COURSE OF MODERNIZATION: Kazakhstan has gained the most advanced experience of regulating natural monopolies.

To learn how to develop the regulation of natural monopolies in the world and in Kazakhstan, our correspondent talked to Deputy Chairman of the Agency for Regulation of Natural Monopolies Mr. Duisebayev, who has recently attended the meeting of the International Association of Energy Regulators in Abu Dhabi.

- Mr. Duisebayev, what is the International Association of Energy Regulators, what are its objectives, and what does Kazakhstan's membership in this organization give?

- Energy Regulators Regional Association (ERRA) is a voluntary organization that brings together independent energy regulators in Central Europe, Eurasia and its affiliated members, the countries of Africa, Asia, the Middle East and the U.S. It was established in 1999 on the basis of the National Association of Regulatory Utility Commissioners under the agreement with the Agency for International Development (USAID).

The primary purpose of this organization is sharing experience among countries in the regulation of energy and heat, water and gas.

Kazakhstan joined ERRA during the time of its establishment in 2000. Currently, the Association includes 32 countries. Meetings are held twice a year in different countries, one by one. Two years ago, one of the meetings was held in Almaty.

This year's meeting of the organization took place on February 6-7 in Abu Dhabi, UAE. It was attended by the delegation of Kazakhstan represented by our Agency.

Our participation in ERRA is very useful. As a fast developing country that conducts large-scale reforms in all areas including regulation of these industries should examine all the best practices in this field to choose the best ones and put them into practice.

- How was the meeting conducted? And did you learn about the work of regulatory bodies of other countries?

- First of all, I would like to note that our report caused the greatest interest among the representatives of thirty countries that participated in the meeting. In particular, we talked about the best practices for management and its plans for the future. And our international colleagues became interested in the new tariff mechanism for water, which we are implementing early this year in Kazakhstan.
If we talk about foreign experience of natural monopolies' regulation, it is possible to point out some interesting points. For example, in Abu Dhabi, the regulatory body in the field of energy is headed by an English manager. He told us that their thermal electric power stations are a few kilometers from the capital of the Emirates and they all together produce 5,600 MW. In this case, only 30 megawatts are of wind power, and 13 megawatts of solar power. According to them, this is not due to the fact that the businesspeople do not want to invest in wind and solar power, but by the fact that this kind of energy is very expensive. And, when balancing, the cost ultimately falls on the consumer of that energy.

And in Europe, as we have learned, the production of wind energy is quoted, that is limited. It is also associated with its high cost, when differentiating the load is on the end-user.

In all countries, there is a growth in electricity tariffs, from 9 to 11 percent, while production and consumption change in both directions, which is somewhere increases and somewhere decreases.

- How well can foreign practice be implemented in Kazakhstan?

- I can say that after each ERRA meeting we adopt something and implement it here. From our past trips, for example, we have used the method of comparative analysis called benchmarking. On January 1, the new method has been implemented for regional electricity companies.

And this time, we learned that many countries introduce quality standards for consumers. We are particularly interested in such know-how. Therefore, we will be studying in detail all the materials and I think in the future we will carry out the work to implement these standards in Kazakhstan.

Another example: we know that in order to reduce losses it is necessary to implement new technologies. Due to that Jordan reduced losses from 14 to 4 percent, and we will also work on that. Before the end of this year we have planned the complete exclusion of excessive losses. Many businesses have already achieved this by upgrading, and those who failed to do that should do it before the end of the year.

- Which countries have, in your opinion, the most effective system of regulating natural monopolies?

- Now no one can say that, say, in a certain country, this system is the most effective. As I have noted before, one can not even say with certainty which owner is the best, the state or private one. At the meeting there was a representative of the United States, and he could not definitely answer this question.

But, when speaking about the organizational side of things, the ERRA officially recognized that best practice of regulation in this area belongs to Kazakhstan. It is because regulation is under the charge of single institution, the Agency. In many countries, this work is being done by various commissions and departments. For example, water management is under the charge of one body, heating - of the other, and so on.

In some countries, there are several regulatory bodies, such as in Ukraine. They can act inconsistently, for example, to simultaneously raise tariffs for electricity and water. There is no uniform policy. So our model of regulation organization, as well as control methods have long been recognized as the most advanced. Therefore, at the meeting most of the questions have been asked to us, everybody was interested in our experience. For example, many countries are still only working to implement differentiated tariffs and Kazakhstan they have already been widely used.

In general, in terms of how to regulate, one should first of all take into account local conditions - climate, availability of energy and water and political situation.

- What is the Agency's intention to further strengthen cooperation with ERRA in terms of sharing experience?

- Now there is an agreement on creating common information base for all the news to be learned online. That, of course, will help improve the work in terms of sharing practices. We will certainly keep track of everything that happens in other countries, and learn from their experience. We will also broadcast the news from Kazakhstan and report on their achievements.

- Thank you for the interview Mr. Duisebayev.