Government to raise utility tariffs ahead of elections

According to the government’s plan, utility tariffs for the population will double in 2014, and quadruple in 2015 , while wages will increase only by 3% annually. However, fearing rising tension in society, the government may not stick to the plan.

On January 1^st, 2014 utility tariffs for the population rose by an average of 16%, more than the annual threshold for increase in utility tariffs (USD 5) set by the President.

The population will only ‘feel’ the change in early February, when they receive their utility bills. Utility tariffs do not differ much by region, except for lift-usage tariff.

Official statistics says that utility costs make up about 10% of a household budget. In addition, the population pays only about 15% of their real costs. According to the government plan, which aims to increase the population’s share, in 2014 the population will pay 30% of utility costs and in 2015 – 60%. Thus, In 2014, utility tariffs for the population will double, while their wages will increase only by 3%.

According to preliminary estimates, by the year-end, a family of three occupying a one-bedroom apartment will pay circa USD 50 for their monthly utility services; now it pays circa USD 25.

One of the reasons why the government is raising utility tariffs is that it intends to abandon cross- subsidisation. Today, industrial enterprises compensate for the population’s underpayment. Electricity tariffs for industrial enterprises are several times higher than for the population. The government wants to stop this cross-subsidisation in electric-power industry in 2014, and in the thermal-power industry in 2015.

Despite higher tariffs, the quality of utility services is not improving, and municipal sector remains the most criticised of all sectors by the population. The state has retained the monopoly on the utility services market.