Electrifying News: Russian company intends to ask for substantial rise in energy tariffs

The Electric Networks of Armenia intend to ask for a more than 40-percent rise in the electricity tariff and, if approved, it will become the third such increase in three years.

The company published a statement late last week saying that it would submit a formal bid to the Public Services Regulatory Commission to raise the current electricity tariffs by 17 percent. It is proposed by the company that the daytime rate for the population be raised from the current 41.85 drams per 1 kW/h to 58.93 drams and the nighttime rate – from 31.85 drams to 48.93 drams. (The average U.S. dollar exchange rate today is 480 drams).

This information came almost simultaneously with two other reports relating to the electric power sector of Armenia.

Meeting with representatives of the Armenian American community in Washington, DC, Armenian President Serzh Sargsyan last week commented on the signing of the Trade and Investment Framework Agreement with the United States. He said it would pave the way for American investments in Armenia. He mentioned that the American company, ContourGlobal, would start operating in Armenia within a matter of days. The Vorotan Hydro Cascade was sold to the firm that intends to invest more than $250 million in the facility.

The second piece of information concerned Sargsyan’s visit to Moscow where he went after the United States and the likely conclusion of an agreement on the sale of the Armenian power grid. At present, the Electric Networks of Armenia are owned by the Russian company, Inter RAO. According to media reports, Russian-Armenian tycoon Samvel Karapetyan, the owner of the Tashir group, wants to buy the facility.

These two pieces of information are clearly related to the Electric Networks of Armenia bid for the rise of electricity tariffs. But no reports came immediately about the possible deal following Sargsyan’s visit to Moscow. Still, the matter was apparently discussed there.

One can only guess what kind of game the Armenian authorities are “playing” with the American and Russian companies. Most likely, this is connected with the debt of $300 million that the Armenian power grid has contracted. Now the tariffs are being raised in order to “compensate” the debts of the Russian company and to sell it “clean”.

At the same time, the increase in the tariffs should “neutralize” the entry to the Armenian energy market of the American company. International financial organizations believe the prices of electricity in Armenia are overstated. As it was previously expected, after purchasing the Vorotan Hydro Cascade ContourGlobal could announce the reduction of the cost of energy. And this could raise the political image of the American company as compared to the Russian companies, which only raise tariffs.

Anyway, such a significant increase in electricity tariffs will become another blow to the already empty pockets of Armenian consumers. It is yet unclear whether the move will cause the social protests like the ones that the attempt of the Yerevan municipality to raise public transport fares in 2013 caused. Then citizens managed to get the decision of the municipal authorities reconsidered. But at the same time they “swallowed” a significant rise in the tariffs of natural gas and electricity.