: The prices just cannot stop rising. If fuel prices rise, if there is general inflation and consumer prices go up, they (the utilities rates) are bound to surge as well. They need to keep up with the inflation rate and with the rising costs of raw materials, which are beyond state regulation. But, of course, the quality and the reliability of the services should be enhanced accordingly. This has been set as a priority task.
The elaboration of a regulatory basis, as well as of requirements and rules of conduct on the utilities market, is nearing its completion at the federal level, and we are almost certain that we’ll be able to put our house in order in the years to come.
This year, most municipalities (over 98%) remain within the limits set by the Government on March 1. But there are also some previously “underegulated” municipalities, where the prices have been kept down artificially. In particular, this has been the case in the Ministry of Defence townships, with the utilities providers there heavily subsidised. Those townships have now been transferred under municipality jurisdiction, but the utilities rates there still remain much lower than elsewhere. There is a 3- to 4-fold price difference within the respective regions and a one-digit gap across the provinces. We need to adjust that, raising the disproportionately low prices to an economically adequate rate, in line with the quality and the reliability of the services offered. And we need to get this across to the communities – why they should pay as much as their neighbours do. For the same living conditions and utilities services, tenants may now be charged 5,000 or 2,000 roubles, depending on the block where they live. This is an unpopular decision, but we have to make it, so as to eliminate distortions in the housing and utilities sector and in the economy at large. We need a transparent mechanism and control over billing, along with appropriate consumption limits for utilities services in places with no metres, so that the housing and utilities sector could get back on track.
Question: Mr Kozak, is there an understanding of how far the regions have come in their preparations for the coming winter? And how are the price adjustments taken by the public?
Dmitry Kozak: Speaking of preparations for the winter, thanks to efforts taken at the federal and regional level, we’ve been advancing at a faster pace this year -- in some utilities infrastructure segments, 2, 3 or 5 percent faster over the same period of last year. So the degree of preparedness is higher as compared with the previous year. Having said that, there remain some problems to address, such as a delay in stocking up hard and liquid fuel in certain regions. We are going to explore the causes of that delay shortly and take measures to redress the imbalance.
Also, we’re working to reduce the number of accidents and emergencies, which does go down with every passing year. We’re determined to continue our efforts in that direction. We’ve proved this course right through practice. And we’ll be able to substantially enhance the reliability of all utilities infrastructure operations in the near future, I think.
As for the public response, we get negative reactions mostly from residents of former military townships. To them, such an abrupt upward price adjustment is quite sensitive -- even if people in neighbouring communities have been paying as much for a long while now. This is why related explanatory work should be done on the ground.
We’ll need to further raise the utilities and housing rates, but within limits, so that the surge isn’t too sensitive. As we were making decisions concerning utilities price regulation this past February, governors and municipality heads themselves asked us not to set any top limits for former military townships. We honoured their request and they, in turn, promised us to make appropriate efforts in providing relevant explanations, as well as in restraining an unreasonable utilities price upsurge. I hope that they deliver on their promises.
Question: Does this mean that there will be no price hikes in the near future, as we pass on to long-term price planning?
Dmitry Kozak: We don’t expect any hikes any time soon, no. I don’t think that there will be any more surges like those that we are now having in “underregulated” municipalities and city districts, where the prices have been artificially kept below the regional and national average. Except for cases where communities themselves come up with the initiative to have their utilities and housing infrastructure upgraded – an option provided for by the law – and express their willingness to pay for this upgrade. Otherwise, there will be no further price surges. The rates may rise somewhat to match fluctuations of world prices, including fuel prices, but we do not expect any sharp hikes. We hope that by the end of this year, we will complete the price adjustments to an economically adequate level across the nation, so that from then onward, the rates could be set under long-term planning schemes. This way, investors, the business community, and the public will also be able to calculate their prospective expenses for longer terms.
Speaking of housing services, let me remind you that I’ve called regional heads’ attention to the fact that in apartment buildings, the prices and lists of services are up to the residents to set. Officials may not interfere, except for cases where there is a dishonest management company involved. Regional authorities should make this clear to homeowners because the price and the quality of services provided to the public depends in no small measure on their proactive involvement.
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