On Monday, 23 May, the Cabinet of Ministers did not support Economy Ministry’s guideline project that provides an increase of state fees for regulation of public utilities. Ministers will look for solutions to increase the Public Utilities Commission in the near future.
Prime Minister Maris Kucinskis has ordered Economy Minister Arvils Aseradens and Finance Minister Dana Reizniece-Ozola to prepare solutions to improve PUC budget situation without increasing the rate from 0.17% to 0.2% in the middle of the year.
Although PUC manager Rolands Irklis has informed ministers about the institution’s unambiguous budget situation, ministers were not supportive of the intention to increase the rate in the middle of the year. Kucinskis emphasized that it would not be good practice. With that, rules will not be submitted to the Cabinet of Ministers in the near future.
Irklis told ministers that the institution has a large budget deficit that heavily influences its function – it is no longer possible to keep professional workers in their posts. It is also necessary to make painful decisions that will undoubtedly affect the institution’s overall quality of work. Therefore, he believes it would be less painful to raise the rate. Approximately EUR 80,000 will be necessary to ensure function of the institution in its current state until the end of the year. «But I would rather not continue work in the current regime,» – added Irklis, saying that it would mean losing valuable employees.
Previously, the head of PUC said that without changing the fee the institution’s budget deficit could reach EUR 600,000 this year.
EM notes that PUC’s function should be financed using revenue acquired from administration of state fee for regulation of public utilities.
The law on public utilities regulators mentions that the rate of the state fee for public utilities regulation cannot exceed 0.2% of the entrepreneur’s provided net turnover of the public utility for the previous calendar year. The current rate is 0.17%.
EM’s proposed changes state that the rate would be increased from 0.17% to 0.2%, because there have been changes added to the range of regulated entrepreneurs and turnover. EM emphasizes that the total amount of the fee is not expected to change in comparison with the planned amount.
By keeping the fee at 0.17%, PUC will experience a deficit of EUR 600,000, which is above 10% of the regulator’s planned annual revenue.
«This is largely related to the decline of turnover in supervised industries. This includes the decline of prices on natural gas. In addition, liberalization of the electricity market will change the way the fee is administered from electrical energy supply services. There are also multiple different factors related to PUC’s decisions, including last year’s reduced fee on high-voltage network. Most of the heating tariffs were reduced as well. All related processes have an effect on regulated industries. Another decline is expected this year,» – says Irklis.
The head of PUC concluded that all of the aforementioned factors mean that PUC cannot hope to experience an increase of revenue in 2016.