RAB method to be introduced in Ukraine

Since November, new utility costs charging rules have been introduced in Ukraine, director of department for public services strategic planning and development in of the Public Utilities National Regulatory Commission Dmytro Arlachev told a news conference, ForUm correspondent reports.
According to the official, the Public Utilities National Regulatory Commission proposed a mechanism providing for establishing long-term 3-5 years tariffs for thermal energy, centralized water and wastewater enterprises.

According to him, the rates are designed to encourage enterprises in the industry to reduce energy consumption and generate income on the investment.

"The new scheme, known in the United States and the European Union as the method of RAB (regulatory asset base - adjustable base of invested capital) will allow the state to establish an economically reasonable cost of utilities and stop subsidizing enterprises through tariff difference compensation," Arlachev said.

He continued that the basic idea of the new technique is lower tariffs for consumers.

He said that the proposed procedure registers the benefits to both companies and consumers: "The first tariff reduction will come from the fact that the savings of the company will be divided between two market participants - the company itself and the recipient of services. In this case, the supplier will benefit from reducing costs faster than it would be set by the regulator. In this case, half of the total savings cost will also reduce tariffs for the consumer.

The official said that the transition to the RAB-methods will be gradual, as public utilities must learn to work under new schemes, which are fundamentally different from the current tariff algorithm.