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ENERGY CONCERNS: EXPERTS DISCUSS IMPACT OF ELECTRICITY TARIFF RISE ON ARMENIAN ECONOMY
ECONOMY | 08.07.14 | 11:59
http://armenianow.com/economy/55865/armenia_energy_system_tariff_rise
Photolure
By SARA KHOJOYAN
ArmeniaNow reporter
The periodical increases in energy prices in the last few years and
Armenia's decision to join the Russia-led Customs and Eurasian Unions
are leading the country to energy isolation, some economists believe.
The country does not use the opportunities offered by its two
neighbors, Georgia and especially Iran - for purchasing alternative,
more affordable energy sources. Moreover, the Russian companies
operating in Armenia make deals with each other that are against the
interests of the population and the State, opposition and independent
experts said during a July 7 panel discussion hosted by Media Center.
The discussion was devoted to the expected rise in electricity prices
in Armenia and its possible impact on the economy.
Economic expert Ashot Yeghiazaryan pointed out that rises in
electricity prices should have been avoided in the past few years as
more increases are expected ahead, in particular, during the expected
repairs at the Armenian nuclear power plant, as a result of which
energy prices are expected to rise more dramatically.
Moreover, according to Yeghiazaryan, by joining the Eurasian Economic
Union, Armenia will have bigger energy problems, as because of the
Russian-Ukrainian crisis, the Russian companies that own most of
Armenia's energy system are facing serious challenges.
"They have trouble attracting finances and technologies, as without
foreign investments it is impossible to imagine development in the
sphere. By joining the Eurasian Economic Union project, we deprive
ourselves also of the opportunity to develop alternative routes,
such as Iran and European countries," said the expert, emphasizing
that Armenia has found itself in complete energy isolation.
In spring of this year 11 electricity producing companies applied
to the Public Services Regulatory Commission (PSRC), requesting
the revision and increase of the electricity tariff, then the PSRC
met their request and beginning on August 1 electricity tariffs for
Armenian citizens will be raised by 10 percent.
It is remarkable that the PSRC largely explained the increase by the
17.5 billion (about $44 million) financial gap of the energy market
companies. This is the second rise in electricity prices within a space
of about a year. Last year also saw a rise in natural gas tariffs.
Stressing that the recent rises in energy prices in Armenia do not
contribute to Armenia's policy of export promotion, opposition Armenian
National Congress Party Board member, economist Vahagn Khachatryan
noted that the $300 million required for repairs of the Metsamor
nuclear power plant will also be included in the electricity tariff.
"Corruption risks are very high, the energy sector is at the lowest
level of the governance system. I look at their records and see that
there were no such problems in 2012, then every year 10 billion drams
($25 million) losses were added, and there are no conclusions,"
said the economist.
According to Khachatryan's estimations, if the salaries, profitability
and losses of the electricity networks company (which holds a monopoly
on electricity supply) were a little lower, it would be possible to
have a lower tariff.
Head of the Republican Union of Employers of Armenia Gagik Makaryan
also presented the possible losses for the country's economy and
business environment because of the energy price rises, saying that
big business will largely remain unharmed, while small businesses
will have to add about $100 to their monthly costs.
According to Makaryan, companies with a turnover of one million
drams (about $2,500) will see a 30-35-percent increase in their
total costs, while the new mechanism of the turnover tax does not
envisage compensation. In the meantime, the money mass will decrease
by 10 percent. "Therefore, people will become poorer, the purchasing
power will fall, the multiplicative effect should be negative, the
small businesses will be more depressed, therefore they will have
to either go to the shadow or close down, also there will be public
dissatisfaction," said Makaryan.
Referring to public resentment, Mane Tandilyan, a member of the Dem.am
civil initiative, which campaigns against the controversial pension
reform, urged all citizens of Armenia to struggle.
"The burden of unprofessional administration has been shifted onto
citizens," she said. "I have seen analyses that say that the price
for us could be a maximum of 25 drams. As a citizen, I feel cheated
that I will have to be responsible for the faults of companies."
From: Baghdasarian
ECONOMY | 08.07.14 | 11:59
http://armenianow.com/economy/55865/armenia_energy_system_tariff_rise
Photolure
By SARA KHOJOYAN
ArmeniaNow reporter
The periodical increases in energy prices in the last few years and
Armenia's decision to join the Russia-led Customs and Eurasian Unions
are leading the country to energy isolation, some economists believe.
The country does not use the opportunities offered by its two
neighbors, Georgia and especially Iran - for purchasing alternative,
more affordable energy sources. Moreover, the Russian companies
operating in Armenia make deals with each other that are against the
interests of the population and the State, opposition and independent
experts said during a July 7 panel discussion hosted by Media Center.
The discussion was devoted to the expected rise in electricity prices
in Armenia and its possible impact on the economy.
Economic expert Ashot Yeghiazaryan pointed out that rises in
electricity prices should have been avoided in the past few years as
more increases are expected ahead, in particular, during the expected
repairs at the Armenian nuclear power plant, as a result of which
energy prices are expected to rise more dramatically.
Moreover, according to Yeghiazaryan, by joining the Eurasian Economic
Union, Armenia will have bigger energy problems, as because of the
Russian-Ukrainian crisis, the Russian companies that own most of
Armenia's energy system are facing serious challenges.
"They have trouble attracting finances and technologies, as without
foreign investments it is impossible to imagine development in the
sphere. By joining the Eurasian Economic Union project, we deprive
ourselves also of the opportunity to develop alternative routes,
such as Iran and European countries," said the expert, emphasizing
that Armenia has found itself in complete energy isolation.
In spring of this year 11 electricity producing companies applied
to the Public Services Regulatory Commission (PSRC), requesting
the revision and increase of the electricity tariff, then the PSRC
met their request and beginning on August 1 electricity tariffs for
Armenian citizens will be raised by 10 percent.
It is remarkable that the PSRC largely explained the increase by the
17.5 billion (about $44 million) financial gap of the energy market
companies. This is the second rise in electricity prices within a space
of about a year. Last year also saw a rise in natural gas tariffs.
Stressing that the recent rises in energy prices in Armenia do not
contribute to Armenia's policy of export promotion, opposition Armenian
National Congress Party Board member, economist Vahagn Khachatryan
noted that the $300 million required for repairs of the Metsamor
nuclear power plant will also be included in the electricity tariff.
"Corruption risks are very high, the energy sector is at the lowest
level of the governance system. I look at their records and see that
there were no such problems in 2012, then every year 10 billion drams
($25 million) losses were added, and there are no conclusions,"
said the economist.
According to Khachatryan's estimations, if the salaries, profitability
and losses of the electricity networks company (which holds a monopoly
on electricity supply) were a little lower, it would be possible to
have a lower tariff.
Head of the Republican Union of Employers of Armenia Gagik Makaryan
also presented the possible losses for the country's economy and
business environment because of the energy price rises, saying that
big business will largely remain unharmed, while small businesses
will have to add about $100 to their monthly costs.
According to Makaryan, companies with a turnover of one million
drams (about $2,500) will see a 30-35-percent increase in their
total costs, while the new mechanism of the turnover tax does not
envisage compensation. In the meantime, the money mass will decrease
by 10 percent. "Therefore, people will become poorer, the purchasing
power will fall, the multiplicative effect should be negative, the
small businesses will be more depressed, therefore they will have
to either go to the shadow or close down, also there will be public
dissatisfaction," said Makaryan.
Referring to public resentment, Mane Tandilyan, a member of the Dem.am
civil initiative, which campaigns against the controversial pension
reform, urged all citizens of Armenia to struggle.
"The burden of unprofessional administration has been shifted onto
citizens," she said. "I have seen analyses that say that the price
for us could be a maximum of 25 drams. As a citizen, I feel cheated
that I will have to be responsible for the faults of companies."
From: Baghdasarian