Moscow Minister of Economy - on the growth of housing and communal services tariffs

The Moscow government approved the decision to increase housing and communal services tariffs from July 1 by the maximum amount possible by law - 10%. Despite the crisis, the authorities do not expect a decline in payment discipline and intend to continue spending on optimizing targeted social support instead of subsidies to utility providers. MAXIM RESHETNIKOV, director of the economic policy department of the Moscow government, told Kommersant about how the city’s tariff policy is structured, how the mayor’s office manages utility assets and fits infrastructure needs into the inflation-limited tariff growth ceiling.

Photo: Dmitry Dukhanin, Kommersant / buy photo

— The established ceiling for tariff growth is 10%. How much will it actually be?

— If we talk about utilities, the weighted average increase in tariffs will be 10%. This corresponds to the maximum permissible size for Moscow. One and a half times lower than the inflation rate. Currently, the average annual inflation rate in Moscow is estimated at 16.6%. 10% is the average value, the tariff for heat will increase by 13%, the tariff for hot water - by 11.5%, for cold water and sewerage - by 5.9%, for gas - by 7.5%, for electricity tariff growth will range from 7.5% to 13.7%. Housing services in general will become more expensive by 11%.

— Annual inflation, according to the forecast of the Ministry of Economy, will be 12%.

Houses and walls are extorting

— I’ll explain the nuances. There are two indicators: average annual inflation and December-to-December inflation. They diverged greatly - the devaluation shock occurred in November-December. In 2014, the average annual inflation was 7.9%, tariffs increased by 7%, we met the deadline, everything was great. And in December 2014 by December 2013, inflation was as much as 11.7%. This “overhang” turns into average annual inflation in 2015. It turns out that the average annual inflation will be 16.6%, and December to December - about 13.4%. But we focus on the annual average. What you call 12.2% is one of the estimates of one federal body for the country as a whole - and just an estimate of inflation from December to December.

— What if we recalculate December tariffs to December?

- 10.8%. Approximately within these parameters.

— Is the social component more important to you in this story or the economic one?

— The issue of tariffs for me is always a matter of implementing economic policy. But somewhere a line arises where the economy faces social restrictions - and, of course, such restrictions are strong in tariffs, since these decisions affect everyone’s pocket. It is very important to understand how relevant they are here and now.

— This year there will be problems with the income of the population. In Moscow, the Ministry of Economy expects a decline in real disposable income of 9.6%.

— It is foolish to argue with the fact that nominal income growth this year is unlikely to reach the projected level of inflation. But at the same time, according to Rosstat, the growth of nominal wages is now plus 7.5–7.9%. Yes, there is a lag behind the rate of tariff growth. But on the other hand, when we indexed tariffs in the previous two years, we didn’t use the logic “Muscovites’ wages are growing, let’s take more”? There is an acyclical nature in tariff indexation. When wages grow at an accelerated pace, we maintain tariffs. And when wages fall, we still have to cover the objective costs of the monopolists (increasing costs of metal for pipes, reagents, gas).

— Don’t you expect failures in payment discipline?

— We don’t see such problems and risks as systemic in the city yet. Problems arise when leapfrogs begin with suppliers and management companies. When people are not sure whether the payment will reach the real suppliers. There is no such chaos in the city; the entire system is strictly administered and each payment is immediately split and goes to those who supply water, heat, and gas. No one keeps or spins money there.

We have problems with payment discipline especially among owners of large apartments who have left somewhere and do not pay on time. But this is not a social category, and it does not depend on income.

— What is the city’s share in public utilities now?

- As an owner? Here our influence today extends to water and sanitation (JSC Mosvodokanal, which is a wholly owned subsidiary of the city). This is our area of responsibility - that’s why there is a slight increase in tariffs: 5.9%. Next are management companies. Quite a lot of houses have now come under the management of the State Budgetary Institution “Zhilishchnik” - although this is not the best housing stock, these are houses that are old, many of them are difficult to manage. And we also have Mosgaz - and there, too, the tariff increase is below the maximum, 7.5%. If we talk about shares, water accounts for approximately 20% of the bill, another 10% is housing services. That is, the city’s share of public services can be estimated at 25–30%. But it doesn’t matter whether we are the owners or not - we, as administrators, are responsible for the heat, for maintaining the courtyards, and for repairs.

Why will thermal energy rise in price the most from July 1?

The most important thing is warmth. There is a special situation here - the supply of thermal energy, as well as housing services, were and are subsidized directly by the city. At the same time, the cost of 1 gigacalorie, which is provided to the population, is subsidized regardless of who receives it—a grandmother in an apartment of 30–40 square meters. meters or a wealthy city dweller with an apartment of 150 square meters. meters. Paradox: the larger the housing area, the greater the subsidy amount.

We categorically do not like this situation and in recent years we have been gradually moving away from direct subsidies. We are replacing subsidies to resource supply organizations, heat producers and management companies with targeted subsidies to Muscovites.

That's why our heat tariffs are growing by 13%. High growth rate - but not all of this money goes to thermal workers. They get 7% - the rest goes to replacing subsidies with social subsidies. So, this year we are adding another type of social subsidy - in case the growth rate of a Muscovite’s payment is above 10%.

— Is this the one that at the federal level should be within 22%?

- No, these are different things. What you are saying is a subsidy if you do not have enough income to pay for housing services. In other words, you receive a salary of 100 rubles, and you receive a housing bill for 15 rubles. The maximum permissible Moscow standard is that no more than 10% of your income can be spent on paying for housing services, otherwise the city will provide you with a subsidy to cover this difference. 10%, no more than 10 rubles. There is a difference of 5 rubles, which the budget will provide. And starting this year, another subsidy is being introduced. If the increase in your payment under comparable conditions exceeds 10%.

— Do you smooth out peaks when moving from one subsidy to another?

- Yes. This is how we reduce ineffective subsidies by introducing targeted subsidies.

— In numbers, what does this elimination of the general heating subsidy and the transition to targeted subsidies look like?

— 40 billion rubles were in 2010–2011. We have begun to take small steps; by 2015 it will be about 12 billion rubles.

— Have they cut it three times already?

- Yes. But at the same time, the volume of benefits and subsidies for Muscovites is growing.

- Actually the same money.

- Not the same. A bit less. Previously, I, the minister, also received a heat benefit - I didn’t know about it, but the city actually gave us this benefit. The volume that I conditionally took from people like that does not need to be compensated. And when my grandmother’s heating bills increased, she was compensated for the whole thing, either through a benefit or a subsidy.

We have allocated almost 12 billion rubles for targeted subsidies to Muscovites for 2015. And another 28 billion rubles - for benefits, federal and additional, established by Moscow legislation.

- How do they relate?

- Approximately one to one. In total, we have 3.5 million beneficiaries, and another 900 thousand benefit from subsidies. Every third Muscovite uses social support.

— You collect taxes in Moscow and use them for subsidies. But at the same time, prices, the cost of living, and starting a business are rising. There is an ideal proportion - how much, from whom and to whom can you transfer?

— It was more likely when the city received a very large share of oil and gas rent. There was total subsidization. Now the share of oil and gas is decreasing, while the share of payments from Muscovites and businesses in the budget is growing. It is clear that this is not only economically inexpedient, but also politically more difficult. Therefore, our task is for everyone to pay what it costs. And the city helped only those who, for some reason, could not bear this burden.

— To what level and by when will you reduce subsidies to resource suppliers?

- Will watch. There are no tasks such that by such and such a number everything will be zero. We will look at how the economic situation develops - in terms of personal income, inflation, and economically justified tariffs. We consider these expenses, well, maybe not the most effective, yes, but necessary to smooth out fluctuations.

- 10% increase in tariff - how much is that in money?

— The situation for each apartment is individual. Take an apartment of 64 sq. meter, in which three people live, they pay according to the standard (according to meters - each has their own). The increase in utility bills will be 200 rubles per person or 9 rubles per square meter. meter, 600 rubles for payment.

— And the average payment...

Will the authorities be able to force citizens to pay new bills?

- 7 thousand rubles according to the standard. When consumption is metered, it is significantly lower. Payment is the product of two elements - tariff and volume. Over the past three years, the population has begun to manage payments and consumption volumes. 80% of apartments are equipped with water meters. 100% of houses have heat meters. The situation is very different and the payment is different. Yes, by the way, regarding payment management: Muscovites are now leaving for the summer - they can write an application and minimize their payments.

Those who have not installed meters pay according to the standards. The situation there is completely different - the task is to update the regulatory framework.

— Will you lower the standards?

“We have suspicions that for many houses the standard should be lower. The task has been set, our colleagues are doing the work.

— How are the city’s relations with utility suppliers? Who's twisting who's arms?

– We don’t have the feeling that we are overpaying the monopolists. They are forced to maintain fairly large infrastructure capacities. And often not all of these capacities are used. Over the past 20 years, the thermal system has been fragmented: efficient generation was in Mosenergo, ineffective generation remained in MOEK (Moscow United Energy Company - Kommersant ). But inefficient generation maintained reliability. There were profits at Mosenergo, losses at MOEK. What was the city doing? I tried to create a second system. For twenty years I have invested very large budget money in new capacities.

As a result, we received a duplicate structure. It exists, it functions, everything is connected to the network. It has to be paid for. Now we have excess capacity in heating, excess capacity in energy, we have excess capacity in Mosvodokanal. All this was built under the previous master plan, which assumed that we would almost double the city here. Well, we’ve built the infrastructure, what now? It became clear that such a redensification of the city was inappropriate, and most importantly, that Muscovites did not support it. But the infrastructure is there - it must be maintained.

- Or sell...

— MOEK, for example, is now showing quite serious losses. That’s why we agreed to a deal to privatize MOEK - and it’s good that Gazprom Energoholding acquired it. Now, in fact, Moscow heat suppliers have one owner, and he begins to optimize capacity. They are discussing how to remove inefficient capacities. Last year, when REC did tariff regulation, it cut the company's costs by 74 billion rubles. A lot of these costs were in heat generation. Monopolists say: “We have objective losses, we have underutilized capacity, one, two, three.” But when we entered into a deal, we immediately agreed: we will not look at all this - cover losses through optimization, by searching for internal efficiency. This was the main objective of the MOEK deal. It's no secret that we have similar problems with Mosvodokanal. Water consumption by the population is falling - by more than 20% over the past four years.

- Are these counters?

— And counters, and efficient washing machines and dishwashers. Much less water is wasted than when we wash it with our hands. But water use is being reduced - and as a result, we have a slightly more than 50% load level at Mosvodokanal. We pump water from the Smolensk region, and the water flow is determined by the diameter of the pipe. It is impossible to quickly take it and turn it off. Hence the high fixed costs, which, of course, put pressure on tariffs.

— Which Moscow resource supply assets would make sense to sell next?

— Sale is a political issue. We have two energy transmission companies - MOESK and the city OEK. We understand that there could potentially be good synergies there and unnecessary investments could be avoided. When everything is collected in the hands of one owner, he looks at everything completely differently.

— One gets the impression that the problems of housing and communal services that are voiced at the federal level, including the need for investments of 6 trillion rubles, do not concern Moscow.

— There are just some peculiarities. The problem of housing and communal services is a problem of an effective owner and long-term development plans. The city has been present as an owner in the housing and communal services sector for many years - and the problem of underinvestment and the critical state of infrastructure is not as acute as for the whole country. But there is a downside. Many investments turned out to be ineffective. And if the city had taken a slightly different position, the level of tariffs could have been significantly lower. On the other hand, this is our competitive advantage, and we are interested in using these capacities. Another point is that we must optimize them as much as possible - as in the case of Mosenergo and MOEK.

Yes, Moscow may have a slightly different agenda - we have to look for this balance and resolve issues of urban development. This also allows us to curb the growth of tariffs. We have been increasing the average tariff for the population for many years now at a rate below the inflation rate. We are squeezing the monopolists. In 2013, our heat did not become more expensive - the privatization deal included a condition that we would not index the economically justified tariff. But we raised the tariff for the population a little - and now, due to this, we are reducing ineffective subsidies. Thermal production was limited to support the population. How did we meet the 10% target? Because the water was pressed. Due to the fact that there are connection tariffs and we are trying to finance investment programs through new connections, so that new consumers, and not all Muscovites, pay for new facilities. A very complex mechanism of interconnected decisions in order to still save the population from paying for unnecessary things.

Interview conducted by Oleg Sapozhkov

“So that everyone pays what it costs”