Armenia’s Russian-owned national gas distribution company defended on Thursday higher tariffs sought by it, saying that state regulators’ refusal to approve them would put continued supplies of Russian gas to the country at risk.
The company controlled by Russia’s Gazprom formally asked the Public Services Regulatory Commission (PSRC) on April 1 to allow it to raise its retail prices by an average of 11 percent.
The Gazprom Armenia network argued that the cost of Russian gas supplied to Armenian households and corporate consumer has remained unchanged since Gazprom raised its wholesale price for Armenia from $150 to $165 per thousand cubic meters in January 2019. The network has incurred major losses as a result.
The PSRC proposed on Monday that Gazprom Armenia settle for more modest price rises that would average 4.6 percent. It also decided to hold a further discussion on the issue with the company’s representatives and civil society members.
The company’s chief executive, Hrant Tadevosian, insisted on its tariff demands when he spoke during the three-hour meeting held on Thursday.
“If we carry on with current expenditures we will no longer be able to import the 2 billion or 2.2 billion [cubic meters] of gas which we have imported until now [annually,]” warned Tadevosian. “If the gas supply is interrupted for one or two days I can guarantee that we will have very serious problems.”
“I’m not trying to scare you,” he said. “I just have to state the existing the truth.”
Tadevosian added that higher tariffs would also allow Gazprom Armenia to make 230 billion drams ($474 million) in badly needed capital investments in the network over the next 10 years.
In its tariff application sent to the PSRC, Gazprom Armenia offered to slightly cut the gas price for the majority of households, which currently stands at an equivalent of $290 per thousand cubic meters. However, it demanded the scrapping of a 36 percent price discount enjoyed by low-income families.
The PSRC objected to this demand on Monday. It also urged the gas operator to reconsider plans for a sizable increase in gas tariffs set for manufacturing and agricultural firms.
The regulatory body is expected to make a final decision on the Gazprom Armenia application later this month.
Shortly before Gazprom Armenia requested the price hikes, the Armenian government urged the Russian energy giant to cut its wholesale gas price for Armenia. It argued that global energy prices have collapsed because of the coronavirus pandemic.
Armenian Prime Minister Nikol Pashinian and Russian President Vladimir Putin discussed the matter by phone on April 6. They apparently failed to reach an agreement.
Speaking at a May 19 video conference with fellow leaders of the Eurasian Economic Union (EEU) member states, Putin rejected Armenia’s and Belarus’s calls for the Russian-led trade bloc to set uniform energy tariffs which would reduce the cost of Russian natural gas imported by them.