New Law on Natural Monopolies has been adopted in Kazakhstan

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On December 27, 2018, a newly adopted Law of the Republic of Kazakhstan “On Natural Monopolies” (the Law) was signed. The Law was published officially on January 4, 2019 and  became effective after 10 calendar days following the date of its official publication (i.e. January 15, 2019).

In general, the proposed Law introduces substantial changes to the activity of subjects of natural monopolies through enhancement of efficiency and transparency of their business, as well as by increasing control over such entities.

Below we summarize the most important amendments thereof. Among other things, the Law:

  • Determines the spheres of natural monopolies and the order in which the State register of subjects of natural monopolies is formed; Amendments also influenced the small subjects of natural monopolies
  • Regulates the types of tariffs, the order of formation and execution thereof (for example, subject to some exceptions, it is no longer possible to impose one-year tariffs for the services of subjects of natural monopolies. Tariffs should be imposed for the period of five years or more)
  • Establishes a term for transition of subjects of natural monopolies to new tariff regulation methods upon expiration of the previously approved tariffs
  • Provides for the rules ensuring predictability of tariffs through the establishment by the competent body of tariff prediction indexes for the regulated services, which determine an acceptable increase of tariffs for the regulated services in all spheres of natural monopolies over a five-year perspective
  • Retains the mechanism of approving temporary reduction coefficients for services of natural monopolies
  • Increases control over formation and execution of investment programs
  • Dedicates special attention to the publicity of state regulation process and transparency of subjects of natural monopolies’ business, as well as the order of performing public monitoring and technical examination (for instance, observance of tariffs and execution of tariff estimates, execution of investment programs, compliance with quality and reliability indicators for regulated services, achievement of efficiency indicators of subjects of natural monopolies, etc.)

Publicity of state regulation process, transparency and the order of performing public monitoring will be ensured through (i) the creation of an advisory body under the competent body – the Tariff Policy Council, (ii) the functioning of non-governmental organizations, (iii) reports of subjects of natural monopolies to the Government, competent body and particularly consumers.

Members of the Tariff Policy Council will include, for example, representatives of state bodies, deputies of the Parliament of Kazakhstan, representatives of the National Chamber of Entrepreneurs, public associations / non-governmental organizations of consumers, subjects of natural monopolies, experts and other interested persons.

Together with the above, the Law provides for the obligation of subjects of natural monopolies to place their reports on execution of approved tariff estimate and the investment program in the media.

  •  Does not provide for a “Special order of regulation” for subjects of natural monopolies that attract loans of international financial organizations.

Amendments also influenced the responsibility of subjects of natural monopolies.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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