Domestic Gas Prices To Grow 80-85% On July 1.
9 June 2008
On June 8, the National Electricity Regulation Commission (NERC) approved a 80-85% increase in gas tariffs for the population, municipal heating enterprises and budget enterprises. Effective from July 1, the tariff for the population will surge by 85% to USD 80.6/ths cm (USD 87.9 for those without gas meters) for municipal heating enterprises – by 78.9% to USD 135.8/ths cm, for budget enterprises – by 80% to USD 128.3/ths cm. The tariff increases were approved by the Cabinet, which plans to adjust gas tariffs to meet costs by December 2006. Concorde Capital: Compared to 2005 gas tariffs, this hike implies 132.6% higher tariffs for the population, 184.1% higher for municipal heating enterprises and 180.5% greater for budget enterprises. The increase was unexpectedly high – a month ago the Cabinet announced plans to raise tariffs by only 50%. Moreover, Naftogaz authorities say that the tariff for the population is likely to go up by another 20-25% this year, along with 4% and 14% tariff increases for heating and budget enterprises on January 1, 2007. As higher gas tariffs for budget enterprises will basically result in the reallocation of money within the state budget, the tariff increases will fall squarely on the shoulders of the population through more expensive gas and higher tariffs for heat. Despite the some negative effects from this “gas shock” in the short term (e.g. inflation), we believe the country will benefit in the long term. Appropriate gas pricing would improve the cost efficiency of local gas consumers and optimize the allocation of gas resources in the economy.
Gas Tariffs History, USD/ths cm
Population % change Municipal Heating Enterprises % change Budget enterprises % change
Jan 1, 2005 34.7 – 47.8 – 45.7 –
Jan 1, 2006 34.7 – 60.3 26.1% 57.0 24.7%
May 1, 2006 43.6 25.7% 75.9 25.9% 71.3 25.0%
Jul 1, 2006 80.6 85.0% 135.8 78.9% 128.3 80.0%
