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Russian Energy Minister supports switching to the ‘alternative boiler house’ method

24 April 2019

Summarising the All-Russia meeting dedicated to the 2018/19 heating season, Alexander Novak, the Minister of Energy of the Russian Federation, supported the statements made by Siberian Generating Company and T Plus about the need to accelerate the transition to long-term tariff setting.

'Despite all the difficulties that exist, despite the tariff setting problems that have been touched upon, we must, of course, switch to a long-term tariff and more widely use the “alternative boiler house” method in the regions,’ the Russian Energy Minister Alexander Novak said in his closing remarks at the All-Russia meeting ‘On the 2018/19 heating season highlights for the power industry, housing and public utility companies’.

During his speech at the event, SGC’s CEO Stepan Solzhenitsyn noted the need to change the approach to problem solving by heating suppliers in order to maintain the reliability of the system: from plasters, i.e. short-term regulation, to surgery, which allows for long-term regulation. According to him, the annual accident rate in heating networks is growing by 5-6%. ‘This is by no means a normal situation. We need surgery. To decrease this accident rate, we need scheduled replacement for heating networks,’ Stepan Solzhenitsyn added.

He noted that the necessary tool for raising investments in network upgrades was already there, the ‘alternative boiler house’ method, a kind of infrastructure mortgage: investments in advance which pay back in instalments.

This principle is already used for regulating heating prices in Rubtsovsk (Altai region), where SGC operates. Recently, the company’s branch in Barnaul, created less than two years ago, submitted a request for transition to the same model.

Stepan Solzhenitsyn said that, if all cities covered by SGC would switch to the infrastructure mortgage, the company would invest 48 billion roubles in the next 5 years. In the case of maintaining the current regulation model, this amount would be 8 times less, just 6 billion roubles.

The need for a quicker transition to long-term regulation for preventing the deterioration of heating networks was discussed during the meeting on the winter heating season, and Andrey Vagner, Management Board Chairman of T Plus, proposed to make the transition to the new market model of ‘alternative boiler house’ in Russia ubiquitous and mandatory.

An alternative boiler house is a universal method for calculating heating prices, when only the maximum level is set. It is calculated based on the cost of constructing and operating a new heating source (alternative boiler house). The final heating price is determined by agreement of the parties.

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