Privately owned firms are free to set any price they want for their products. For privately owned public utilities, however, government regulators typically set rates so as to allow firms to realize a certain rate of return to recover their costs; public utilities, as natural monopolists, may otherwise charge much higher prices. For the electric grid in Armenia, the tariff rate has been fixed at 25 Drams for several years (pre and post privatization) until April of 2009 when it was raised by 20 percent to 30 Drams, which also happens to be the rate at which the Dram depreciated relative to the Dollar in the previous month. As the Dram continued to depreciate following the global Great Recession, regulators seem to have allowed the utility to charge higher tariff rates, albeit with a lag as the figure below shows.
Foreign investment in public utilities in Armenia, effectively electric and gas, took off in 2006, peaking in 2008 at USD 477 million in FDI; they dramatically declined to USD 7 million by 2013 (see here). When stated in USD, the tariff rates have changed little over this period. Raising tariff rates would be welcome by power providers as it will help them recover their costs. Of course consumers can get hurt by this, and it is no surprise that some strongly oppose raising rates. Unfortunately, and given the aging infrastructure, and in particular the nuclear power plant, tariff rates are likely to increase much more dramatically over the next decade to cover the cost of new investments. I am not sure that this is being communicated well to the public.
|Electricity peak tariff rates in Armenia|
Republic of Armenia : Power Sector Tariff Study (2013)
From Crisis to Stability in the Armenian Power Sector Lessons Learned from Armenia’s Energy Reform Experience (2006)
Also the following is useful:
Armenia Power Sector Policy Note (2014)