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Official News

Thursday, 25 June 2015

PM Addresses Situation Related to Electricity Tariffs

A Cabinet sitting was held today, chaired by Prime Minister Hovik Abrahamyan.

Opening the meeting, the Prime Minister said, “First of all, I would like to address the electricity tariffs-related situation and thereby get an extra item put on the agenda. To begin with, I wish to note that like any other government, the Government of Armenia is reluctant to raise the cost of electricity.

“However, the Government needs to take into account the objective reality, which often comes at odds with the public’s perceptions. People believe that the increase in electricity tariffs is due to abuses in the power distribution network (PDN) or, otherwise, they are the result of robbery.

I do not rule out the possibility of such abuses. However, I declare responsibly that whatever abuses there might have been, no single dram has been included in the tariff.

For instance, the PSRC always looks into the PDN’s procurements and reduces any such cost as may appear to result from irregular market rates, preventing thereby the Company to put the burden on the shoulders of our consumers.

Since 2007, tariff rise requests amounting to AMD 22 billion or 20% of overall investment have been declined on the aforementioned grounds.

Let us see another example. Losses arising from a criminal conspiracy between inspectors and consumers are not included in the tariffs; consumers are not affected, and the owner is the one to suffer from such manifestations of bad governance. Although the owner’s profit decreases, it has never been included in rates,” the Prime Minister said.

Luxury spending is another concern, say when the Company buys expensive cars, housing and pays off very high wages. Here, too, I can state responsibly that the Commission has reduced the costs. For instance, car and housing rental costs are calculated at zero rates, while the costs of vehicle procurements have been reduced threefold.

The question may arise: why do tariffs keep rising? There are 3 reasons:

The first reason was the recent years’ water shortage. Electricity produced in hydroelectric power stations is cheaper and stands between 2 and 24 drams. The price of electricity produced by the 5th unit of Hrazdan power plant is 40 drams, i.e., the replacement of water power for heat is always more expensive. The second reason was the non-scheduled halt of the ANPP for 88 days in December, 2013. The third reason was the devaluation of the national currency by 20% over the past 3 tears, which in turn affected the cost of electricity.

Thus, we are obliged to admit that the undesirable system losses were due to objective reasons. Typically, such losses are covered either through changes in tariffs or subsidies. We considered unacceptable the option of universal subsidies, preferring to apply it to vulnerable and needy groups. I suggest putting the corresponding bill on the agenda.

Now, let us see what kind of threats may arise, should the tariffs remain the same and losses not reimbursed.

In this case, the PDN will not be able to comply with its liabilities before electricity producers. This will trigger a chain reaction that will lead to irreversible consequences for the economy. We run the risk to be back to power blackouts. We need to adopt a more responsible approach in this matter providing for energy security through a healthy financial system. We cannot afford to neglect the above key component of national security.

As I noted above, the authorities are bound by duty to take care of vulnerable groups. Our estimates have shown that as a result of the planned rise in electricity tariffs each family will have pay additional 1400 drams per month for an average of 200 kWt electricity consumed monthly.

This is why after a consultation held with President Serzh Sargsyan, we drafted a resolution aimed at mitigating the impact of higher electricity tariffs for 105,000 vulnerable households, or some 400,000 people by taking up to AMD24, 000 the amount of family allowances. The Government will spend 2.5 billion drams to that effect.

Not only does the Government care about the vulnerable, but also about any Armenian citizen in order to provide a decent standard of living that is the most important task of the Government.

The Commission on Protection of Economic Competition must prevent all groundless attempts to raise the prices of other goods under the pretext of the planned rise in the cost of energy.

Wrapping up my remarks, I wish to remind you that there are numerous challenges faced in the energy sector. The Government is developing a long-term strategy which will soon be available to society for consideration. I am prepared to work with any civil or political force, regardless of their position with regard to the government.”

The Government amended a previous decision in order to provide compensation against the rise in electricity tariffs to 105 thousand vulnerable households or some 400 thousand citizens.

The meeting next approved the list of NGOs to be represented in the Disciplinary Commission of the Police in 2015.

Addressing the issue, Prime Minister Hovik Abrahamyan stated in part, “By the way, this issue was high on the agenda back at the time when there were no protesters on Bagramyan Avenue. The Disciplinary Commission’s work is becoming even more important considering that it is a standing body operational as part of the police force.

The Commission is supposed to carry out thorough and impartial investigations into the legality of actions and decisions taken by police officers in exercise of public order enforcement duties during mass gatherings.

The actions launched by the police against the protesters early on the morning of June 23 have aroused specific concerns in society and our international partners.

The Police have already declared that service probe is underway into some incidences. From this perspective, I believe that the Commission has a task to complete in this case. In addition, the public at large expects them to be objective and transparent.

I would like to take this opportunity to tell the activists and organizers of rallies that the way they have chosen will get nowhere. I suggest being more constructive. The government stands ready to discuss any issue raised by them. The straightforward blocking of Baghramian Avenue which impedes the free movement of citizens is at odds with the Constitution and the laws of the Republic of Armenia.

Taking the opportunity, I call on our citizens, our partners to abide by a constructive approach and discuss together all those issues of concern to society.”

Based on the master plan of Yerevan city, as well as the urban highway construction project envisaged under two tranches of the investment program for sustainable urban development as stipulated in the credit agreement signed between the Republic of Armenia and the Asian Development Bank, some administrative areas in Yerevan, as well as in Argavand and Getapnya communities of Ararat Marz have been granted the status of prevailing public interest.

To finance design and estimate work for the reconstruction of damaged sections in the second tunnel of Arpa-Sevan water pipeline, the Government allocated AMD18 million to the State Water Committee by the Ministry of Agriculture.

Heating in Armenia’s penitentiary institutions is chiefly ensured by means of electricity. Given the recent increase in prices of electricity, initiated by the Ministry of Justice, Armenia’s Renewable Energy and Energy Efficiency Fund has conducted a study into energy efficiency measures in penitentiary institutions and found out that at least 40% annual energy savings can be achieved through the program. The Government approved the project.

The Government accepted the proposal to sign an arrangement between the governments of the Republic of Armenia and the Russian Federation in the field of nuclear and radiation safety on short notice and exchange of information in the event of a nuclear accident.

In conclusion, the meeting approved the results of elections held at the Yerevan State Medical University, the Yerevan State University and the Polytechnic University of Armenia. To remind, Michael Narimanyan, Aram Simonyan and Vostanik Maroukhyan had been elected rectors of the above universities respectively.

September 2020