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Problems of Legal Regulation of Approval of Heat Supply Investment Programs
 
PIIS231243500023544-6-1
DOI10.18254/S231243500023545-7
Publication type Article
Status Published
Authors
Nadezhda V. Golub 
Affiliation: Territorial Generating Company No. 11 Joint-Stock Company
Address: Russian Federation
Journal nameEnergy law forum
EditionIssue 4
Pages56-64
Abstract

It is impossible to ensure uninterrupted heat energy supply if heat systems are in an unsatisfactory condition, and therefore the deterioration of heat systems is a major concern for the state. Nevertheless, in view of tariffs established for regulated entities, an investment program is often the only way to take measures aimed at heat system reconstruction and modernization. Currently, there are a number of gaps in the legal regulation of investment program approval, which, if not addressed, make it impossible to fully implement heat supply investment programs. The lack of requirements for refusal to approve investment programs cause a lot of problems for heat supply organizations. These problems have not been adequately covered by the legal doctrine and have not been addressed by the legislator. The author has studied the major problems associated with the legal regulation of heat supply investment program review and offered ways to address them.

Keywordsenergy law, legal regulation in the heat supply sector; investment program approval
Received23.12.2022
Publication date27.12.2022
Number of characters26576
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1 Ensuring reliable heat supply is one of general principles of organizing heat supply relations under Federal Law No. 190-ФЗ on Heat Supply dd. July 27, 2010. [1] Meanwhile, it is impossible to ensure uninterrupted heat energy supply if heat systems are in an unsatisfactory condition.
2 Currently, heat systems require regular reconstruction and modernization due to wear and tear caused by both external factors and equipment obsolescence. Despite the great importance of the energy sector, including heat supply, the critical condition of a part of key assets and the emergency condition of certain utilities have been repeatedly mentioned by the doctrine [2] and mass media. [3]
3 The wear and tear of heat systems is a major concern not only for organizations engaged in heat supply but for the state as a whole because heat system failure can have a negative impact on the energy security of certain regions. Besides, in the Russian climate, people’s quality of life as well as the economic development of the state largely depends on heat supply, which is of particular importance under sanctions restrictions.
4 The fact that a significant percentage of utilities need repair makes it necessary to take measures and eliminate existing problems as well as prevent new ones.
5 Nevertheless, due to tariffs established for regulated entities, an investment program approved as per the Rules of Review and Approval of Investment Programs of Organizations Engaged in Regulated Heat Supply Activities, as well as Requirements for the Composition and Content of Such Programs (Except for such Programs Approved under the Electric Power Industry Laws of the Russian Federation), approved by Decree of the Government of the Russian Federation No. 410 dd. May 5, 2014 [4] (hereinafter referred to as Rules No. 410) is often the only way to take measures aimed at heat system reconstruction and modernization.
6 Although Rules No. 410 have been applied for quite a long time, a number of existing legislative gaps do not allow regulated entities to fully implement investment programs, including quality revisions after a refusal to review or approve them.
7 Attention should be paid to the lack of proper study of existing problems related to the approval and revision of heat supply investment programs both at the law-making and doctrinal levels. This situation shows that there is insufficient control over the process of review of investment programs and final decision-making by bodies authorized to review and/or approve an investment program (hereinafter referred to as the competent authority). As a result, such issues are often within the exclusive competence of officials of the competent authorities, which poses a risk of abuse of power without proper external control. At the same time, when regulated entities do not contest the refusal due to the lack of court practice and clear requirements for the content of documents received, is a wrong impression may be made, that there are no problems related to the implementation of heat supply investment programs.
8 We believe that insufficient legal regulation of issues related to refusal to review and/or approve an investment program not only creates additional obstacles for regulated entities by making it impossible to timely address the concerns of the competent authority but may also lead to wrongful refusals caused primarily by the lack of transparency in the relevant decision-making procedure.
9 Meanwhile, it seems wrong to ignore the fact that law enforcement practice often differs from region to region, which makes it especially important to unify requirements for refusals to review and/or approve heat supply investment programs.
10 The analysis of court practice and current laws suggests that there are a number of problems related to the approval of heat supply investment programs.
11 Rules No. 410 mention the unaffordability of a regulated entity’s tariffs for consumers as a ground for refusal to review and/or approve an investment program. Meanwhile, the analysis of existing regulations of the Russian Federation suggests that the criterion of affordability of tariffs for consumers is not fully disclosed by the legislator.
12 Given the fact that the affordability of tariffs for consumers is evaluated based on the entire scope of public utility services consumed, [5] it is very difficult for a regulated entity to predict the actual heat supply tariff. When planning investment projects, heat supply organizations are unable to predict the exact level of actual tariffs that will be established for public utility services. Despite the fixing of marginal indices and projected indexation, there is a risk of exceeding consumer solvency margin due to the increase of tariffs for certain public utility services and, consequently, reducing its level for other public utility services. A situation when the regulator sets a tariff for a certain heat supply organization exceeding the marginal index, which in turn will also result in the necessity to reduce investment projects for the regulated entity submitting its investment program for approval, is also possible.

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1. Federal Law No. 190-ФЗ on Heat Supply dd. July 27, 2010 (as amended on May 1, 2022) // Official Internet Portal of Legal Information http://pravo.gov.ru,  May 1, 2022
2. See: Vashchukov A.A. Peculiarities of Efficiency Assessment of Investment Projects to Modernize the Heat Supply Sector of the Russian Federation // National Association of Scholars. 2015. No. III (8). P. 8 (7-11 p.); Titov G.I., Novopashina N.A., Titov V.G. Causes of Heat System Damageability // Bulletin of the Samara State University of Architecture and Civil Engineering. Urban Planning and Architecture. No. 2 (23).  P. 19–22. DOI: 10.17673/Vestnik/2016/02/4
3. See: URL: https://eenergy.media/archives/19313;  URL: https://expert.ru/siberia/2019/20/sibir-iznoshennaya/;  URL: https://www.tatar-inform.ru/news/stepen-iznosa-teplovyx-setei-po-tatarstanu-dostigla-54-5828040?utm_source=yxnews&utm_medium=desktop 
4. Decree of the Government of the Russian Federation No. 410 on the Procedure for Review and Approval of Investment Programs of Organizations Engaged in Regulated Heat Supply Activities as well as Requirements for the Composition and Content of Such Programs (Except for such Programs Approved under the Electric Power Industry Laws of the Russian Federation) dd. May 5, 2014 (together with the Rules of Review and Approval of Investment Programs of Organizations Engaged in Regulated Heat Supply Activities as well as Requirements for the Composition and Content of Such Programs (Except for such Programs Approved under the Electric Power Industry Laws of the Russian Federation) (as amended on August 29, 2022) // Official Internet Portal of Legal Information http://pravo.gov.ru,  August 31, 2022
5. Housing Code of the Russian Federation No. 188-ФЗ dd. December 29, 2004 (as amended on October 07, 2022) // Official Gazette of the Russian Federation. January 03, 2005. No. 1 (Part 1). Art. 14
6. Decision of the Omsk Region Commercial Court dd. July 07, 2020 in case No. А46-3970/2020 // https://kad.arbitr.ru/ 
7. Commercial Procedure Code of the Russian Federation No. 95-ФЗ dd. July 24, 2002 (as amended on October 07, 2022) // Official Gazette of the Russian Federation. July 29, 2002. No. 30. Art. 3012
8. Ruling of the Eighth Commercial Court of Appeal dd. October 29, 2020, in case No. A46-3970/2020 // https://kad.arbitr.ru/ 
9. Ruling of the West Siberian District Commercial Court dd. March 10, 2021, in case No. A46-3970/2020 // https://kad.arbitr.ru/ 
10. Order of the Regional Energy Commission of the Omsk Region No. 22-П on Approval of the Administrative Procedure for the Approval of Investment Programs of Organizations Engaged in Regulated Heat Supply Activities Public Service dd. August 8, 2016 (as amended on November 2, 2021) // Official Internet Portal of Legal Information http://pravo.gov.ru,  August 9, 2016
11. Federal Law of the Russian Federation No. 59-ФЗ on the Procedure for Consideration of Appeals of Citizens of the Russian Federation dd. May 2, 2006 (as amended on December 27, 2018) // Official Gazette of the Russian Federation. May 8, 2006. No. 19. Art. 2060
12. Decree of the Government of the Russian Federation No. 400 on the Formation of Indices of Changes in the Amount of Citizens’ Payment for Public Utilities in the Russian Federation (together with the Basic Principles of Formation of Indices of Changes in the Amount of Citizens’ Payment for Public Utilities in the Russian Federation) dd. April 30, 2014 (as amended on March 3, 2022) // Official Gazette of the Russian Federation. May 12, 2014. No. 19. Art. 2434
13. Decree of the Government of the Russian Federation No. 1075 on Pricing in Heat Supply dd. October 22, 2012 (as amended on October 10, 2022) // Official Gazette of the Russian Federation. October 29, 2012. No. 44. Art. 6022

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