Ministry of Energy proposes changing the method for calculating the costs of distribution energy companies

The Ministry of Energy of Kyrgyzstan has submitted for public discussion a draft order amending the current document “On Certain Issues in the Electric Power Industry for Distribution Companies” dated 2022. The document will remain under discussion until March 25.

The initiative aims to ensure a reliable and uninterrupted power supply in conditions of electricity shortages, as well as to reduce the financial deficit in the energy sector.

According to the explanatory note, based on the planned technical and economic indicators of energy companies, the country's electricity deficit in 2025 is estimated at 3.8 billion kWh, and the industry's cash deficit at approximately 4.6 billion KGS.

The draft order proposes to change the methodology for calculating the total annual costs of distribution companies. In particular, a mechanism is being introduced to establish a single tariff for the purchase of imported electricity for all distribution companies.

The tariff will be calculated based on the weighted average cost of imported electricity purchased by the main supplier, taking into account the costs of transmitting electricity through its networks.

The tariff calculation formula provides for the division of the total costs of electricity imports by the total volume of purchases, with the addition of the tariff for transmission services through the main supplier's networks.

In the event of a cessation of electricity imports, the tariff for distribution companies will be set at the level of the maximum tariff for producers from renewable energy sources.

If electricity is not purchased either through imports or from renewable energy producers, the annual costs of distribution companies will be calculated using the basic formula of the methodology.

The draft also specifies the procedure for using funds financed from the profits of distribution companies. They must be directed towards:

• the development of electricity networks;
• the creation of new production assets;
• reconstruction and modernization of infrastructure;
• technical re-equipment;
• repayment of credit obligations.

At the same time, expenses can be included in the tariff structure only if there is an agreed investment program approved by the authorized body for regulating the fuel and energy complex.