Sergey Agafonov: Competition is a natural antidote to monopolies.

Sergey Sergeyevich, in the September Address to the People, the Head of State instructed to address urgent infrastructure issues. What questions should be prioritized? What work has already begun?

The most crucial aspect is the modernization of the energy and utility sectors, which is a national project emphasized by the President. This is paramount because the level of wear and tear in certain cases reaches 80-90%. This applies to power plants, electrical grids, and water supply and sewage networks, which are not within my jurisdiction, but we clearly understand the situation there. What does 80-90% wear and tear mean? These are practically emergency facilities, and such objects exist in our infrastructure, which is why this is the number one issue.

Another point I would like to highlight, which the President also mentioned, is that consumers should not be left alone with monopolists. I think it’s unnecessary to explain how prevalent monopolists are in our economy and how they behave towards service consumers; we experience this constantly. This is a very important aspect, conditioned by the fact that the level of competition in sectors such as electricity supply, primarily, is very low. Competition is a natural antidote against monopolists, so to speak, but our level of competition is very low because these markets are not developing. I believe the President understands this as well. Thus, to somewhat balance the interests of consumers and monopolists, which is currently heavily skewed towards monopolists, measures need to be taken. In a similar manner, it was possible to balance the interests of officials and the population when all state services were transitioned to electronic format. We all felt this when the need to visit officials was eliminated, reducing the corruption factor to a minimum, and now we receive all state services through applications. It is faster, and I reiterate, it is less corruptive, thus, a similar solution in the area of natural monopolies, I believe, is correct. Since we are unable to develop competition, which, unfortunately, we are not succeeding in, we need to balance the system in some way. This can be achieved by eliminating direct contact between monopolists and consumers, transitioning to an electronic format based on the principle of state services. This is precisely why the President suggests doing this, to minimize the corruptive factor, abuses by monopolists, etc. Therefore, in my opinion, the Address highlights two very important aspects: the modernization of infrastructure and support for consumers in their dealings with monopolists.

By the end of the year, Kassym-Jomart Tokayev instructed to approve a national project for the modernization of the energy and utility sectors. What has been done in this direction? What does the document include?

The national project has been posted on the "Open NPA" portal, and its public discussion concluded on November 7th. It is a large-scale project, and you can visit the portal to see all the proposals. It is estimated at 10 trillion tenge, and such projects have not been seen in Kazakhstan before. It clearly outlines what it will include. However, I would like to focus on one important aspect: just last week, the Prime Minister, speaking at a business forum organized by the NPP RK "Atameken," delivered a very important message: domestic producers must participate as much as possible in the national project. This means that these 10 trillion tenge should also be utilized through the procurement of Kazakh equipment, domestic goods, etc. This is very important for the development of domestic production. Of course, it is possible to purchase imported products with this money, and they might even be cheaper, but it is far more important to use, if I may say so, the national project to develop domestic producers.

In your opinion, how is the situation with the formation of a culture of saving utility resources in Kazakhstan? And how do you assess the principle, which is to be implemented in the country at the President's instruction, "the more you consume, the more you pay"?

Just recently, on November 11th, the whole world celebrated International Energy Saving Day. Unfortunately, Kazakhstan has nothing to celebrate yet. Our GDP is one of the most energy-intensive in the world; we rank 105th out of 140 countries. Therefore, I agree with the principle articulated by the President: "the more you consume, the more you pay," especially under conditions of electricity shortages. If we had a surplus, we might have to stimulate consumption, but there is no such need now; we need to implement the opposite measure.

Expanding on the President's message, I would like to mention another aspect—the need to abandon tariff differentiation. Our tariffs continue to be differentiated by consumer categories. That is, the tariff for the population is lower than for small and medium-sized businesses, and this is a huge problem. This does not provide any benefit to the population because, allegedly, by paying less for electricity, you go to the store or receive goods and services, and you still pay for that expensive electricity that legal entities are charged for; you still end up giving that money away. Therefore, this distortion provides no benefit for Kazakhstanis.

Therefore, it is necessary to equalize tariffs for the population and legal entities. I want to say that in some countries, the population pays even more than legal entities, which is generally reasonable. For example, the process of supplying electricity to the population is more costly than supplying it to small or medium businesses. We are not advocating for that; let’s at least have equal tariffs. At the same time, it is clear that certain categories of our citizens, socially vulnerable groups, require subsidies and assistance, and they should be helped in a targeted manner. This has long been clear to everyone, including the regulator. However, so far, the only region in Kazakhstan where this has been successfully implemented is ZKO, where tariffs have been equalized, and targeted assistance is provided. Why do I connect this with the President's thesis "the more you consume, the more you pay"? Because when there is targeted assistance, it is clear: we help the low-income, and all others pay at the same tariff level, which is comparable to the tariff for legal entities; everything is fair, I believe. But what is happening now is that the entire population pays at a subsidized tariff, both the low-income and those who, let’s say, may not notice their electricity bills. For instance, you live in a mansion with a heated pool, etc., but you pay the same tariff as someone who genuinely needs assistance. Do you understand the distortion?! What problem has this differentiation actually created?!

Therefore, I reiterate, I completely agree with the President—"the more you consume, the more you pay" under conditions of electricity shortages. I would also add that we need to quickly eliminate differentiation and provide targeted assistance to the population. As for the culture of energy saving, I refer to it as motivation because we can be forced to save by, on one hand, high tariffs, and on the other hand, convenient market services, which are still lacking. By the way, this applies not only to the population but also to the budgetary sector, where the potential for savings is also significant.

K. Tokayev has instructed to pay close attention to the development of nuclear energy. I would like to hear your opinion on this type of generation. What prospects does Kazakhstan expect in developing this direction?

Regarding nuclear energy, this is a very large-scale issue. Personally, I have dedicated and continue to dedicate a significant amount of time to popularizing nuclear energy, which has five main advantages. First and foremost, there is the problem of scarcity, which is clear to everyone, already obvious and even tangible. We may not physically feel it; I hope there will be no outages, but I can assure you that we already feel it in our wallets. That is, our electricity tariff already includes a component of expensive imports, and its share will increase if we do nothing. Nuclear energy is meant to reduce our energy dependence. Indeed, one station will not solve the problem, but as I say, the first nuclear power plant is the entry into the industry, the nuclear energy sector, and a very important step toward achieving energy independence.

The next aspect is achieving carbon neutrality. We all know that Kazakhstan has joined the Paris Agreement, according to which we must reach carbon neutrality by 2060, meaning we must completely cease the burning of fossil fuels. Can we achieve this without nuclear energy, given that 70% of our energy balance consists of coal generation today? My answer is no! In principle, we cannot do this without nuclear energy. Yes, renewable energy sources (RES) are very good; I am a strong supporter of RES, but RES lack the necessary "baseness"; they are an unstable energy source, so we need something to stabilize it. This can be achieved through so-called accumulators, but all this significantly increases the cost of RES. Thus, our ideal future energy balance will be a symbiosis of nuclear power plants and