The government promises enterprises to reduce energy costs

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April 22, 2016 18:02

Regardless of significant discounts on purchase price of gas, economic entities continue to pay relatively high for energy and electricity in particular. Nevertheless, energy monopolies are consistently unprofitable or operate with a minimum margin.

First Vice Premier of Belarus Vladimir Semashko has promised businesses to reduce electricity costs by the end of the heating season or in 2013. “We have the following prospects: we shall not increase the electricity cost, maybe we shall reduce the energy tariffs after the heating season ends”, Semashko said at the board meeting of the Ministry of Industry, referring to the reduction in gas prices to USD 165.6 per 1 thousand cubic meters in 2012.

The government is not prepared to start a full-scale reform of the energy sector. Regardless of the adoption of the Concept and Development Strategy for the electricity sector in 2012, envisaging for restructuring and corporatization of the sector and a tariffs policy reform in 2012, its implementation is postponed indefinitely. As a result, having almost a two-fold advantage with the price of gas, enterprises are paying almost European prices for electricity and heat, with Belenergo having zero profit in 2011. The reasons behind high electricity costs for businesses are, on the one hand, the inefficiency of the Belenergo, the largest state monopoly, and its daughter companies, and on the other hand, cross-subsidization of the population.

Bearing in mind the overall inefficiency and subsidies, any gas price discounts will not yield to economic agents and will only increase the overall imbalance of the economy.

The population of Belarus is paying incredibly low rates for electricity: less than USD 0.02 per 1 kWh. Currently the population pays only 27% of the overall costs of the electricity production. Water and heating tariffs for the population are also very low (businesses pay 5 times more). The government is well aware of this problem and of the imbalance however it is not ready for appropriate and decisive actions. For instance, valuation of electricity consumption (when 100 k Wh per household per month would be paid at a lower rate and anything beyond that at a higher rate) has been under consideration during more than half a year. However, various ministries have not managed to reach a compromise. To the moment only one decision has been made public, i.e. that restrictions on energy consumption will not bound the least socially-protected. There is about half a million of them. For the rest of the population the increases will be gentle as well and the high rate will not be more than 30% of the lower rate. So far no one speaks about raising energy tariffs for the population as a whole.