“The existing electricity tariff-setting mechanism is cost-plus only formally due to social considerations. Changes to electricity tariffs are infrequent, with the last change in 2007. Although depreciation is included in the cost base for tariff calculation, recovery of capex spending via tariffs may be difficult for Azerenerji. Fuel costs represent almost half of Azerenerji's operating expenses. Since December 2013 gas prices increased by 63% to AZN 80,000/thousand cubic meters, while electricity tariffs remained flat. In the medium term, the company expects that electricity and gas tariffs will remain unchanged. Azerenerji's payment terms for gas tend not to be strict and are supported by the government.
The Tariff (Price) Council told APA-Economics that no tariffs are expected to rise.
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