The Committee on Regulation of Natural Monopolies on the recognition of illegal and cancellation of the order
No. 6001-23-00-6ap/377 dated 24.10.2023
Plaintiff: KTO JSC (hereinafter referred to as the Company)
Respondent: Russian State Institution "Committee for Regulation of Natural Monopolies of the Ministry of National Economy of the Republic of Kazakhstan" (hereinafter referred to as the Committee)
The subject of the dispute: on the recognition of illegal and cancellation of Order No. 117-OD dated October 29, 2017, recognition of illegal and cancellation of Order No. 131-OD dated November 26, 2021
Review of the defendant's cassation appeal.
PLOT: The Company filed a lawsuit with the Committee to declare illegal and cancel Orders No. 117-OD dated October 29, 2017 and No. 131-OD dated November 26, 2021, arguing that there was no tariff estimate under Order No. 117-OD, as well as an investment program for a regulated service for 2020. the period of validity of the temporary compensation tariff (hereinafter referred to as – CGT) the order does not establish what is unacceptable, CGT cannot be applied under the articles "travel expenses" and "fuel", and according to order No. 131–OD, a violation of the special cost formation procedure is charged when approving tariffs for 2015-2019, which did not exist, since bonus costs were not taken into account in tariffs.
Judicial acts:
1st instance: the claim is partially satisfied. Order No. 131-OD dated November 26, 2021 "On Approval of a temporary compensating tariff for a regulated service for pumping oil to the domestic market of the Republic of Kazakhstan through the Company's Main Pipeline system" was declared illegal and canceled. The rest of the claim was denied.
Appeal: the court's decision is upheld.
Cassation: judicial acts were annulled, a new decision was made in the case to dismiss the claim.
Conclusions: It follows from the case file that by Order of the Committee No. 347-OD dated August 21, 2015, the Company approved the maximum level of tariffs and tariff estimates for a regulated service for pumping oil to the domestic market of the Republic of Kazakhstan through the main pipeline system for 2015-2019: in 2017 – 3,902.13 tenge per ton per 1000 km (excluding VAT); in 2018 – 4,292.4 tenge per ton per 1000 km (excluding VAT); in 2019 – 4,721.72 tenge per ton per 1000 km (excluding VAT).
By Order of the Committee No. 71–OD dated November 27, 2020, the Company approved the maximum level of tariffs and tariff estimates for a regulated service for pumping oil to the domestic market of the Republic of Kazakhstan through the main pipeline system for 2021-2025.
The tariff is 4,355.57 tenge per ton per 1000 km (excluding VAT). Based on the results of the analysis of the annual report on the execution of the approved tariff estimate for 2020, the facts of non–fulfillment of cost items by more than 5% were established, and therefore, on October 29, 2021, the Committee issued Order No. 117-OD approving the CGT Company for a regulated service in the amount of 4,328.04 tenge per ton per 1000 km (excluding VAT) from December 1, 2021, without specifying the expiration date.
The Accounting Committee conducted an audit of the asset management efficiency of the JSC and its subordinate organizations, and on March 16, 2021, an audit report was prepared for the Company. On May 5, 2021, in connection with the violations identified, the Accounts Committee sent the Committee, as the authorized body, order No. 7-2-N-kbpu to take measures against the Company to introduce CGT in connection with the unlawful inclusion in the tariff estimate of the cost of paying premiums in the amount of 7,336,600,000 tenge for the period from 2017 to 2019. years.
In this regard, by Order of the Committee No. 131–OD dated November 26, 2021, the Company approved a CGT for a regulated service in the amount of 3,728.82 tenge per ton per 1000 km (excluding VAT) from January 1 to December 31, 2022, and Order No. 117 OD was canceled.
Recognizing illegal and canceling the Committee's order No. 131-OD dated November 26, 2021, the courts proceeded from the fact that the resolution of the Accounts Committee dated May 5, 2021 No. 7–K–kbpu regarding the direction to the Committee of the instruction on taking measures to introduce CGT to the Company (paragraph 2) contradicts paragraph 182 of the Rules of External State Audit and financial control, approved by the regulatory resolution of the Accounts Committee dated July 30, 2020 No. 6-NK (hereinafter referred to as – Rules of External State audit), where it is determined that the instructions of the Accounts Committee are sent only to the objects of state audit, that is, a mandatory act of financial control response could not be sent to the Committee due to the fact that the latter was not the subject of state audit.
In this regard, the court considered that the violation of the CGT approval procedure committed by the Committee is an unconditional basis for the cancellation of the contested administrative act. These conclusions of the courts of first instance and appeal are unfounded, they are based on the incorrect application of substantive and procedural law.
In accordance with article 26 of the Law "On Natural Monopolies" (hereinafter referred to as the Law), a natural monopoly entity has the right to:
reduce the tariff for all consumers during the tariff period;
independently manage the underutilized part of the costs provided for in the approved investment program, subject to the implementation of measures and in the approved tariff estimates resulting from cost savings due to the use of more efficient methods and technologies, the implementation of an action plan for energy conservation and energy efficiency improvement developed based on the results of an energy audit or express energy audit, measures to reduce regulatory technical losses or reduction in the volume of regulated services provided for the following reasons, independent of the natural monopoly entity, or the results of competitive (tender) procedures;
to appeal, in accordance with the procedure established by the laws of the Republic of Kazakhstan, the actions (inaction) of the authorized body, as well as its officials, orders to eliminate violations of the legislation of the Republic of Kazakhstan on natural monopolies.;
have other rights established by the laws of the Republic of Kazakhstan. By virtue of Article 33 of this Law, the temporary compensating tariff is approved based on the results of: verification of the activities of a natural monopoly entity;
annual analysis of reports on the execution of the approved tariff estimates and on the execution of the approved investment program submitted by the natural monopoly entity.
The grounds for approving a temporary compensation tariff are:
excess of the tariff approved in accordance with this Law; misuse of depreciation funds;
failure to implement the activities of the approved investment program included in the tariff, except in the following cases:
reduction of volumes resulting in the shortfall of funds provided for in the approved tariff estimates for the implementation of the approved investment program.
At the same time, the amount of lost income commensurate with the reduction in volume is excluded from the total amount of non-fulfillment of the approved tariff estimate, and a temporary compensating tariff is introduced by the authorized body for the remaining amount of unjustified income.
In addition, in accordance with paragraphs 10, 13 of the Special Cost Formation Procedure used in approving tariffs (prices, rates of fees) for regulated services (goods, works) of natural monopolies, approved by Order No. 130-OD of the Chairman of the Agency of the Republic of Kazakhstan for Regulation of Natural Monopolies dated April 25, 2013 (hereinafter referred to as – Special procedure) the expenses of the period are taken into account in the cost part of the tariff (prices, fee rates) as follows: the cost of paying administrative staff is determined based on the actual number, but not exceeding the standard number of staff of the natural monopoly entity, and the average monthly salary accepted in the applicable tariffs (prices, fee rates), taking into account the indicators forecast of socio-economic development of the Republic of Kazakhstan (inflation).
In the case of actual savings in administrative staff costs as a result of a reduction in the number of staff, administrative staff costs are included in the tariff in the amount provided for in the previously approved tariff estimates, and the amount of savings can be directed by the natural monopoly entity to increase the salary level of administrative staff.
Expenses for bonuses and other types of remuneration to wages are not included in the cost part of the tariff (prices, collection rates) of a natural monopoly entity (with the exception of state-owned enterprises) and are carried out at the expense of income received from unregulated activities of a natural monopoly entity, or by saving administrative and production staff costs.
Based on the specified requirements of the Law and the Special Procedure, the judicial board notes that when labor costs are saved as a result of staff reductions that have taken place in the Company, labor costs are taken into account in the tariff in the amount provided for in the previously approved tariff estimates, and the amount of savings can be directed by the natural monopoly entity to increase the salary level of the administrative staff.
In this case, the Company allocated the amount of labor cost savings to employee bonuses, while the amount of wages remained at the same level, which indicates that the Department had legitimate grounds for introducing CGT in the Company.
Given that the case does not require the collection and additional verification of evidence, the circumstances of the dispute have been fully established, however, the courts of first and appellate instances made mistakes in evaluating evidence, interpreting and applying substantive and procedural law, the judicial board believes that the judicial acts issued in the case should be annulled with a new decision to dismiss the claim..
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