Cross-subsidies in Russian Electric Power Tariffs: Not as Bad as their Reputation

This chapter describes how, in formerly socialist countries, the policy of keeping prices for so-called essential goods low has survived the collapse of the old ideology. In Russia this is the case with tariffs for rail transport, electric power, gas, heating and water among others. In some cases, that is, electric power, the provider has to cover the losses from serving residential customers at low rates through the profits from industrial customers who pay higher rates. This policy of cross-subsidizing is routinely being criticized by economists and international organizations. However, given the poverty of large parts of the population, policy makers have been reluctant to increase residential tariffs for social reasons and therefore failed to rebalance tariffs. This chapter argues that in the case of electric power the critique is in fact somewhat misplaced. Aside from social concerns, cross-subsidies are justified for purely economic reasons. The next section of the chapter briefly reviews the main features of current power tariffs in Russia. Then the chapter outlines a simple model of second-best tariffs, which clarifies the trade-offs to be taken into account in the Russian context. Finally, the chapter presents a rough quantitative calculation showing that the present relation between industrial and residential tariffs in Russia is probably efficient, through the overall level of tariffs is clearly not.

• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/isbn/1843767902
• Corporate Authors:

  Edward Elgar Publishers

  William Pratt House, 9 Dewey Court
  Northampton, MA  United States  01060-3815
• Authors:
  • Hubert, Franz
• Publication Date: 2004

Language

• English

Media Info

• Media Type: Print
• Features: References; Tables;
• Pagination: pp 277-287
• Monograph Title: Trends in Infrastructure Regulation and Financing. International Experience and Case Studies from Germany

Subject/Index Terms

• TRT Terms: Cross subsidization; Electric power; Electric power generation; Electric power transmission; Policy; Policy making; Profits; Subsidies; Taxes
• Geographic Terms: Russia (Federation)
• Subject Areas: Administration and Management; Energy; Finance; Highways; Planning and Forecasting; Policy; I10: Economics and Administration;

Filing Info

• Accession Number: 01031350
• Record Type: Publication
• ISBN: 1843767902
• Files: TRIS
• Created Date: Aug 23 2006 7:59AM