OREANDA-NEWS. September 26, 2011. The 20th Arbitration Appeal Court pronounced legitimacy and reasonableness of the decision and determination issued by the Office of the Federal Antimonopoly Service in the Kaluga Region (Kaluga OFAS Russia) regarding the Government of the Kaluga Region and “Kaluga Regional Vodokanal” Ltd., reported the press-centre of FAS Russia.

In course of an inspection, Kaluga OFAS Russia discovered that a cooperation agreement set the rates that were supposed to cover economically justified costs of the water services company and provided for the rate of return no less that 3% of the proceeds from the rates for water supply and water drainage.

Kaluga OFAS Russia found that the Government of the Kaluga Region and “Kaluga Regional Vodokanal” Ltd. violated Article 16 of the Federal Law “On Protection of Competition” and issued a determination to stop the violation.

The Government of the Kaluga Region and the water services company filed a lawsuit challenging the decision and determination of the antimonopoly body.

“Despite special complexity of the case, when respondents included a large commercial organisation and the Government of the Kaluga Region, it was investigated successfully. Therefore, we have created a precedent – holding liable the highest executive body of the whole region and one of the largest organisations, providing housing-and-utilities services. The 20th Arbitration Appeal Court also confirmed the rightness of our decision. This positive experience, particularly in investigating cases on antimonopoly violations in housing and utilities sector, will undoubtedly be used in the future”, commented the Head of Kaluga OFAS Russia, Mr. Igor Baranov.

Reference:
Article 16 of the Federal Law “On Protection of Competition” prohibits agreements between the authorities of the constituent territories of the Russian Federation or between them and economic entities, or concerted actions of these bodies and organisations if such agreements or such concerted actions lead or can lead to preventing, restricting, eliminating competition.

The Law “On the Basics of Regulating the Rates of Utilities Organisations” determines general principles for regulating tariffs and mark-ups. However, the law does not provide for specific rate of return from proceedings from the rates for water supply and water drainage as a set percentage, regardless of economic justification of the rates, for particular economic companies. As a result of specifying the criteria in the agreement, according to which the water services company should have the rate of return no less than 3% of the proceeds from the rates for water supply and drainage, the payments for the relevant tariffs can become economically unjustified, which would give “Vodokanal” more advantageous conditions in comparison with other economic entities.