Find and secure: new mechanisms for network modernization discussed in Moscow

The issues of attracting investments in municipal infrastructure and accelerating the modernization of worn-out utility networks became one of the key topics of the meeting of the Public Council under the Federal Antimonopoly Service of Russia. The participants discussed mechanisms for improving the efficiency of updating water supply, sanitation and heat supply systems, taking into account existing financial and technical constraints. The focus was on tariff regulation, the availability of long-term financing and the creation of conditions for the growth of investment activity of resource-supplying organizations. Details can be found in the Izvestia article.

Investments are limited by tariff restrictions

Ilya Dolmatov, Director of the Institute of Economics and Regulation of Infrastructure Industries at the National Research University Higher School of Economics, noted in his speech that one of the main factors hindering the modernization of public infrastructure remains the current system of the Citizens' Wage index (PII), which significantly affects the industry's ability to attract investment.

"IPG remains an important tool for protecting the public, but its current structure limits the ability of resource-supplying organizations to raise capital and accelerate the replacement of networks. Even with market profitability and the availability of borrowed funds, companies cannot effectively invest," Dolmatov explained.

According to the expert, the current pace of updating the engineering infrastructure is significantly lagging behind the guidelines laid down in the state strategic documents. Currently, about 1% of utility networks are being replaced annually, while the Housing and Communal Services Development Strategy provides for a minimum figure of 2.5%, and in an optimistic scenario — up to 5%.

"To reach these figures, investments must grow by at least 25% annually. Even with a 10% increase in actual investments, in 2025, the implementation of programs in the field of water supply and sanitation amounted to only 69%. That is, about 50 billion rubles of planned investments have not been disbursed," the representative of the Higher School of Economics emphasized.

To solve this problem, in his opinion, a set of measures is needed, including the launch of a long-term program of concessional loan financing with subsidized interest rates, as well as the provision of tariff guarantees from regional authorities.

"This measure will help overcome the limitations of the IPG and create conditions for a systematic increase in investments," Dolmatov said.

The citizens' pay index retains a social function

The topic of the role of the citizens' wage index was continued by Suren Oganisyan, Head of the Housing and Communal Services Regulation Department of the Federal Antimonopoly Service of Russia. He noted that the approaches of the regulator and the expert community to understanding the purpose of this mechanism are gradually converging.

"From the content of the presentation, I see that we are bringing together the understanding of this institution in the form of salary indices for citizens," he stated.

According to Ohanisyan, a few years ago there were significantly more grounds for circumventing the established index, but today such cases are practically excluded and are mainly related to the implementation of investment programs and the conclusion of regulatory agreements.

"Indexes are a tool for protecting citizens. And they perform their function. And this function is linked to the Constitution, which says that Russia is a welfare state. And in this regard, I think that we will need to continue to approach, understand, improve, and develop these institutions," the FAS representative added.

The return on equity method requires additional incentives

During the meeting, the participants also discussed the prospects of applying the method of return on invested capital. As Ilya Dolmatov noted, the Federal Antimonopoly Service has already adjusted the yield standards, bringing them closer to market values. However, in practice, this tool has not yet been widely used.

According to him, the key obstacles remain the restrictions related to the index of citizens' wages, as well as the insufficient profitability of utilities. Under these conditions, the use of the return on invested capital method is possible only with the simultaneous launch of concessional financing mechanisms and the provision of long-term tariff guarantees by the regions.

The 2030 Agenda

Summing up the discussion, Andrey Sharonov, Chairman of the Public Council under the FAS of Russia, stressed the importance of further joint work with federal development institutions, including DOM.The Russian Federation, as well as with the Ministry of Construction of Russia. In his opinion, it is at the site of the Public Council under the Ministry of Construction and Housing and Communal Services that it is advisable to continue working on an initiative to create a long-term concessional financing program, which today is considered as the most realistic mechanism for accelerating the modernization of municipal infrastructure.

Following the meeting, the participants agreed to continue working on draft regulatory agreements, to form a list of issues for joint discussion with the Ministry of Construction, as well as to conduct an additional analysis of the practice of using the method of return on invested capital and the effectiveness of investment programs.

The meeting participants agreed that only the integrated application of financial and regulatory mechanisms will increase investments in the utility sector, accelerate the renovation of engineering infrastructure and ensure the achievement of national goals in the housing and communal services sector by 2030.