6 July 2020, Monday, 12:57
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Tariff Rates for the Electricity Include Price for Lukashenka’s 'Toys', Economist Says

Tariff Rates for the Electricity Include Price for Lukashenka’s 'Toys', Economist Says

People can take to the streets and warm them up.

It became known that the Belarusians would be subject to a new fee because of the BelNPP: the cost of its construction would be included in the tariff rate for electricity for citizens.

Director of the Department of Nuclear Energy of the Ministry of Energy Vasil Palyukhovich stated this. BelNPP Director General Mikhail Filimonau confirmed the information and specified that tariff rates would be announced when the construction's completed. Then it will be clear how much the construction, installation and commissioning works cost.

Charter97.org got comments of economist Leu Marholin.

- How do you assess the idea to make citizens pay for the project called "BelNPP" in full?

- By and large, it was clear from the very beginning. When the construction of the plant was still under consideration and when the authorities insisted that it would be the cheapest form of electricity, experts noted that the current and even capital costs of the NPP construction were not the major thing. The major thing is that the power plant has a certain operation period. And the expenses for the future decommissioning of the NPP will also be added to the tariff.

It is hard to say how it will look like. Neither the director of the power plant nor the Minister of Energy decides on tariffs. The final decision is made by the Cabinet of Ministers. We will learn about it soon.

- For example, France uses nuclear power plants to lower the price of electricity, because it at least reduces the cost of goods produced in the country. Why is the opposite true in Belarus?

- The use of nuclear energy at a certain stage - the second half of the 20th century - was explained with the lack of resources in many countries. They lacked oil, gas, and coal, so the countries switched to nuclear power.

I would not say that this is the cheapest type of energy. Indeed, if we consider only current expenditures, it is very cheap. But if we take into account the capital expenditures for construction, which are represented by depreciation payments, as well as the costs of future decommissioning, it turns out that this is not the cheapest kind of energy. Europe is well aware of it.

But one has to keep in mind that Europe, all countries with market economies compete in electricity generation. That is, most often the state is not involved in electricity generation. Even if it is, private companies that compete with each other usually sell it.

Belarus misses even a sign of private property in this sphere! At present, there is electricity produced at the NPP. We do not know what is included in the cost of electricity tariff rates. Periodically, it turns out that it includes the construction of a new office building for the Ministry of Energy, or maintenance of some football clubs, etc. Therefore, the size and content of the electricity tariff rate is an unpredictable thing.

We regularly face the fact that we already pay 80% of the economically justified costs of electricity. It takes a year or two and it turns out that we don't even pay half of it, and again it is increasing.

To make tariff rates predictable and reduce them, we need two small, but essential conditions. Firstly, the transparency of tariff formation, so that people could know what they include. Secondly, it requires a market competitive environment.

- Some countries like Lithuania, Poland, Estonia, Finland refused to buy energy from the BelNPP. Lithuania calls for further boycotting nuclear energy from Belarus. If it increases the unprofitability of the NPP, can the losses from the operation be shifted on Belarusian consumers, thus raising the prices even more?

- They can! The thing is that any large production, such as the nuclear power plant, depends on its productivity. If its capacity is not loaded, if it produces electricity at the level of 50-60% of its production capacity, then the cost of electricity production will grow at the expense of the fixed costs.

We are well aware that our state likes to make it the burden of citizens. Therefore, the less the plant is loaded, the higher the electricity price will be.

- Given all these factors, what figures can Belarusians face in their utility bills?

- I think the figures that Belarusians may face do not much relate to the figures that are generated by the Energy Ministry. Tariffs are, to a large extent, a political issue.

The government practices small tariff growth. It realises that excessive or sudden tariff rates growth can cause the resistance of people. It is afraid of it.

Therefore, they will keep groping their way. The same happens to gasoline: on Sunday they raised its price by a kopeck and watched the reaction. Was it accepted? Next week they raise the price by a kopeck again. The same will happen to electricity. Nobody will risk raising the tariff at once and much.

- Even according to the data of the National Statistical Committee in 2018, almost 30% of Belarusians had incomes below the minimum consumer budget. If the current economic situation and the level of income remain unchanged, can we say that communal amenities will become a luxury for a third of citizens?

- I think that the state will still hand on. There is a mechanism for compensation of expenses for the population with low incomes. Of course, this mechanism is far from perfect, but, nevertheless, tolerance will determine the upper limit of all tariffs. They will increase only until the population can tolerate it. If it's cold at home, the population can take to the streets to warm up. Therefore, it is a political issue.

- Doesn't it figuratively mean that the BelNPP makes us back to the times of firewood?

- No. People cannot be forced to return to the Stone Age! Either people won't pay for these tariffs, if there are no compensation mechanisms or they will just take to the streets and defend themselves, if the electricity is switched off in mass.

- Recently it became known that the state spent almost a billion dollars on unprofitable "modernization" of cement plants. Can we say that Belarusians will pay for this adventurous project through indirect taxes, price increases, etc.?

- I would not compare cement plants and the NPP. The fact is that the cement plants were public investments. As a rule, they are not effective. Officials who make decisions are not responsible for this.

In this regard, the BelNPP is an example of the same public investments, which according to experts' calculations, Belarus does not need at all. Most likely, this is a toy for Lukashenka. How can the country do without its nuclear energy? If there is nuclear power, one may make a small bomb.

There was no real need for that. I assume that the NPP may become a burden in a few years as well as it happened to cement plants.

- What other loss-making projects of the authorities did Belarusians have to pay for? What are the losses of every citizen inflicted by an inefficient economy?

- It's a senseless task to evaluate every citizen's losses. It should be calculated. These are quite complicated calculations.

As for the projects, I immediately come up with the modernization of the woodworking industry. It would seem all elements required are available - the need for woodworking products, raw materials, modern equipment, competent specialists.

One could invest in modernization and start to roll in money. But in our conditions, it has also turned into a loss-making project. When the government invests, not an investor, these investments are often loss-making.

- How can this stealing from people be stopped?

- To change this power! The stealing from people will stop at once! When the country misses the division of powers, as well as the influence of the people on the authorities, there is no other way to stop this stealing. It is another topic to discuss how to change this power, but as long as this power exists, people will be stealing from.