Time to read: 13 minutes(s)

Author: Tatyana Rybakova

The first frosts have hit, and news of the first serious utility accidents has appeared.The city of Angarsk in the Irkutsk region, with a population of 200, was left without heating.And off it went..

There was a lot of talk about Angarsk because it is the third largest city in the region, but about Mama village In the Irkutsk region, for example, there isn't. Meanwhile, burst radiators and pipes have long been so common there that houses are heated with potbelly stoves. But there is a kindergarten, a hospital, and a school. Furthermore, the village is cut off from the mainland in winter until the winter road is installed, so there's no help to be had. Ultimately, the only aid available was allowing the residents of Mama to dismantle their old houses for firewood.

Worn-out pipes have also begun to burst in other Siberian cities: Novosibirsk, Tyumen…In Central Russia it is still relatively calm – although there are some emergency areas, but that's because winter is late this year, and there haven't been any serious frosts yet. When they arrive, we'll be hearing reports from other cities and towns, large and small.

We know the exact causes of breakdowns; we're told about them every time there's an emergency: 60-80% of the housing and utilities infrastructure is worn out, up to 90% in some places, and in others, it's long past its prime. Local authorities regularly talk about how many pipes they've replaced and how many boiler houses they've modernized, but come winter, breakdowns become as commonplace as ice and icicles. The funniest thing is, they've been talking about up to 80% of the utilities infrastructure being worn out since the late 90s. How can this be? Repairs are ongoing (even relevant national programs are regularly adopted), yet tariffs have risen over the past quarter century. factor of — and the situation is still the same—the infrastructure is worn out, accidents are inevitable? Let's figure it out.

Heavy legacy

The Russian housing and communal services sector is the heir to the Soviet centralized system of public utility provision.. This, in turn, was initially created not for the comfort of residents who lived in communal apartments and barracks with stove heating, but for the needs of the factories and plants being built.Those, in turn, were built in the 30s with an eye toward a future war, and therefore communications to them were provided with a significant reserve of both power and reliability: even direct bombing of the plant should not have stopped the production of those same tanks and shells.Naturally, large public utility facilities were built for industry: thermal power plants, state district power plants, etc., and the very structure of supplying light, heat, and other public utilities was centralized.And it's just as natural that the construction of communal apartments for the population, if it was carried out, retained the same central structure: much simpler and generally in accordance with Soviet principles of centralization of everything and everyone..

Years passed, and during the Khrushchev Thaw, housing construction began – people were moved from barracks to comfortable, for those times, “Khrushchev-era” apartments.But the principle of centralized supply remained the same.Firstly, they still preferred ease of management over cheapness – however, labor was cheap, and the post-war industry did not reduce metal smelting, so there were no special expenses for laying many kilometers of pipes.Secondly, housing was still a derivative of industry: a factory was built, and houses for its workers were built nearby.. Therefore, the supply of heat, water and electricity often went through departmental offices..

In the 90s, when enterprises began to close and go bankrupt, this entire system collapsed.Enterprises were no longer able to pay for infrastructure, and when they were privatized, new owners often spun off utilities into separate companies, unwilling to bear the social burden.In fact, it was then that problems in the housing and utilities sector began to mount: a lack of scheduled maintenance, accidents with patching up the holes in the pipelines haphazardly, and the time had simply come to replace many of the pipes and cables laid during the years of Stalin's industrialization..

Error in strategy

The author of these lines worked in the antimonopoly agency in the early 2000s and was personally present during discussions with relevant agencies on a strategy for bringing the housing and utilities sector out of crisis.Given: worn-out infrastructure, mass non-payments (primarily by enterprises), tariffs that do not cover costsThe situation is dire, but Eastern European and Baltic countries have already experienced it.There, they followed a harsh scenario: tariffs were sharply raised to cover costs, and then to "costs + investment." The state attracted businesses to modernize the infrastructure, participating primarily as a guarantor for loans, which were typically provided by the European Union and European investors.It was very difficult for both businesses and the population.I remember a Polish family whose gas was cut off for nonpayment, and they were left without heating and a gas stove in the middle of winter. My relative in Estonia survived by growing a vegetable garden on a farm: her entire pension went towards paying for utilities.Everyone was terribly economizing on water, electricity, gas, and coal: it was then in Poland that I learned to turn off all the lights and consider a hot bath an unnecessary luxury.But within a few years, everything returned to normal: yes, utility bills were high, but manageable; heating was now either individual or shared between apartments—and residents themselves decided what temperature to maintain in their apartments.The companies either went bankrupt or were taken over by new owners who competed not on low production costs, but on quality—and, at first, on cheap labor compared to Western Europe..

However, at the time of the discussion of the reconstruction of the Russian housing and utilities sector in Eastern European countries, things were still not so good, so opponents of the European path pointed to the same closing enterprises, cold apartments and said that the people would simply tear the government apart if it raised tariffs to acceptable levels.Moscow City Hall then declared that it would not allow Muscovites to be offended and would itself pay additional fees for citizens.As a result, they decided to cut the dog's tail bit by bit: tariffs would be raised gradually, faster for households than for businesses, in order to eliminate cross-subsidies: since Soviet times, businesses had been paying more, "for themselves and for the other guy.".

There was another strategic decision. In Eastern Europe, they followed the Western path: generation competes and sells its product on the market, delivery routes (cables, wires, and pipes) are usually a monopoly of local authorities or controlled by them, and suppliers of energy, water, heating, and gas compete again: consumers can choose from two or three companies. In Russia at that time, admittedly, businesses weren't particularly keen on getting involved in utilities: why bother with such a low-margin, small-scale business when oil, metals, and other raw materials were starting to rise in price on global markets, and even collecting scrap metal for smelting plants was more profitable than providing heat, water, and electricity to even a large, well-off city? The ministries, too, weren't eager to deal with a multitude of companies outside their control, and then someone brought in a report on the reasons for this. energy crisis in California, where the electric power industry was deregulated and market manipulation began... In general, it was decided not to arrange any competition, and to call all sorts of sales organizations by a new name: local monopolies, with their management in the same way as natural monopolies (Gazprom, RAO UES, Russian Railways), only by regional antimonopoly authorities.

It was then that the system that exists to this day was established: public utility infrastructure and utility service providers to consumers remained monopolies, their tariff policies are approved by local authorities together with regional offices of the Antimonopoly Service (FAS), funds for utility repairs, which the providers themselves lack (tariffs are regulated), are provided by regional budgets, as well as the federal budget within the framework of national programs for the modernization of public utilities..

Anatoly Chubais slightly disrupted the harmonious structure: it was his “switch” that stopped non-payments in the 90s, and by 2008, RAO UES under his leadership ceased to exist as a natural monopoly, dividing into privatized generation (except for nuclear and hydroelectric generation), state grid monopolies (FGC UES, System Operator, Rosseti) and energy retailers.But since the latter became “local monopolies” in the regions, this did not disrupt the overall appearance of the housing and communal services system.Specifically, thanks to the strategy chosen in the early 2000s, the housing and utilities sector remained monopolized, chronically underfunded, including due to tariff growth restraints, and highly corrupt, as local authorities lacked both the security forces and often the will to curb this corruption..

Chronic aging

Pipes laid during the Stalin years were supposed to last 50 years, and the capacity of the boiler houses and thermal power plants of that time was often ten times greater than the needs of the early 2000s.Plastic pipes, which began to be laid in the 2000s, have a service life of 25 years, and capacity has hardly increased since then.As you can imagine, it's time to replace the pipes laid in the 2000s, and economist Nikolai Kulbaka recalls that in some places, all that remains of the Soviet-era cast-iron pipes are clay "tunnels"—the pipes themselves have completely rotted away.At the same time, previously excess capacity became insufficient: firstly, equipment at boiler houses, thermal power plants, pumping stations, power substations, etc., became worn out and obsolete. Secondly, rapid housing construction and the growth of new industries (and more recently, mining farms) have sharply increased the need for capacity – the old ones are no longer sufficient, and there is not enough money to build new ones..

There isn't enough money even for timely pipe replacement—most regions haven't gotten rich, so even scheduled repairs are presented as a feat, let alone simply replacing old pipes..

Today, the regions are also burdened with the responsibility of contributing to military expenditures—including additional payments to contract soldiers, payments to the wounded and families of the deceased, and all sorts of propaganda efforts. And all this is happening in the context of a sharp decline in tax revenues and deficiency most regional budgets.

Tariffs are now rising quite mercilessly: from 2023 their growth will go at an increasing pace — from 9 to 12% on average, with some regions seeing tariff increases exceeding 20%. Starting next year, the increase will reach 18% on average: starting January 1, indexation will be 1,7% for all regions, with the main increase expected starting October 1. In some regions, the total increase could exceed 40%, while in others it will be around 9-10%. Of course, inflation and high borrowing costs also play a role, but the main problems stem from the strategic error in choosing the path for building the Russian housing and utilities system, which is currently facing financial and personnel challenges.

"Rates will still have to be raised because there are too many problems, but raising rates alone won't solve the problem. It's not just a problem of money, but also of technology, competition, the structure of the government, and municipal funding," says Kulbaka. Wealthy regions like Moscow lack experienced repairmen, while poorer ones lack funds. Plus, corruption is rampant in a monopolized system, he explains. "Within the existing system, there's no solution: funding had to be provided after the 2000s, when oil prices were high. This was partially achieved—plastic pipes, including Russian ones, were introduced, boiler rooms were modernized, and so on. Now, modern technology makes it possible to make heating apartments a personal matter for the residents themselves—meaning, de-monopolization is possible. But these are systems that need to be individually developed: every building, district, and city is unique. And for this, strong local government is needed; municipalities must have the funds and power, and they themselves must be accountable to voters." Competition between suppliers and management companies is needed—and changing management companies is practically impossible these days. At the same time, for any management company, investing in modernization is a direct loss, so they operate on the principle: "If it works, that's good enough." - explains the expert.

Problems are also mounting in the much more prosperous and partially reformed energy sector. One such problem—the decline in generation capacity in the European part of Russia—is, oddly enough, linked precisely to modernization.

"After the dissolution of RAO UES and the privatization of some generation, Western investors arrived, bringing in Siemens, whose combined-cycle turbines were used to re-equip most of the generation in the European part of Russia. Unlike steam turbines, such a turbine produces not only electricity but also heat, and it's much more efficient. But with the start of the war, Siemens left Russia, and the turbines have parts that need to be replaced periodically. There's nowhere to get them: even the Chinese, who manufacture them under license, flatly refuse to sell them, fearing sanctions—or rather, they simply don't respond to letters. As a result, generation capacity is declining." — explains economist Sergei Petrov.

The second problem is financial."The tariffs cover the costs 'on average for the hospital'"There are three hierarchies in the energy sector: large generating capacities, medium-sized grid structures, and small distributors—energy retailers.And while the major energy suppliers are doing more or less well, as are the grids, at the lower end, everything depends on the region."In rich, large regions, it's good; in depressed ones, there's a lack of funding, but you can't get more from the poor population and flimsy businesses," says Petrov.Plus, there's the problem of dying villages: often, they only have a few pensioners left, but maintaining electricity supplies to them costs the same as a fully populated village—you can't cut their power lines.Here again, local solutions could be found, but, firstly, they are Western, so there is no access to them, and secondly, it still means investments.

Another problem is chronic non-payments by the North Caucasus republics. Poverty among the majority of the population, plus corruption, plus electricity theft by mining farms, plus the federal authorities' reluctance to spoil relations with the leaders of such a sensitive region (who are often themselves involved in or profiting from the same corruption schemes and cryptocurrency mining). It has reached the point that residents of other regions may have to pay higher tariffs. pay off debts for electricity in the North Caucasus, which has already sparked a storm of indignation. Southern Russia traditionally experiences electricity shortages—investments in infrastructure should have been made early, but they weren't, and now there's no time to do so: Crimea and the occupied territories are the top priority.

In general, the idea that the state should first invest heavily in modernizing the entire infrastructure, possibly with the help of private investment, has been discussed since the 2000s, but in the prosperous years this was only partially done, and now there is no time for that.“In Tatarstan, regional authorities did this, and quite successfully"But in the Ivanovo or Kostroma regions, for example, there's not enough money even to maintain the existing infrastructure," says Petrov..

The experts interviewed agree that the number of accidents will only increase, but they don't expect a major collapse.“There shouldn’t be any serious problems in the Russian energy sector – for that to happen, generation needs to fall by 20 percent.”Plus, there's always backup capacity, and the unified energy system allows for the rapid transfer of excess energy to areas of shortage."Finally, Russia has a lot of hydropower generation, and it responds to changes in energy consumption faster than anyone else, almost instantly," says Petrov.“However, the number of accidents will steadily increase,” Kulbaka warns.So soon, utility accidents in both cold and hot weather will become as commonplace as "tinsmith's day" in icy conditions or forest fires in the summer..

Is there anything that can be done at the local level? In principle, yes—even with Western equipment supplies blocked by sanctions, it is possible to install solar panels and wind turbines, set up a home boiler room, install a backup generator, and dig a well.In a private home, this is costly, but possible. In an apartment building, it unfortunately requires both the solvency of all residents, solidarity, and persistence in the fight against the management company.And recording videos of complaints to the authorities is a bad idea.Such requests are increasingly rarely responded to effectively.But many citizens simply have no other options..