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Press release of the Ministry of Energy of the Republic of Kazakhstan on the implementation of the Plan of the Nation - "100 concrete steps"

On August 2, 2017 the press conference with the participation of the Vice-Minister of Energy of RK Bakhytzhan Dzhaksaliev was held in the press center of the Office of the Prime Minister of RK. At a press conference the Vice-Minister of Energy of RK told about the implementation of the Plan of the Nation - "100 concrete steps" in the sphere of the electric power industry of Kazakhstan. The implementation of all steps is a long-term.

Step 50. "Reorganization of the electric power industry. Implementation of the "Single purchasing agent" model. This will make possible to decrease differences in tariffs for electricity between the regions. "

Step 52. «Implementation of a new tariff policy in the electric power industry, stimulating investments to the industry".

The changing of the tariff structure. There are will be two components in the tariff: a fixed part for financing capital expenditures and a pay for used electricity to cover variable expenses of electricity production. This will change the existing situation, when the tariffs are approved according to the "cost" method.

The Law "On Introducing Amendments and Additions to Legislative Acts on the Issues of Electric Power Industry" was passed in 2015, it covers the implementation from January 1, 2019:

- capacity market models, through the  long-term investment agreements and cap rates on the service for maintaining the availability of electrical power:

- "Single purchasing agent" models, through the centralized purchase and sale of capacity on the base of the RFC “KEGOC” JSC. These measures will decrease differences in electricity tariffs between the regions.

- the current tariff for electric energy will be divided into electricity tariffs and power tariffs, which will ensure the pay-back of electric energy production expenses, as well as ensure repayment of investment putting up in the construction of new and renovation, modernization, reconstruction, expansion of current electrical power.

For reference:

Today, each paid kilowatt-hour of electricity gives for power plants the opportunity to cover the expenses necessary:

1) for ensuring the production of this kilowatt-hour of electricity (fuel, staff salaries, spare parts, etc.)

2) for modernization its power equipment.

In Kazakhstan, the electric power plants differ greatly by type: some produce electricity from coal, the seconds from gas, and the third from water. That’s why, their electricity production costs are different.

Power plants are also differing in size, so they have different costs for their modernization.

Everyone pays for electricity exactly as much as they consume it, i.e. how many kilowatt * hours (kW * h) “winded” the meter, and at the same time, in today's electricity bill, it does not show how much money from that has been paid is spent to ensure the production of electricity, and how much for modernization of the energy equipment of the power plant: there is only one total payment for electricity.

However, from 2019 when the new legislation comes into force, almost all consumers of electricity in Kazakhstan, except for the population (nothing will change for them), will already pay these two station expense items separately, i.e. most directly, in the electricity bill will be calculations in the above breakdown. The pay level for the first item will depend directly on how much the consumer actually consumed electricity, i.e. from the  hour-meter reading, and for the second one, from the consumer maximum electrical power consumption in a year, which is no longer measured in kilowatt*hours (kW*h), but in kilowatts (kW).

The main feature of this innovation is that the second item of expense, referred above, will be paid by consumers constantly (monthly), no matter how much electricity they have consumed on actual basis.

How the pay for the second item will be calculated? It will look like this: the costs for modernization of the power equipment of all power plants in Kazakhstan, which, as above, are different from one another, will be averaged countrywise, i.е. they will be equally "smeared" on consumers. This "smearing” operation will be performed by the so-called Single purchasing agent.

As the result, all this will allow, without a significant price increase on electricity for the population, to ensure the availability of the necessary amount of electric power in the country's power system, always ready to work and cover the country's electricity needs, and also to decrease the differences in electricity prices across the country, thereby, to equalize the terms of consumers' access to electricity, which is important for the development of small and medium businesses in Kazakhstan.

The above innovations were presented in the President's instruction, which he gave to the Government on May 5, 2015, and which were included in the "100 concrete steps" program.

Step 51. "The expanding of the regional electric grid companies. (REC)".

In order to implement the tasks, set in Step 51, the Ministry drafted the Law ""On Introducing Amendments and Additions to some Legislative Acts of the Republic of Kazakhstan on the Issues of Electric Power Industry"

On July 11, 2017, the law was signed, it is directed to expand the regional electric grid companies, which would reduce the number of energy transmission organizations, solve the problem of ownerless grids and etc.

After the Law will enter force, the REC will be expanded according to the following mechanisms:

- exemption of energy transmission organizations (EPO) from corporate income tax and property tax when accepting transfer of ownership of no ownerless electric grids;

- lifting of bans for energy transmission organizations provided for by legislation in the sphere of natural monopolies in case of their expanding;

- the introduction of the possibility of revising of the cap levels of rates for the transmission of electricity during the expanding of electric grids;

 - transfer of newly constructed electric substations and electric grids which is on the balance sheet of  the government enterprises, on the EPO balance.

The next stage is the practical implementation of the step, which includes:

- transfer to trust management or  free use of the electric grids, which are on the basis of the right of economic management or on the operational administration of the public corporations (by January 1, 2019);

- transfer of no ownerless electrical grids to the balance of the energy transfer organizations (on existing ownerless grids - by January 1, 2019, then - as soon as it is identified).

The introduction of requirements for the activities of energy transmission organizations at the level of the Law will be carried out on a step-by-step basis:

1) the availability of a operator- and process-enabled control - no later than January 1, 2018;

2) the availability of services, staffed with trained and certified personnel, operating and maintaining of the electrical grids, equipment, mechanisms, labor protection and prevention of accidents ,provided with individual and collective protection equipment, overalls, tools and devices - no later than 1 January 2020;

3) the existence of contracts with the system operator for the provision of system services - no later than January 1, 2020;

4) the availability of automated revenue metering systems, telecommunications systems that ensure their unification with systems installed by the system operator and the regional electric grid company - no later than January 1, 2022.

This will reduce the amount of EPO by 2022 by 30% (from 160 to 110) and improve the reliability of power supply, solve the problem of ownerless electrical networks.

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