Initiative to Abolish the Law on Natural Monopolies Closely Linked to New Tariff Policy

4 april 2018 | Rossiyskaya Gazeta

The issue of the tariff policy in the energy sector is the main topic of the new energy bulletin prepared by Analytical Center experts.

Alexander Kurdin
Alexander Kurdin
Department for Fuel and Energy Sector

Last week, FAS Deputy Head Sergey Puzyrevsky made the following statement: "The abolishment of the Law on natural monopolies is another legislative initiative of ours. In our opinion, the Law impedes the shift from a natural monopolistic state to a competitive one. The Law on natural monopolies has fulfilled its historical mission. Now, it performs two functions only: it contains a natural monopoly definition and lists the spheres related to such a state."

"The initiative to abolish the Law on natural monopolies is closely linked to the new tariff policy: The FAS seeks to have a more flexible approach to the regulated industries and to get rid of excessive legislative obstacles, - Alexander Kurdin, expert of the Analytical Center, explained to the "Rossiyskaya Gazeta" reporter. - The historical mission of the Law on natural monopolies was the following: within the market transformation of the economy, there were risks of getting into the areas of so-called "market failures", because there was no experience of overcoming them. It was necessary to separate sectors with the preserved regulation and the ones shifting to the free market, at least in the first approximation, which had been done." Now, there is a sufficiently developed regulating experience, effective tools to protect competition, therefore we need more flexible approaches, rather than keeping such a dividing line, the expert supposes.

Kurdin mentioned the transportation of oil products through pipelines as one of the possible examples of changing the approach. "This industry is quite consistent with a classic natural monopoly definition and is accordingly defined in the law, but in practice, there's competition with another transportation mode – railway, that is also covered by the Law on natural monopolies, - Kurdin continued. - That is another issue, whether they are interchangeable everywhere, but competition exists in general and the necessity of price regulation in this context may be questioned because it is capable of distorting the conditions for competition."

Speaking about the vectors of the new tariff policy, experts mention involving consumer councils with formalized authority in the tariff regulation. "This is about all consumers including the population, - Kurdin explains. - One of the challenges that the current tariff system is facing now is the development of an effective mechanism to allow a wider range of consumers to take part in the tariff regulation mechanisms with state support, without being limited to the involvement of certain business circles".