Article 15. The procedure for forming the tariff of the Law on Natural Monopolies

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1. The tariff must ensure recovery of the costs associated with providing the regulated service and the generation of profit, which is directed towards the development and effective operation of the natural monopoly entity and other purposes not prohibited by the legislation of the Republic of Kazakhstan.

2. The tariff is set for a period of five years or more, except in cases provided for by this Law.

At the same time, it is permitted to establish a tariff for a period of three years or more for natural monopoly entities providing regulated services in the areas specified in subparagraphs 2), 3), 4) and 14) of paragraph 1 of Article 5 of this Law, except in cases provided for by this Law.

2-1. If a natural monopoly entity enters into a purchase and sale agreement for electrical energy with an energy‑producing organization using renewable energy sources, and at least twenty‑five percent of the voting shares (participation shares in the authorized capital) of that organization directly or indirectly belong to the National Wealth Fund, in accordance with paragraph 2‑2 of Article 10 of the Law of the Republic of Kazakhstan “On the Electric Power Industry”, the authorized body, when setting tariffs, takes into account the costs of the natural monopoly entity for the purchase of electrical energy during the term of the purchase and sale agreement for electrical energy.

2‑2. In order to ensure the repayment of borrowed funds raised for the implementation of projects aimed at expanding, modernizing, reconstructing, updating, maintaining existing assets and creating new assets in populated areas within the framework of the national project to modernize the energy and utility sectors, a natural monopoly entity in the areas specified in subparagraphs 3), 4) and 14) of paragraph 1 of Article 5 of this Law shall ensure that the costs are included in the tariff for the upcoming period of its approval and in subsequent tariff approval periods until the natural monopoly entity fulfills its obligations to repay the debt.

At the same time, the amount of costs included in the approved tariff for borrowed funds obtained by a natural monopoly entity is not subject to change, except in cases where the terms of the loan agreement are changed.

The natural monopoly entity is obliged to fulfill its obligations under the loan agreement when implementing the measures of the approved investment program and tariff estimate as part of the national project to modernize the energy and utility sectors.

3. If the tariff expires, the natural monopoly entity provides regulated services at the tariff approved by the authorized body, without taking into account the funds allocated for the implementation of the approved investment program (depreciation charges and profits), with the exception of funds allocated to repay the principal debt on loans raised for the implementation of the approved investment program.

4. To have the tariff approved by the authorized body, the natural monopoly entity submits an application.

5. The application is submitted in electronic form.

6. The application is reviewed by the authorized body within ninety business days from the date of its submission.

7. The following are attached to the application:

1) a draft tariff (or price list taking into account industry‑specific features);2) a draft tariff estimate with supporting materials in the form approved by the authorized body;3) a justification statement confirming the need to approve the tariff.

4) a draft investment program or an approved investment program;

4-1) a map of the subjects’ repairs with target indicators within the framework of investment programs;

5) an estimate of costs allocated for repairs that do not lead to an increase in the value of fixed assets;

6) financial statements for the two preceding calendar years;

7) reports:

on financial and economic activity, on investment activity;

on the condition of fixed assets, on the structure and distribution of wages by type of labour for the two preceding calendar years, in accordance with the forms approved by the authorized body in the field of state statistics;

8) itemized calculations of expenses;

9) profit calculation;

10) calculations of the number of personnel, the need for raw materials, materials, fuel, energy, and technical losses, carried out on the basis of standard norms and regulations in force in the relevant industry (sector).

11) copies of the decisions of the competitive (tender) commissions regarding the procurement of goods, works, and services for the previous calendar year;

12) a calculation of depreciation charges for fixed assets used prior to the implementation of the approved investment program (project) and put into operation during the implementation of the approved investment program (project), covering a long‑term period with a breakdown by year;

13) supporting documents regarding the terms of financing and reimbursement of borrowed funds.

14) data on the design capacity of the natural monopoly entity and its actual use;

14-1) data on the actual use of the natural monopoly entity's capacity from digital objects;

15) documents confirming the planned volume of regulated services (a register of contracts indicating the actual volume of consumption of regulated services).

For regulated services in the field of heat power engineering, the documents confirming the planned volume of regulated services include heat supply development schemes approved in accordance with the legislation of the Republic of Kazakhstan in the field of heat power engineering;

16) documents confirming the actual data on costs and the volume of regulated services for the four quarters preceding the submission of the application and for the previous calendar year.

When approving a tariff using the incentive‑based tariff regulation method, the application must be accompanied by the documents specified in subparagraphs 1), 3), 4), 6), 7), 9), 10), 13), 14) and 15) of part one of this clause, as well as draft indicators of the quality and reliability of regulated services and indicators of the performance of natural monopoly entities, with the relevant supporting materials attached.

8. A natural monopoly entity has the right to submit an application to the authorized body for the approval of a tariff using the incentive‑based method of tariff regulation after the expiration of the validity period of the approved tariff, except in cases where tariffs are approved using the incentive‑based method of tariff regulation for natural monopoly entities whose list is determined by the authorized body.

9. The authorized body shall, no later than seven working days from the date of receipt of the application, verify the completeness of the attached calculations and supporting materials for compliance with paragraph 7 of this article, and shall inform the natural monopoly entity in writing about whether the application has been accepted for consideration or whether it has been rejected, indicating the reasons for the rejection in accordance with paragraph 11 of this article.

10. The calculations and supporting materials attached to the application in accordance with paragraph 7 of this article must be submitted in compliance with the following procedures:

1) They are stitched, numbered, and signed by the head of the natural monopoly entity, or by the person in charge of it, or by the deputy head of the natural monopoly entity. This requirement does not apply to the submission of an application in electronic form;

2) They are prepared separately for each type of regulated service.

The natural monopoly entity is responsible for the completeness, validity, and accuracy of the calculations, documents, information, and other materials attached to the application for approval of the tariff, tariff estimate, and investment program, as well as those attached to the reports on the implementation of the approved tariff estimate and the implementation of the approved investment program, in accordance with the laws of the Republic of Kazakhstan.

11. The grounds for refusing to accept an application are:

1) failure by the natural monopoly entity to submit the documents provided for in paragraph 7 of this article;

2) the submitted documents do not comply with clause 10 of this article;

3) classifying as a commercial secret information that is not provided for in clause 7 of Article 25 of this Law.

12. If additional information is required when reviewing the application, the authorized body has the right to request it from the natural monopoly entity in writing, with a specified deadline, but not less than five working days.

13. Public hearings are held by the authorized body when the tariff is approved no later than thirty calendar days before the tariff is approved; when the tariff is approved under the simplified procedure; and in cases provided for in subparagraphs 4), 6), 7), 8), and 9) of paragraph 1 of Article 22 of this Law — no later than ten calendar days before the tariff is approved.

14. The natural monopoly entity is obliged, after publishing an announcement in a periodical print publication regarding the date and place of the public hearings, to submit, upon request of the participants in the public hearings:

draft tariffs and tariff estimates;

information about the reasons for changing the tariff, including economically justified calculations.

15. Based on the results of reviewing the application, the authorized body has the right to adjust the draft tariffs, tariff estimates, and investment program.

16. When approved, the tariff may be differentiated depending on:

1) the presence or absence of a metering device at the consumer’s premises;

2) the group of consumers;

3) the type of cargo transported, the type of rolling stock, the transportation distance, and the volume (weight) of the transported cargo.

16-1. The additional income obtained through the application of tariff differentiation must be directed by the natural monopoly entity towards increasing the investment program.

17. The decision on the approval of the tariff is sent to the natural monopoly entity no later than five calendar days from the date of the decision to approve it.

The decision to approve the tariff is accompanied by a justification of the changes and clarifications to the cost items, profits, and measures of the approved investment program, submitted by the natural monopoly entity together with the application.

18. The tariff comes into effect no earlier than the first day of the second month following the month in which the tariff is approved, except in cases provided for by this Law.

19. The natural monopoly entity is obliged to inform the consumer about the approval of the tariff no later than thirty calendar days before the effective date.

20. If a natural monopoly entity fails to inform the consumer about the introduction of the tariff within the timeframes established by this Law, the said tariff shall not be introduced from the date specified in the decision of the authorized body. The approved tariff shall be introduced from the first day of the third month following the month in which the tariff was approved.

21. A natural monopoly entity has the right to submit an application to the authorized body to amend the approved tariff estimate without increasing the tariff, before November 1 of the current calendar year, in electronic form.

22. The rules for setting tariffs define:

1) the mechanism for calculating the tariff, taking into account the methods of tariff regulation in the areas of natural monopolies provided for in this Law;

2) the procedure for approving a temporary compensatory tariff;

3) the procedure for tariff differentiation;

4) the procedure for approving a tariff in a simplified manner;

5) the procedure for approving an investment program and its amendments.

6) the procedure for determining the tariff based on the concluded public‑private partnership agreement;

7) the procedure for approving a temporary reduction factor;

8) the procedure for maintaining separate records of income, expenses and assets involved for each type of regulated services and, in general, for activities not related to regulated services;

8‑1) the procedure for including the costs of purchasing, installing, verifying, and maintaining common household commercial metering devices in the tariff for services related to the production, transmission, distribution, and sale of thermal energy;

9) the procedure for recalculating the cost of a regulated service for the sale of thermal energy, taking into account the actual outdoor air temperature;

10) the procedure for determining the permissible level of profit for a natural monopoly entity;

11) the procedure for changing a tariff approved by the authorized body before its expiration date.

12) a list of costs included and not included in the tariff, the procedure for limiting the amount of costs included in the tariff;

13) the procedure for tariff indexation;

14) the forms of tariff drafts, tariff estimates, investment programmes, reports on the implementation of the approved tariff estimate, and on the implementation of the approved investment programme;

15) the mechanism for calculating price limits for regulated services of main railway networks and their annual adjustments.

16) the procedure for applying price limits to regulated services of mainline railway networks;

17) the procedure for calculating and applying the forecast tariff index.

23. The rules for carrying out activities by natural monopoly entities determine:

1) the procedure for inclusion in and exclusion from the State Register of Natural Monopoly Entities;

2) the procedure for holding public hearings.

3) the procedure for granting consent to perform certain actions by a natural monopoly entity, as well as for accepting a notification from a natural monopoly entity regarding the conduct of activities that are not related to regulated services, in accordance with the Law of the Republic of Kazakhstan “On Permits and Notifications”;

4) the procedure for conducting procurement by natural monopoly entities;

5) the procedure for ensuring equal access to regulated services.

6) the procedure for preparing reports on the implementation of approved tariff estimates, the implementation of approved investment programs, compliance with the quality and reliability indicators of regulated services, and the achievement of performance indicators of natural monopoly entities in relation to consumers and other interested parties;

7) the procedure for disclosing information about the availability of free and available capacities, storage facilities, locations, and throughput capacities of a natural monopoly entity’s networks, as well as diagrams of utility service engineering communications in the areas of natural monopolies, excluding information that is classified as a state secret or other legally protected confidential information in accordance with the laws of the Republic of Kazakhstan.

8) the procedure for agreeing on the fee for the purchase and installation of a metering device;

9) the procedure for approving performance indicators for entities in the natural monopoly sector;

10) the procedure for exercising state control in the areas of natural monopolies;

11) forms:

petitions for consent to carry out transactions with property used to provide a regulated service, if the book value of the property recorded in the balance sheet at the beginning of the current year exceeds 0.05 percent of the book value of its assets as per the balance sheet at the beginning of the current year, and for the reorganization or liquidation of a natural monopoly entity;

reports from a natural monopoly entity to consumers and other interested parties:

on the implementation of the approved tariff estimate;

on the implementation of the approved investment program;

on compliance with the quality and reliability indicators of regulated services;

on achieving performance indicators for the activities of natural monopoly entities;

12) the procedure for informing consumers and (or) the authorized body about the tariff, its changes.

President

Republic of Kazakhstan

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