The development tariff and investment in municipal heat supply systems

For years, investment in municipal housing and public utilities (MHPU) has been pronounced a cure-all for the woes of this sector in Russia. Housing services will certainly attract private investors. This assumption is, however, hardly justified for the debt-ridden monopolistic public utilities, where rates are strictly regulated and investment efficiency is low. Private investors expect to return their money. A federal law adopted at the end of 2004 pointed at an obvious source of return on investment, i.e., the investment component of the tariff turning a payback tariff into a development tariff. In this connection, it is important to find out whether the development tariff can be used to secure an acceptable payback period for investments in heat supply systems when the household solvency is low, if tariff rise entails sharp growth in budgetary expenditures on subsidies for the population, and the current heating tariff often fails to reach even the production cost level. © Nauka/Interperiodica 2006.