The Concept of Tariff Regulation in the energy sector of the Republic of Tajikistan

On May 27, 2017, the Government of the Republic of Tajikistan approved the Concept of Tariff Regulation in the energy sector of the Republic of Tajikistan and the Action Plan for the implementation of its first stage.

This Concept is based on the National Development Strategy of the Republic of Tajikistan for the period until 2030 and is aimed at full and reliable supply of electricity to consumers through introduction of commercial based relations and the achievement of financial self-sufficiency in the country’s energy sector and its further development. At the same time, the Concept reflects the protection of the interests of the population by establishing economically justified tariff setting mechanisms for certain consumer categories. Due to the important role that electricity plays to ensure the well-being of the population, this Concept provides for such issues as ensuring access of vulnerable groups of population to electricity, social protection by taking the required financial measures, as well as establishing differentiated tariffs.
It should be noted that the existing mechanism for setting tariffs and hence tariffs in the energy sector of the Republic of Tajikistan can not contribute to the full economic viability of entities, involved in power supply service provision and efficient operation of the energy supply system. Current tariffs at all levels do not cover all costs. In addition, the current electric power tariff regulation is characterized by a cross-subsidization of power supply. The existing tariffs have a significant negative impact on operation of enterprises in the energy sector and the revenue side of the state budget, which can lead to negative consequences in meeting the growing needs of the economy and the social sphere. The previous approach to calculation of tariffs did not allow to invest steadily in the development and modernization of the electric power infrastructure and maintaining this approach in the future could lead to a decrease in the reliability of power supply, quality reduction and large losses of electricity, and an increase in the efficiency of energy sector as a whole.

In order to solve the existing problem related to ensuring reliable and high-quality power supply to consumers, protecting the population and the economy of the republic from the assumed destructive economic changes, it became essential to initiate power supply tariff regulation reform.

Thus, the main objectives of this Concept are:

– ensuring a balance of interests between consumers and power supply enterprises by setting tariffs that reflect the actual costs of enterprises, taking into account aspects of social protection of population;

– moving away from the existing cross-subsidization of power consumers gradually;

– ensuring financial stability of enterprises in the energy sector and attracting investments;

– contributing to transparency, consistency and predictability of tariff regulation and minimization of regulatory risks;

– facilitating discussions with consumers and providing information on decisions taken on tariffs;

– stimulating competition and effective activity of enterprises in the sector, improving the quality and reliability of electricity supply.

The first stage of the Concept implementation covers the period 2017-2020. During this period tariffs should cover the costs of power supply services, provided by regulating enterprises. Regulation of the difference between expenses and incomes of enterprises on production, transfer and distribution of electricity will be done in accordance with the new Tariff Calculation Methodology, which will be developed within the framework of the first stage of the Concept.

The implementation of this Concept will improve the financial performance of enterprises in the energy sector, streamline and ensure transparency in regulating the activities of enterprises and organizing energy sector, and ensure provision of support to the poor and vulnerable segments of the population by the Government of the Republic of Tajikistan.