A day after being given vast new tariff-setting powers, the head of the the Federal Energy Commission said Wednesday that he was ready to start raising energy prices -- a move that will have wide-ranging ramifications for the whole economy.
FEC Chairman Georgy Kutovoi told reporters that, to begin with, gas tariffs should be raised by 15 percent to 18 percent as soon as possible.
A decree signed by President Vladimir Putin late Tuesday essentially makes the FEC a unified agency for setting tariffs on natural monopolies. The commission's brief, which already included setting tariffs for Gazprom, Unified Energy Systems and Transneft, was expanded to include other natural monopolies -- most importantly the railways, but also sea ports, telecoms and postal services.
Analysts said Wednesday the creation of a one-stop window for tariff-setting was a long-awaited step toward resolving the problem of subsidized energy prices, which have discouraged efficiency and have been a drag on the economy.
"Without raising tariffs, first of all on gas, no reform is possible," said NIKoil analyst Andrei Abramov. "As long as gas prices are artificially low, power companies have no incentive to invest in modern technologies."
Until now, each one of the natural monopolies, all of which use each other's services, would lobby the government to raise its tariffs before the tariffs of the other monopolies. When one natural monopoly was allowed to raise its prices, the other monopolies' operating costs immediately increased as a result, thereby sparking even more intensive lobbying. This cycle created tensions throughout various sectors of the economy and discouraged corporate strategies based on sound economic judgement.
But the creation of a unified tariff agency has raised hopes that the government will be able to synchronize tariff hikes.
Another major breakthrough that the new tariff policy could bring about is the weakening of local authorities' grip on regional energy producers.
Abramov says this is likely to be more visible in the case of UES, whose local subsidiaries are less dependent on the holding company than, for example, Gazprom's units.
"The main task of the new agency is to eliminate tariff discrepancies between different groups of customers, as there is currently little coordination among agencies when setting tariffs on services of various natural monopolies, most importantly on energy and railroad services. Tariff hikes, particularly those for railroad services and electricity, need to be better coordinated," Renaissance Capital wrote in a research note.
Some analysts, however, are taking a wait-and-see approach in deciding whether the creation of the new agency will produce any dramatic changes.
Interfax analyst Mikhail Matovnikov said he is not quite sure the recent government moves already indicate a major change. "Lobbying will now be centralized, but this does not mean a struggle between natural monopolies won't continue," he said.
"The outrageous lags in tariff changes between branches of industry may disappear, but we have to see what methodology [the FEC] will use before we can talk of real change," he added.