The Public Services Regulatory Commission (PSRC) signaled the impending price hikes earlier this month. It warned that the Armenian energy sector will operate at an annual combined loss of 23.8 billion drams ($49 million) if the existing tariffs are not revised upwards.
In a December 20 statement, the PSRC cited the need to repay $270 million in loans used for the recently completed modernization of the Metsamor nuclear plant. It also pointed to Armenia’s contractual obligation to enable Russia’s Gazprom energy giant to recoup investments made in a large thermal-power plant located in the central town of Hrazdan.
The statement revealed that the Armenian and Russian governments have reached an agreement that commits Yerevan to providing the Hrazdan plant with $31.8 million annually for the next ten years.
“Those obligations must be fulfilled,” Ashot Urikhanian, a senior PSRC official, said on Wednesday. “Or else, we will have very serious problems.”
Urikhanian also stressed that in exchange for this subsidy Russia’s Gazprom giant will keep the wholesale price of its natural gas for Armenia “stable” for the next ten years. The gas price currently stands at $165 per thousand cubic meters, which is well below the international levels.
The PSRC’s decision means that electricity tariffs will rise by 4.7 drams (about 1 U.S. cent) per kilowatt/hour on average on February 1. The daytime price paid by most Armenian households currently stands at almost 45 drams (9 cents) per kilowatt/hour.
The regulatory body said low-income families making up 11 percent of the population will not pay more for electricity. Other individual consumers will see their electricity bills rise by between 3 and 7 percent depending on the monthly amount of energy use. The steepest price rise was set for businesses.
The new tariffs and their knock-on effects could further push up the cost of living in the country. According to government data, consumer price inflation there rose to 9.6 percent in November, the highest rate in many years.
Little wonder then that many Armenians are reacting angrily to the PSRC’s decision.
“They should just hand out ropes to people and tell them to hang themselves,” said one woman in Yerevan. “We can barely afford food, and they are now making electricity more expensive.”
“We should hope for the better but there is no future,” said another.