By Shakeh AvoyanState regulators ordered on Wednesday an almost 10 percent decrease in the retail price of natural gas supplied to individual consumers in Armenia, pointing to the strengthening of the national currency, the dram.
The Public Services Regulatory Commission obligated the ArmRosGazprom (ARG) national gas distributor to charge households 59 drams (16 U.S. cents) per one cubic meter, down from the existing fee of 65 drams, starting from January 1.
“We were obliged to make such a decision. No other regional country has seen such exchange rate fluctuations,” Robert Nazarian, the commission chairman, said. He argued that the price of Russian gas supplied to Armenia is fixed in U.S. dollars.
The Armenian dram has gained more than 40 percent in value against the dollar since the start of its dramatic appreciation three years ago. The process has left the authorities in Yerevan under growing opposition pressure to cut key utility tariffs.
The gas price cut is a welcome development for a growing number of Armenians that use gas for heating their homes during winter months. Centralized gas supplies to the local households were disrupted with the outbreak of the war in Nagorno-Karabakh in 1992 and began to be slowly restored in 1997. According to ARG, 84 percent of the country’s population now has access to the relatively cheap fuel, saving at least $160 million in combined expenditures on winter heating each year.
Nazarian’s commission ordered the price cut in response to ARG’s request for an increase in its separate gas tariff for power plants and chemical enterprises. The commission allowed the Russian-controlled utility to only slightly raise it to $153 per thousand cubic meters of gas. The weaker dollar means that the corporate consumers will actually pay less in dram terms.
The gas prices would have been much higher had the Armenian government not controversially agreed last April to hand over more energy assets to Russia’s state-run gas monopoly, Gazprom. Those included a major thermal power plant and a controlling stake in ARG. Gazprom is also expected to gain control of an under-construction gas pipeline from neighboring Iran.
The deal followed Russia’s decision late last year to double the price of its gas for Georgia and Armenia to $110 per thousand cubic meters. It essentially allowed the latter to continue pay about $60 until the end of 2008. It remains unclear what the price will be after that.
The Russians announced plans last month to charge Georgia $230 per thousand cubic meters next year and may well set the same tariff for Armenia in 2009.