A senior official in Kazakhstan has warned that household utility rates are set to rise precipitously, by up to 30 percent, this summer as the country confronts the gargantuan challenge of overhauling crucial infrastructure.
Speaking to reporters, National Economy Minister Alibek Kuantyrov said on April 26 that the government will take measures to ensure the cost increases are as pain-free as possible, but that they are unavoidable.
“We have to use resources sparingly,” Kuantyrov said.
Rate increases for electricity, water and gas will not rise uniformly across the country. The size of the hikes will depend on the current state of infrastructure in any given region and how much it is believed will be needed to upgrade them, the minister said.
Kuantyrov said that the central authorities will keep municipal governments in check to keep them from hiking costs in unsustainable ways.
“For example, Ekibastuz [a city in northern Kazakhstan] announced a 108 percent increase in tariffs. That is something we cannot agree to,” he said.
Ekibastuz, a city of over 100,000 people, is emblematic of why the dramatic rethink on tariff policy is happening. The collapse in late November of operations at the city’s power plant left most residents without central heating just as nighttime temperatures were sinking to -30 degrees Celsius (-22 Fahrenheit). The Energy Ministry later attributed the incident to deterioration of the system of pipes that delivers steam into radiators in homes throughout the city. Officials noted that a government commission had only a few months before demanded the plant’s operators speed up work on repairs. The same plant suffered yet another breakdown in February.
The government has been signaling the arrival of utility hikes for some time now. In December, then-Energy Minister Bolat Akchulakov said during a Cabinet meeting that urgent financial injections needed to be made into the country’s utilities infrastructure as things had reached a critical stage.
Most thermal power plants in Kazakhstan are around 50 years old and are only designed to carry on functioning for another decade, he warned.
Akchulakov further lamented that low pay earned by workers in the utilities sectors – which average around 220,000 tenge ($500) – is limiting the size of the potential talent pool for personnel.
It is not just the infrastructure carrying things into people homes that is creaking.
Also in December, Olga Bulavkina, a senator, talked about the worsening states of sewer networks in the regions. The situation is posing a grave threat to people’s health, she warned.
Speaking to the Inbusiness news site in January, Timur Kosymbayev, the deputy chairman of the Natural Monopolies Regulators at the National Economy Ministry, estimated that electricity, heating, water and sewer infrastructure was across the board at around 60 percent levels of degradation.
Kosymbayev said even tariff hikes will not be enough to cover the costs of repairs and modernization. It is the companies that provide the utilities – they are typically monopolies – that need to dig deep into their own cash reserves to underwrite the work.
When utility tariffs start to float upward, it will mark the jarring end of an era. The authorities say that utilities in Kazakhstan are among the cheapest anywhere in the former Soviet Union. In laying the stage for imminent price rises, they have calculated that where the entire bouquet of utilities for a two- to three-bedroom apartment in Kazakhstan averagely costs around $47 per month, homeowners in Belarus and Russia can expect to pay around $57 and $132, respectively. At the other end of the spectrum, a similar average homeowner in Estonia faces costs of $255.
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