Daniels Pavluts

The verdict of the Administrative Regional Court in the case of Latvenergo tariffs highlights several problems and this situation should be assessed ambiguously, believes Economy Minister Daniels Pavluts.

«On one hand, the goal of Latvenergo for creating a differentiated tariff was to support low-income groups of society during the crisis. On the other hand, what we see now – is that not all “Start” tariff payers are the people who cannot afford to pay a full electricity tariff. For example, large families that have a large consumption of electricity would need this kind of support the most, being included in the group, which pays the highest base tariff,»- the Minister says.

«According to the initial assessment of the Court’s verdict by the experts of the Economy Ministry, the Court concluded that the determination of a lower tariff to some range of consumers is not profitable and it cannot create social support instruments with the help of these tariffs. In a way, the Court admitted that an increase of tariffs can be justified, but the Court questions the method how it was done. Keeping in mind that both sides have already announced their intention to challenge the Court’s verdict it is important to ensure the availability and clarity of information about the future, as well as about current tariffs and tariff formation principles,»- Pavluts says.

At the same time, keeping in mind if the court’s verdict would become in force, it would automatically mean the necessity for Latvenergo to develop a new tariff offer. Latvenergo should carefully use the time it has left before the final verdict to rationally and practically assess the effectiveness of the current tariff offer and its compliance with society’s and business development interests, as well as think of ways to develop alternative mechanisms to support society’s less profitable groups, the minister says.

He also says that there is one more argument in the Latvenergo tariff case in favor for carrying out reforms in the management of Latvienergo because the current system is functioning in contradiction to the ministry. In this case, the objective to develop a socially responsible tariff increase offer came from the Economy Ministry, which is both the main shareholder of the company and the developer of the energy policy at the same time. A reform of the management of the state shares would help divide the competences of the ministry according to the principles of good management and decrease political interference in the company’s activities.

Ref: 102.109.109.2261