Armenian government ends energy subsidy

By Asbarez | Wednesday, 03 August 2016

YEREVAN (RFE/RL)—The Armenian government has stopped subsidizing the domestic retail prices of electricity just over one year after state utility regulators raised them and triggered dramatic street protests in Yerevan.

The government will now compensate only Armenians living below the official poverty line.

The June 2015 protests dubbed “Electric Yerevan” forced the government to keep the tariff unchanged for the vast majority of Armenian households until August 1, 2016. The resulting subsidy has since been equally financed by the government and Samvel Karapetian, a Russian-Armenian billionaire.

Karapetian’s Tashir Group business conglomerate purchased the debt-ridden national power utility, Electricity Networks of Armenia (ENA), from a state-run Russian energy giant in September 2015.

On paper, the daytime electricity price for Armenian households rose from 42 drams to almost 49 drams (10 U.S. cents) per kilowatt/hour.

In late June, the Public Services Regulatory Commission (PSRC) cut this nominal tariff by 2.6 drams, citing a recent decrease in the price of Russian natural gas delivered to Armenia. The regulatory body also argued that the new ENA owner has already managed to cut the company’s losses.

The government announced on July 29 that the subsidy will not be extended, meaning that Armenian households will pay 46.3 drams per kilowatt/hour from now on. Prime Minister Hovik Abrahamian said the government will only cover the extra energy expenses of some 112,300 families receiving poverty benefits.

The average amount of those benefits was raised by 1,000 drams, to 31,350 drams. Abrahamian said that will be enough to fully compensate them for the price rise. The subsidy will cost the government 561 million drams ($1.2 million) this year and 1.15 billion drams next year, he added.

The main official rationale for last year’s electricity price hike was mounting losses incurred by ENA since 2010. The company had $220 million in outstanding debts to Armenian power plants and commercial banks as of September 2015.

The mostly young “Electric Yerevan” protesters dismissed that justification when they held non-stop demonstrations on one of the Armenian capital’s main streets for two weeks. They believe that the losses primarily resulted from corruption and mismanagement.