02.Dec .2020 18:00

“The Main Issue Is Not the Rise in Price of Natural Gas, but Why the GEL Exchange Rate Is Falling” – Vepkhvadze

“The Main Issue Is Not the Rise in Price of Natural Gas, but Why the GEL Exchange Rate Is Falling” – Vepkhvadze
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For non-residential (commercial) consumers, except for bread enterprises, the price of natural gas will increase from January 3, 2021. As it turns out, the tariff will increase from 0.86 GEL to 1.10 GEL today. Tbilisi Energy issued a statement today citing several arguments as the reason for the decision, including a sharp drop in the exchange rate and infrastructure in need of rehabilitation.

According to Levan Vepkhvadze, Executive Director of the Business Association of Georgia, the tariff increase was probably expected, as the GEL exchange rate has been falling for a long time. The fact is that the product bought in dollars would become more expensive.

"As you know, natural gas supply tariffs for all categories of non-domestic customers are deregulated, ie natural gas is supplied without established tariffs. Consequently, companies have the right to make decisions without a regulator when it comes to commercial customers. Still, they must notify the customers one month in advance, as did Tbilisi Energy. In those sectors and areas where there will be an imbalance between the price of the purchased product and the selling price, tariffs or price increases will probably be on the agenda because when we buy the product to be delivered in foreign currency and supply it in GEL, the difference between exchange rates increases. All this should probably be reflected in the price," - Levan Vepkhvadze said while commenting on the topic in the "Business Course" and added that unlike the commercial tariff, the gas distribution companies in the household part have less freedom because in this case, the tariff is set by the GNERC for 3 years and it was approved last year.
To the question - how rational was the time chosen by "Tbilisi Energy," Levan Vepkhvadze answers that it is difficult to say because it's a business.
"The interests of two companies, two different sectors, are conflicting here. It is tough to say why it did it now and not at another time because the company has its own financial accounts, and some problems do not arise overnight.
The exchange rate has been falling for the last 2-3 years. It all boils down to business. It pressures us because we have to pay for additional resources. In the local market, companies have sales in GEL, and on the other hand, the compiler they need for this production is energy carriers. If the amount on energy carriers has increased, in the end, it will already be reflected in the product," - he explained and once again stressed the need to study the issue of exchange rate depreciation.
"When the GEL exchange rate fell, I remember the statements that the fall wasn't the main factor because inflation is. But we see well that the GEL exchange rate is the main factor and we end up saying that everything in this country is getting more expensive. The main issue is not the rise in the price of natural gas but why the GEL exchange rate is falling. If any measures are to be taken, they should be implemented. If there are plans to be modified, they should be modified, ”Levan Vepkhvadze said.