Regulators Proposed for Monopolies

The government is working on a plan to protect consumers from being overcharged by state monopolies for their often unsatisfactory services, officials said Tuesday.


The Anti-Trust Committee announced that it is now finalizing a draft law that would set up new, impartial federal agencies to regulate the prices set by the country's transport, energy and communications monopolies. The move signifies a long-awaited break with the old Soviet practice in which federal ministries lobby for higher centrally-imposed prices in the industries they control.


The law confers on oil and gas pipelines, railroads, telephone communications, power engineering, ports, air terminals and some other industries the status of "natural monopolies," which are to be regulated rather than left to market forces.


Vadim Belov, deputy chairman of the Anti-Trust Committee, pointed out that in the absence of impartial regulation bodies, the natural monopolies have raised their prices faster than industries where competition exists. He said in the first six months of 1994, energy prices went up 1.8 times faster and railroad prices 1.2 times faster than the national average.


"The ministries defend the interests of the enterprises that answer to them," Belov said. "They lobby for higher tariffs and the consumer has no choice but to pay them. The new agencies will be able to regulate the prices in the interests of the consumer."


Belov added that promoting competition was not the answer for the "natural monopolies." For example, he said, only an expanded network of highways could compete with the railroads, but there is no chance that such a network will ever spring up in the vast Siberian forests.


He said that the new regulating agencies will be modeled after the U.S. Federal Communications Commission, which keeps that nation's phone service in line. They will be independent bodies, with their staff appointed for a three-year term.


To ensure fairness, the new regulating agencies will take all their decisions by vote.


"Of course, there will be problems with producers bribing agency officials to bring up the prices," said Natalia Tsukanova of the Russian Privatization Center, who helped work out the draft law.


"But if all decisions are passed by a vote, there will be a chance that not all officials will have received a bribe."


Belov said that no extra funds will be allocated to set up the new agencies, therefore some ministries will have to lay off people or lose them to the new agencies.


"If we're going over from socialism to something different, the role of ministries will have to be reduced," Tsukanova said.


The Communications and Railroad Ministries will be among those affected by the new law.


"As a private citizen, I'm for it, but as a representative of my ministry I have to be against it," said an official at the Railroad Ministry, who did not want her name used.


Belov said that apart from protecting consumers, the new draft law was aimed at attracting private investment in the "natural monopolies" by protecting investors from the arbitrariness of the monopolies' management.


"Say, if a private oil company is building a pipeline from its wells to a major pipeline, the regulating body will make sure they can connect at a reasonable tariff," he said. "The more clearcut the rules are, the more chance we have to attract investment."