“The ‘alternative boiler’ method will, in fact, only increase incomes of heating suppliers”

An opinion of a representative of the energy company about the consequences of the upcoming transition of the republic to a new heating cost calculation model

“The ‘alternative boiler’ method will, in fact, only increase incomes of heating suppliers”
Photo: TGC-16 courtesy

Amendments to the federal law on Heat Supply, which suggest a transition of Russian cities to a new model of calculation of tariff on heat for the population with a method of “alternative boiler”, came into force two years ago. Rubtsevsk became the pioneer, 29 settlements of the country, including Kazan, have already declared their readiness this year. Realnoe Vremya talked with leading engineer in the heat energy sales of TGC-16 energy generating company Stanislav Semyonov. He said about the consequences of the new pricing principle, a rise in heat price for citizens and further prospects in the interview.

The transition to the new model will increase the price for heat energy”

Mr Semyonov, the mechanism of transition to the “alternative boiler” method launched together with the introduction of amendments to current legislation in heating supply in the country. Rubtsovsk became the pioneer in this sphere. 29 settlements of Russia have already declared their potential readiness this year. Kazan is among them. What is the difference between the existing way of calculation of heating tariff for the population and the new method of “alternative boiler”?

Nowadays the tariffs are calculated according to the method “plus costs” when a heat supplying company communicates information about its costs that are necessary to generate heat to the regulating body. The costs of the organisation accepted by the regulating body, that’s to say, necessary gross revenue, are divided into the general amount of generated heat, this is how a tariff is set. In other words, the more costs generation has, the higher the tariff is, because of which manufacturers aren’t interested in their reduction.

The amendments to the federal law On Heat Supply came into force on 10 August 2017. They suggest that cities or settlements will be considered as “price zones of heating supply” in which heating price for the population will be fixed according to the new method, which presupposes a refusal of state tariff regulation. So heat price in the “pricing zone” between heating supply participants will be defined by agreement of the parties, while the end price for consumers can’t exceed the fixed cap calculated according to the so-called “alternative boiler” method, that’s to say, the price level that would enable the consumer to refuse the central heat supply system and build his own (virtual) source of heating. The higher price level as well as tariffs will be fixed by the authorised body of executive power of a Russian region in state price regulation (the State Committee of the Republic of Tatarstan on Tariffs).

TGC-16 photo courtesy

Do heat supply of the republic and its capitals need a new tariff setting method?

It is hard for me to say how much the Tatarstan heating supply system needs such a transition. I can say about big cities such as Kazan or Nizhnekamsk. The current method of setting the tariff already allows not only providing reliable heat supply by maintaining the technical state of the existing equipment of heat producers and heat distributing organisations but also developing investment programmes, including costs on turning them into tariffs and getting a net profit from their activity. So the alternative method won’t bring anything new to Tatarstan’s power engineering except the consequential “surplus of profit” and an additional rise in tariffs for the population of the republic.

By experts’ estimates, the new method can provide additional growth in tariffs from 20% to 84%. Which opinion are you inclined to?

Undoubtedly, the transition to the new financial model of the heating market will increase the price for heat energy for the population. So the official website of the Russian Ministry of Energy has a calculator to calculate the price for energy heat according to the “alternative boiler” method, with the help of which every citizen already can calculate the approximate highest price for heating in case of the transition to the “alternative boiler” in their region. According to the estimates of this calculator, the preliminary price for heat energy for the population of Kazan will grow from 1,741,49 rubles with VAT to 1,972,02 rubles per Gcal with VAT (the difference is 230,53 rubles), which increases the tariff by 13%. According to preliminary estimates, the tariff in Nizhnekamsk will grow from 1,651,46 rubles with VAT to 1,892,71 rubles with VAT (241,25 rubles more), which brings to an appreciation by 14,6%.

Do I understand correctly that after the transition to the new method of calculating the tariffs for all heat consumers in the republic will become equal? Or will the tariffs differ somehow?

No, the tariff won’t become equal. As I noted earlier, the price for heat energy in the ‘alternative boiler’ will also be differentiated depending on the settlement and the heat energy supplier in the heating supply system. But the price for heat for consumers within one settlement won’t exceed the fixed highest level.

“The new edition of the law doesn’t utter a word about control over surplus profit”

What will the difference in price for heat energy with the “alternative boiler” method and the current tariff be spent on?

The goal of the novelty is to allocate the additional profit of the heat energy supplier he obtains, that’s to say, heating supplier, for the modernisation and development of the heating supply system, thus providing a flow of investments in power engineering. However, the law doesn’t include ways and methods of control over the distribution of the profit that’s made. Considering that the current pricing methods already contain methods including costs on reconstruction and modernisation of heat power plants, we can assume that the surplus profit will be freely distributed by the heating supplier as dividends, bonuses, non-core assets and so on.

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By Alina Gubaydullina