Electric and heating prices to be raised step by step

Apartment dwellers and families using more than 150 kw
will pay higher utility bills
On December 9, Parliament approved a resolution on actions for the energy sector. Accordingly, it was resolved to take step by step actions to transfer energy companies to market principles starting in 2014. Bringing it to market principles means to not intentionally hold tariffs, but rather liberalize the tariff so it is determined by the market.
Under the resolution, electricity prices will be stable for the next three years for families’ whose monthly electrical consumption is within 150 kilowatts. If family consumes more than 150 kilowatts per month, it will pay charges in actual cost. The Energy Regulatory Office conducted a survey and issued an estimation of how much alteration will be suitable to make electricity prices in the near future. According to preliminary estimations, it is likely to raise the price per kilowatt to Tgs92 and heating price per square meter to Tgs360 early next year. ERO considers it needs to raise the price of electricity in 5 stages until 2014. Not only the price of electricity, but the price of heating, hot water and coal are likely to increase by 7-25 percent by 2014.
Currently, users receive electricity at Tgs79.8 per kilowatt and heating at Tgs304 per square meter.  Specialists said that the current tariff of electricity and heating just recovers 69 percent of production costs. P. Batkhuyag, Deputy Head of the Transportation Regulation Department at Ulaanbaatar Railways, and D. Tserennadmid and Kh. Tsogtbaatar, specialists of Tariff  Department at Energy Regulatory Office reported how the parliamentary resolution will be implemented, the present situation of energy and coal transportation and other pressing issues. During the press conference, they noted that a large amount of debt accumulated since the socialist governance caused the sector to fail. 
Presently, the actual cost per  kilowatt of electricity is Tgs115 and western aimags of Mongolia are supplied with electricity from Russia at this price. However, domestic producers supply users with electricity at a lower price than actual cost, which causes them to suffer losses. Two years ago, the energy sector had been operating at a loss of Tgs24.4 billion  and but it increased to Tgs69.8 billion by last year. Government started
subsidizing the sector with Tgs15 billion beginning last year; however, it is unable to recoup the loss. Furthermore, Ulaanbaatar Railway’s coal transportation expense was raised by 25 percent, causing the financial condition of power stations to worsen. Kh. Tsogtbaatar said that it requires additional financial resource of Tgs6.2 billion to transport coal. P. Gankhuyag also explained that on the other side, Ulaanbaatar Railway had to raise the expense of transporting  coal. A few years ago, Ulaanbaatar citizens used 8-9 thousand tonne of coal in winter. However, this size of coal was used in warm seasons, proving how energy consumption expanded. In the extent of it, transportation and other expenses increased. 
By November 2010, Ulaanbaatar Railways transported 15,257,700 tonnes of freight, 7,485,000 tonnes of  which were domestic freight. A major part of the domestic freight was coal. Ulaanbaatar Railway suffers  about a 30 percent loss in its domestic freighting, of which coal transportation is a major part. Pursuant to a quarterly survey on family income and expense, a family’s monthly expenses average  Tgs 30,000-50,000 on cell phone and communications services,Tgs10,000-20,000 on transportation and Tgs13,000-15,000 on electricity.
People are unaware of economizing on electricity, because electricity, which is ready for everyday use, is devaluing. Therefore, they needed to work out a policy to serve at a reduced price for those who use little electricity. Next year, the tariff for people who use less than 150 kilowatts of electricity per month will remained unchanged, but the tariff will be raised for users who consume higher than 150 kilowatts.
Parliament instructed the study of an issue on zeroing the night tariff in order to reduce air pollution. In conjunction to it, the Energy  Regulatory Office holds the position that there is nothing free in market; therefore, it needs to reduce the tariff by 50 percent instead of zeroing.



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