By Hrach Melkumian and Atom Markarian
Armenian authorities are leaning towards sanctioning a highly unpopular increase in the prices of basic public utilities sought by the mostly foreign companies that run Armenia’s electricity, water and natural gas networks, officials said on Tuesday.
The utility charges in Armenia are set and can only be changed by the Commission on Natural Monopolies, a body appointed by President Robert Kocharian. Its deputy chairman, Nikolay Grigorian, acknowledged that they will likely increase in the near future, arguing that the utility companies need more revenues to recoup their investments and improve the networks’ financial balance sheets.
“That is becoming a real necessity,” Grigorian told RFE/RL.
Other government sources said the price hikes will most probably take effect at the beginning of next year. They said particularly steep will be rise in drinking water tariffs: from the current 58 drams (10 U.S. cents) to 105 drams per cubic meter.
The government embarked this year on a sweeping restructuring of the Soviet-era water infrastructure. One of the main elements of the overhaul is the ongoing installation of water meters in private houses and apartment blocks across the country. The government has borrowed in recent years millions of dollars in loans from the World Bank and other Western sources to upgrade the aging network.
Also pushing for a tariff increase is the Russian-controlled gas distributor, ArmRosGazprom. The existing gas price, 51 drams per cubic meter, may well go up by 20 percent starting from next year. The company, which imports the fuel from Russia, cites rising operational costs and a dwindling gas consumption in Armenia to justify the measure.
ArmRosGazprom announced on Tuesday that it will formally request a tariff rise from the Commission on Natural Monopoly by August 1. The company warned in a statement that failure to approve it would result in a “drastic deterioration” of the situation with gas supplies to Armenia.
“A business has to be profitable,” the ArmRosGazprom spokeswoman, Shushan Sardarian, told RFE/RL. “But the existing tariffs leave no room for profits.”
Ordinary Armenians will be hit hardest by the impending rise in electricity charges which have remained unchanged for nearly five years. Officials say the measure is inevitable because Armenia imports the bulk of its energy resources from abroad and its national currency, the dram, is now worth about 20 percent less than it was in 1998. They also admit growing pressure from the foreign owners of Armenia’s power production and distribution facilities.
One of them, Russia’s RAO UES power monopoly, was granted ownership of Armenia’s largest thermal power plant at Hrazdan and six hydro-electric stations forming the so-called Sevan-Hrazdan Cascade this year in payment of Yerevan’s multimillion-dollar debts to Moscow. They are valued at a total of $55 million.
Under the terms of the assets-for-debt swap agreement, the Armenian side is to enable the Russians to generate $30 million in earnings from the Hrazdan plant and $25 million from the Cascade in the next 15 and 5 years respectively. According to Grigorian, that is impossible to achieve with the existing energy tariffs.
Speaking in the parliament last week, Prime Minister Andranik Markarian spoke of their eventual increase as a forgone conclusion. He claimed that the tariff rise will not be substantial.
The existing retail price of 25 drams (4 U.S. cents) per kilowatt/hour, one of the highest in the former Soviet Union, is already seen as too high by many Armenians. Government sources say it will likely soar to between 30 and 35 drams early next year.
Grigorian declined to comment on possible social consequences of the planned surge in utility charges, saying only that his commission is charged with “balancing the interests” of consumers and utility monopolies. “It is very difficult to balance the two,” he said. “We will try to make sure that both sides are left equally unhappy.”