Appeal of orders of the antimonopoly authority on approval of tariffs (maximum level, temporary compensating) and tariff estimates

According to article 15 of the Law of December 27, 2018, the tariff must ensure reimbursement of the costs of providing a regulated service and generating profits for the development and effective functioning of a natural monopoly entity and other purposes not prohibited by the legislation of the Republic of Kazakhstan. The tariff is set for a period of five years or more, with the exception of cases provided for by this Law. In case of expiration of the tariff, the natural monopoly entity provides regulated services according to the tariff approved by the authorized body, excluding funds allocated for the implementation of the approved investment program (depreciation and profit), with the exception of funds allocated to repay the principal debt on loans attracted for the implementation of the approved investment program. To approve the tariff by the authorized body, a natural monopoly entity submits an application in electronic form, which is reviewed by the authorized body within ninety working days from the date of its submission. The list of documents attached to the application is established by paragraph 7 of Article 14 of the Law. The authorized body, no later than seven working days from the date of receipt of the application, verifies the completeness of the attached calculations and supporting materials and informs the natural monopoly entity in writing of the acceptance of the application for consideration or refusal to accept it, indicating the reasons for refusal in accordance with paragraph 11 of this article. The grounds for refusal to accept the application are: 1) failure by the natural monopoly entity to submit the documents provided for in paragraph 7 of this article; 2) inconsistency of the submitted documents with paragraph 10 of this Article; 3) attribution of information not provided for in paragraph 7 of Article 25 of this Law to a commercial secret.

Appeal of orders of the antimonopoly authority on approval of tariffs (maximum level, temporary compensating) and tariff estimates

If additional information is required during the examination of the application, the authorized body has the right to request it from the natural monopoly entity in writing with a deadline, but not less than five working days. 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 on its approval. The tariff shall enter into force no earlier than the first day of the second month following the month of tariff approval, with the exception of cases provided for by this Law. The natural monopoly entity is obliged to inform the consumer about the approval of the tariff no later than thirty calendar days before its entry into force. If the natural monopoly entity does not inform the consumer about the introduction of the tariff within the time limits established by this Law, the specified tariff will not be introduced from the date specified in the decision of the authorized body. The approved tariff is introduced on the first day of the third month following the month of tariff approval. By the decision of the Council of Economic and Social Council of the East Kazakhstan region dated October 12, 2018, left unchanged by the appeals board, the application of E LLP for recognition of illegal inaction, for cancellation of the Department's order No. 51-OD dated April 5, 2018, was denied. In the case, it was established that the LLP was included in the local section of the State Register of Natural Monopoly Entities in the East Kazakhstan region for regulated services, transmission and distribution of electric energy, by order dated August 9, 2006. By order of the Department dated October 30, 2015, the maximum level of tariffs and tariff estimates for electric energy transmission and distribution services for the long-term period from January 1, 2016 to December 31, 2020 was approved for LLP. On February 28, 2018, on the basis of the act on the appointment of an inspection, the Department of Energy Supervision conducted a random inspection of the LLP, which is an energy transmission organization. According to the results of the inspection, violations of the requirements of the Rules of Technical Operation of electric power plants and networks were revealed, which consisted in the absence of a recording device for recording operational conversations and orders of dispatchers at all levels of dispatching control, as well as the lack of guaranteed power supply for dispatching and technological control facilities. Based on information from the Department of Energy Supervision, the Department's order dated April 5, 2018 amended the Department's order dated October 30, 2015 on approval of the maximum level of tariffs and tariff estimates for electric energy transmission and distribution services in the direction of tariff reduction, as well as approved new tariff estimates. By the specified order, the tariff was reduced by 23.8%, and costs in the amount of 9,623,810 tenge were excluded. The violations identified by the Energy Supervision Department in the LLP were eliminated, which is confirmed by the act of June 1, 2018. In this regard, the LLP, applying to the court for recognition as illegal and cancellation of the order dated April 5, 2018 on the revision of the tariff, indicated that the elimination of deficiencies is the basis for its termination. The courts refused to satisfy the application, as there were no legal grounds for revoking the disputed order, which was issued by the defendant due to the requirements of the current legislation in the field of natural monopolies. The Law "On Natural Monopolies" does not provide for a revision of tariffs after the elimination of violations that were the basis for their reduction.

The elimination of violations is not a reason to cancel the contested order, since the LLP's activities had to comply with the requirements of paragraph 65 of Article 13-1 of the Law "On Electric Power Industry" (including the requirement of compliance and availability of equipment ensuring the proper functioning of all levels of dispatch control) before January 1, 2018. The absence of a reasoned response to the refusal to satisfy the application for setting the tariff limit in accordance with article 14-1 of the Law is the basis for recognizing the actions of the authorized body as illegal. Thus, MAEK LLP applied to the SME of the Mangystau region with a statement, indicating that it is a natural monopoly entity and is included in the register of monopolists for the production and supply of thermal energy for individuals and legal entities of Aktau city. On March 3, 2017, in accordance with Article 13 of the Rules for Approving the Maximum Level of Tariffs (Prices, Fee Rates) and Tariff Estimates for Regulated Services (Goods, Works) of Natural Monopoly Entities (hereinafter referred to as the Rules), approved by Order No. 213–OD of the Chairman of the Agency of the Republic of Kazakhstan for Regulation of Natural Monopolies dated July 17, 2013, the Applicant submitted The respondent has received an application for a review of the tariff level as an emergency regulatory measure (hereinafter referred to as the CRM), as well as tariff estimates for thermal energy production services, effective from April 1, 2017. The reason for the LLP's application for another tariff increase as a DRM for the production of drinking, technical and hot water was an increase in the cost of a strategic commodity - natural gas, as well as the need to protect the applicant's property interests due to the failure to obtain the required level of income and regular unprofitable activities for the production of drinking, technical and hot water. According to the application, the LLP's costs for the production of thermal energy amounted to KZT 15,759,944,000. However, according to the results of consideration of the specified application, by the order of the Department dated March 24, 2017, the costs in the tariff estimate for regulated thermal energy production services were accepted in the amount of 11,457,140 tenge, which amounted to a reduction in costs in the tariff estimate of 27%. LLP believes that the defendant unreasonably adjusted the tariff estimates for thermal energy production services in line 1.4. (fuel) by reducing the size of this item from 10,913,074,000 tenge to 8,302,009,000 tenge and in line 1.5. Energy (energy resources for technological purposes)" from 2,285,259,000 tenge to 593,520,000 tenge. Thus, the defendant, in violation of the requirements of the Law, underestimated the declared costs of the marginal tariff level as a CPM for the production of thermal energy. It is established that the LLP is a natural monopoly entity and is included in the State Register of Monopolists for the production and supply of thermal energy for individuals and legal entities of Aktau city. Based on subparagraph 7) of Article 6 of the Law "On Gas and Gas Supply", the maximum prices for wholesale sales of commercial gas in the domestic market of the Republic of Kazakhstan for the period from July 1, 2016 to June 30, 2017 were approved for MAEK LLP. On March 3, 2017, in accordance with Article 13 of the Rules, the applicant submitted to the respondent an application for a review of the tariff level as an emergency regulatory measure (hereinafter referred to as the CRM), as well as tariff estimates for thermal energy production services, effective from April 1, 2017, and the applicant submitted the necessary calculations. According to the application, the LLP's costs for the production of thermal energy amounted to KZT 15,759,944,000. However, by order of the Department dated March 24, 2017, the costs in the tariff estimate for regulated thermal energy production services were accepted in the amount of 11,457,140 tenge. According to paragraph 1 of Article 15-1 of the Law, tariffs (prices, rates of fees) or their maximum levels for regulated services (goods, works) of a natural monopoly entity, approved by the authorized body, taking into account the quality and reliability of the services provided (goods, works produced) must not be lower than the cost of the costs necessary for the provision of regulated services (goods, works), and take into account the possibility of making a profit that ensures the effective functioning of the natural monopoly entity.

Appeal of orders of the antimonopoly authority on approval of tariffs (maximum level, temporary compensating) and tariff estimates

By virtue of subparagraph 2) of paragraph 1 of Article 14-1 of the Law, the authorized body is obliged to justify in writing or in the form of an electronic document, depending on the application form, the refusal to accept for consideration the application of a natural monopoly entity for approval or modification of tariffs (prices, rates of fees) or their maximum levels. The defendant's action to refuse to fully satisfy the LLP's application for approval of tariff estimates was declared illegal by the courts, as they were not motivated. By the resolution of the Board for Civil Cases of the Mangystau Regional Court dated October 20, 2017, the decision of the Council of Ministers of the Mangystau region dated July 21, 2017 on the satisfaction of the LLP's application in this case was left unchanged. According to article 19 of the Law, in case of violation of the Law, the authorized body is obliged to take measures to compensate for the damage and (or) losses caused directly or by temporarily reducing tariffs (prices, rates of fees). The authorized body establishes a temporary compensating tariff based on the materials of its inspections of the natural monopoly entity, based on the results of an analysis of the execution of the tariff estimate by the natural monopoly entity and (or) an analysis of the information of the natural monopoly entity on the execution of the investment program (project), taking into account the refinancing rate of the National Bank of the Republic of Kazakhstan on the date of the decision. The introduction of a temporary compensating tariff is carried out from the first day of the second month following the month of verification, analysis of the execution of the tariff estimate by the natural monopoly entity and (or) analysis of the information of the natural monopoly entity on the execution of the investment program (project). Thus, "A" LLP appealed to the court with a demand to declare illegal and cancel the order of the Astana City Department dated June 27, 2018 on the approval of the temporary compensating tariff for the service of providing access roads for rolling stock in the absence of a competitive access road. By the decision of the Council of Economic and Social Council of Astana, the application of the LLP was refused. It was established that the Department, having reviewed the LLP's report dated April 28, 2018 on its performance of the approved tariff estimate for 2017, submitted by virtue of paragraphs 7-5, 11 of Article 7 of the Law, compiled an analysis and conclusion dated May 19, 2018 on the LLP's improper performance of obligations under the approved program, failure to comply with certain provisions. In this regard, the Department issued an order, disputed by the applicant, approving temporary compensating tariffs for regulated services – 3,395.74 tenge per 1 wagon/km (excluding VAT), with a validity period from August 1, 2018 to July 31, 2019, and instructed the LLP to inform consumers about the approval of temporary compensating tariffs.

The court, rejecting the application, proceeded from the fact that during the reporting period, the LLP did not fulfill the cost items of the tariff estimate by more than 5% of the salary amount approved by the Department for production personnel (10,290 thousand tenge were approved, 7,865 thousand tenge were fulfilled, and 2,4250 thousand tenge (23.57%), social tax (1,019,0 thousand tenge was approved, 807 thousand tenge was executed, a decrease of 212 thousand tenge (20.8%), depreciation of fixed assets and non-tangible assets (3,102,2 thousand tenge was approved in the tariff meta, actually 4,460,0 thousand tenge). tenge, an increase of 1,357.8 thousand tenge (43.77%), the bank's services (approved - 104.7 thousand tenge, actually - 44.0 thousand tenge, decrease-60.7 thousand tenge (57.98%). The court's conclusions comply with the norms of substantive law, since according to subparagraph 1) of paragraph 1 of Article 14-1 of the Law, the authorized body is obliged to make a decision on approving a temporary compensating tariff to compensate consumers for losses caused by a natural monopoly entity in cases of non-fulfillment of cost items of the tariff estimate by more than five percent of the amounts approved by the authorized body, except in cases of savings costs associated with the use of more efficient methods and technologies, and measures to reduce regulatory technical losses, reduction of the volume of regulated services provided for reasons beyond the control of the natural monopoly entity, based on the results of competitive (tender) procedures. Another example, JSC "A" appealed to the court with a demand to declare illegal and cancel the order of the Astana City Department dated August 3, 2018 on the approval of a temporary compensating tariff for a thermal energy production service. By the decision of the Council of Economic and Social Council of Astana city dated October 2, 2018, left unchanged by the court of appeal, the application of the JSC was refused. The court found that prior to the issuance of the contested order, the tariff applied by JSC was established by the Department's order dated November 21, 2017 on approval of tariff limits and tariff estimates for 2015-2019. By a joint order of the Department dated March 12, 2013, the Ministry of Industry and New Technologies dated April 10, 2013, and the Ministry of Regional Development dated June 27, 2013 approving the investment program for the production of thermal energy of JSC for 2014-2016, an investment program was approved for the development of design estimates and the implementation of an "Automated system for commercial accounting of thermal Energy" for a total amount of 286 million tenge.

By order of the Department dated November 3, 2016, this program was adjusted with an increase in the amount to 415 million tenge. On April 14, 2015 and April 12, 2016, reports on the implementation of the investment program were submitted to the Department. According to the results of the inspection conducted by the Astana city Prosecutor's Office, it was revealed that the JSC did not purchase the equipment specified in the investment program and therefore its reports do not correspond to reality. In this regard, based on the results of consideration of the Prosecutor's Office's submission dated July 19, 2018, the Department, by virtue of the powers provided for in article 14-1 of the Law, issued an order, disputed by the applicant, approving temporary compensatory tariffs for regulated services. In refusing to satisfy the claims of the Joint-Stock company, the court took into account that, in violation of subparagraph 8-1) of paragraph 1 of Article 5 of the Law, they had misused funds provided for in investment programs approved in accordance with the established procedure, therefore, the Department, by virtue of paragraph 5 of subparagraph 1) of paragraph 1 of Article 14-1 of the Law, reasonably applied a temporary compensatory tariff against him to compensate for the losses they caused to consumers. LLP "P" appealed to the court with a statement to the Department of Pavlodar region on the recognition of the illegal order and the compulsion to eliminate violations. The statement is motivated by the fact that on February 28, 2017, LLP applied to the Department in accordance with paragraph 15 of the Rules for Approving the maximum level of tariffs (prices, fee rates) and tariff estimates for regulated services (goods, works) of natural monopolies, approved by the order of the Chairman of the Agency of the Republic of Kazakhstan for Regulation of Natural Monopolies dated June 17, 2013.

Appeal of orders of the antimonopoly authority on approval of tariffs (maximum level, temporary compensating) and tariff estimates

The reason for such an appeal was that the applicant carries out its activities for the sale of thermal energy using differentiated tariffs. As a result of the installation of metering devices, the number of consumers without metering devices has decreased and the number of consumers with metering devices has increased, and therefore the planned volumes for 2017 and 2018 have changed compared to the volumes provided for in the tariff estimates. Since the application of differentiated tariffs entails losses for him, the applicant, in accordance with paragraph 10 of the Methodology for calculating tariffs or their maximum levels for regulated services of natural monopoly entities for the supply of thermal energy, approved by Order of the Acting Chairman of the Agency of the Republic of Kazakhstan for Regulation of Natural Monopolies dated September 17, 2013 No. 284-OD, in the application for approval of differentiated The tariff plan included the amount of lost income. However, the Department, having approved the differentiated tariffs, illegally, in the opinion of the Partnership, excluded the amounts of lost income from them. By the decision of the Council of Ministers of the Pavlodar region dated May 10, 2017, the LLP's application was satisfied, the Department's order dated March 18, 2017 was declared illegal; the Department is charged with the obligation to eliminate the violation of the applicant's rights, freedoms and legitimate interests within one month, from the date of entry into force of the court decision. In satisfying the LLP's application, the court of first instance proceeded from the requirements of paragraph 15 of the Rules, from the content of which it follows that when the volume of services provided changes due to a decrease in the number of consumers without metering devices, the natural monopoly entity submits an application for approval of differentiated tariffs depending on the availability or absence of metering devices for regulated thermal energy supply services, in particular including without changing the tariff limit approved in accordance with paragraph 14 of these Rules. The LLP included in the application for consideration the amount of lost income in accordance with paragraph 10 of the Methodology, from the content of which it follows that in case of loss of income or unjustified income of the entity due to the use by consumers of differentiated tariffs for heat supply services, depending on the presence or absence of metering devices, the amount of lost income or the amount of unjustified income it is taken into account at the next revision of tariffs due to the corresponding tariff change, determined in accordance with paragraph 4 of the Methodology, including during the period of maximum tariff levels. Paragraph 10 of the Methodology does not specify which of the tariffs can be reviewed to account for lost income, which indicates the possibility of including such income by a natural monopoly entity when reviewing any of the existing tariffs.

Since subparagraph 3) of paragraph 4 of the Methodology defines the marginal tariff, and paragraph 10 allows taking into account the amount of lost income in the tariff determined by paragraph 4, it follows that the applicant was entitled to include the amount of lost income in the marginal tariff when reviewing the tariff. Given the conflict between the Rules and the Methodology, the court considered that the Methodology should be applied, since changes were made to it later. By a decision of the judicial board for Civil Cases of the Pavlodar Regional Court dated August 23, 2017, the court's decision in this case was overturned and a new decision was issued to dismiss the application. The Board concluded that the Department's order challenged by the applicant was legitimate, since it follows from the content of paragraphs 15-16, 25 of the Rules that the approval of differentiated tariffs provided for in them, depending on the availability or absence of devices, is possible only without changing the tariff limit. The approval of these tariffs in the form and amounts proposed by the applicant would entail exceeding the marginal tariff. The reason for the annulment of the judicial act was a misinterpretation by the court of first instance of the substantive law. The position of the court of appeal appears to be in accordance with the law. According to current legislation, the approval of differentiated tariffs depending on the availability or absence of devices is possible only without changing the tariff limit. According to the rules of paragraph 4 of Article 15 of the Law, a special procedure for regulating the activities of natural monopoly entities that attract loans from international financial organizations and are included in the list of natural monopoly entities approved by the authorized body is applied to the activities of natural monopoly entities that attract loans from international financial organizations. By the decision of the Judicial Board for Civil Cases of the Supreme Court of the Republic of Kazakhstan dated April 30, 2019, the decision of the Judicial Board for Civil Cases of the Aktobe Regional Court dated February 15, 2019 was canceled, while the decision of the Council of Ministers of the Aktobe region dated December 22, 2018 remained in force at the request of the prosecutor of the Aktobe region to the Department of the Aktobe region on recognition as illegal and cancellation of the order on approval of the maximum level of the tariff for thermal energy. It was established that the disputed Order approved the maximum tariff level and the tariff estimate for the services of JSC "A" for the production of thermal energy for 2017-2022. JSC is included in the local section of the State Register of Natural Monopoly Entities in the Aktobe region by type of activity - thermal energy production services. By Order No. 348 of the Minister of National Economy of the Republic of Kazakhstan dated September 28, 2017, JSC was included in the list of natural monopolies attracting loans from international financial organizations.

The special procedure for attracting loans from international financial organizations by natural monopoly entities is regulated by the approved Order of the Ministry of National Economy of the Republic of Kazakhstan dated November 24, 2015 No. 710 (hereinafter referred to as Special Procedure No. 710). It follows from the provisions of paragraphs 4, 54 of Special Order No. 710 that in order to apply this procedure, it is necessary to have a loan issued by international financial organizations on the basis of a loan agreement or in the form of promissory notes, bonds, other securities and other monetary obligations of international financial organizations. In addition, according to the rules of subparagraph 5 of paragraph 10 of Special Order No. 710, the formation of costs applied when approving tariffs (prices, rates of fees) or their maximum levels for regulated services (goods, works) of natural monopolies was approved by Order of the Chairman of the Agency of the Republic of Kazakhstan for Regulation of Natural Monopolies and Protection of Competition dated April 25, 2013 No. 130-OD (hereinafter referred to as Special Order No. 130); expenses for the payment of remuneration for borrowed funds for the implementation of an investment project of a natural monopoly entity are included in the expenses of the period when the natural monopoly entity provides concluded agreements on the attraction of borrowed funds. During the consideration of the case, the local courts reliably established that the Department, despite the absence of concluded loan agreements, approved the tariff estimate of the Joint-stock company with remuneration costs in the amount of 3.5 billion tenge. These circumstances indicate the inclusion of non-produced costs in the tariff, as well as the amount of remuneration for non-existent loans. By the decision of the Council of Ministers of the Aktobe region, the application was satisfied and the order was declared illegal and canceled. The Court of appeal, changing the decision of the court of first instance and declaring illegal the order regarding the approval of remuneration in the tariff estimate, proceeded from the fact that the Department had included non-produced additional costs in the tariff, as well as remuneration payments on a non-existent loan. In the rest of the expenses for the production of goods and the provision of services for the production of thermal energy, the applicant did not provide arguments about the illegality of the appealed Order. These conclusions of the court are based on a misinterpretation of the substantive law. According to paragraphs 5 and 6 of Special Order No. 130, tariffs are formed on the basis of separate accounting of income, costs and assets involved for each type of regulated services and for other activities in general. The regulation of the costs included in the tariff and its marginal level by the natural monopoly entity is carried out by limiting the types of expenses included in the cost part of the tariff. Subsequently, the weighted average actual costs should be taken into account when calculating the tariff limit according to Special Procedure No. 710. Accordingly, the recognition of the tariff estimate as illegal in any part of the costs entails the cancellation of the entire tariff estimate and the maximum tariff level. In such circumstances, the judicial board concluded that the cancellation by the court of appeal of the contested order only in terms of approval in the tariff cost estimate in the form of remuneration without canceling the entire tariff estimate and the maximum tariff level was unlawful. The conclusions of the court of appeal that the Department had no grounds for refusing to approve the application are also untenable, since the JSC submitted a draft loan agreement with the Eurasian Development Bank with credit conditions, as well as the order of the Minister of National Economy of the Republic of Kazakhstan dated December 30, 2014 No. 194 approving the investment program of the JSC indicating the sources of financing.

Thus, paragraph 25 of Special Order No. 710 stipulates that the source of financing for the activities of the investment program is borrowed funds, which are taken into account when forming the maximum tariff level (prices, collection rates). In order to approve the investment program of natural monopoly entities that attract loans from international financial organizations, it is necessary to have a loan received from an international financial organization. Therefore, a document confirming this fact is attached to the Company's application. By virtue of Part 3 of Article 68 of the CPC, the circumstances of the case, which by law must be confirmed by certain evidence, cannot be confirmed by any other evidence. Letter No. 955 from the Eurasian Development Bank dated September 29, 2017 is not reliable evidence confirming the fact of financing, as it indicates only the Bank's willingness to consider the possibility of financing, provided that all necessary documentation on the project is provided. Thus, the existence of the Joint-stock company's investment program approved by the authorized body does not confirm the legality of the conclusions of the court of appeal on the absence of violations during the acceptance and approval of the joint-stock company's application. JSC "K" applied to the Department for the West Kazakhstan Region for recognition of the order dated July 14, 2017 as illegal, arguing that, in accordance with the contested order, temporary compensatory tariffs for regulated services for the transportation of commercial gas through distribution pipelines of the West Kazakhstan Production Branch of the Company (hereinafter - ZKPF) were approved, with which he cannot agree to, because the validity period of this tariff has been incorrectly determined from August 1, as well as the validity period of the tariff from August 1, 2017 to December 31, 2018.

Appeal of orders of the antimonopoly authority on approval of tariffs (maximum level, temporary compensating) and tariff estimates

In addition, the Department, not being an authorized body, approved this calculation by its order. In accordance with subparagraph 11) of Article 7 of the Law, a natural monopoly entity is required to submit an annual report on the implementation of tariff estimates no later than May 1 of the year following the reporting period. Pursuant to this provision, the CCPF submitted a report on the implementation of the tariff estimates for 2016 by letter dated April 28, 2017. Based on the results of the analysis of the execution of the tariff estimates for 2016, the Department's order dated July 14, 2017 approved temporary compensating tariffs for the regulated service for the transportation of commercial gas through the distribution pipelines of ZKPF JSC. In accordance with paragraph 2 of Article 19 of the Law, the authorized body establishes a temporary compensating tariff based on the materials of its inspections of the natural monopoly entity. The introduction of a temporary compensating tariff is carried out from the first day of the second month following the month of verification, analysis of the execution of the tariff estimate by the natural monopoly entity and (or) analysis of the information of the natural monopoly entity on the execution of the investment program (project). At the same time, the regulatory legal acts do not regulate the time period for analyzing the performance of a tariff estimate by a natural monopoly entity. In this case, the Department was guided by the provisions of the Law "On Administrative Procedures". The analysis of the implementation of the ZKPF tariff estimates was completed on June 26, 2017, and the contractor who conducted the analysis prepared a conclusion on the results of the analysis. After that, by order of the Department dated July 14, 2017, temporary compensating tariffs were approved with entry into force on August 1, 2017, that is, from the first day of the second month following the month of the analysis of the implementation of the tariff estimates by the natural monopoly entity. The Appellate Judicial Board found these actions of the Department to comply with the norms of current legislation. These conclusions of the court of appeal correspond to the literal interpretation of the rule of law, since the authorized body completed the analysis of the tariff estimates in June 2017, therefore, the 1st day of the second month will be August 1, 2017. illegal, arguing that, in accordance with the contested order, temporary compensating tariffs have been approved for a regulated service for transporting commercial gas through distribution pipelines of the West Kazakhstan Production Branch of the Company (hereinafter referred to as the ZKPF), with which it cannot agree, since the validity period of this tariff has been incorrectly determined from August 1, as well as the validity period has been incorrectly determined. rates from August 1, 2017 to December 31, 2018. In addition, the Department, not being an authorized body, approved this calculation by its order. In accordance with subparagraph 11) of Article 7 of the Law, a natural monopoly entity is required to submit an annual report on the implementation of tariff estimates no later than May 1 of the year following the reporting period. Pursuant to this provision, the CCPF submitted a report on the implementation of the tariff estimates for 2016 by letter dated April 28, 2017. Based on the results of the analysis of the execution of the tariff estimates for 2016, the Department's order dated July 14, 2017 approved temporary compensating tariffs for the regulated service for the transportation of commercial gas through the distribution pipelines of ZKPF JSC. In accordance with paragraph 2 of Article 19 of the Law, the authorized body establishes a temporary compensating tariff based on the materials of its inspections of the natural monopoly entity. The introduction of a temporary compensating tariff is carried out from the first day of the second month following the month of verification, analysis of the execution of the tariff estimate by the natural monopoly entity and (or) analysis of the information of the natural monopoly entity on the execution of the investment program (project). At the same time, the regulatory legal acts do not regulate the time period for analyzing the performance of a tariff estimate by a natural monopoly entity. In this case, the Department was guided by the provisions of the Law "On Administrative Procedures".

The analysis of the implementation of the ZKPF tariff estimates was completed on June 26, 2017, and the contractor who conducted the analysis prepared a conclusion on the results of the analysis. After that, by order of the Department dated July 14, 2017, temporary compensating tariffs were approved with entry into force on August 1, 2017, that is, from the first day of the second month following the month of the analysis of the implementation of the tariff estimates by the natural monopoly entity. The Appellate Judicial Board found these actions of the Department to comply with the norms of current legislation. These conclusions of the court of appeal correspond to the literal interpretation of the rule of law, since the authorized body completed the analysis of the tariff estimates in June 2017, therefore, the 1st day of the second month will be August 1, 2017. The authorized body conducts an expert examination of draft tariffs (prices, rates of fees) or their maximum levels and tariff estimates for regulated services (goods, works) of natural monopoly entities. Independent experts, government agencies, consumers and their public associations are involved in the examination. The legislation provides for a mandatory procedure for approving tariff limits and tariff estimates, which the Department has not complied with, which is the basis for recognizing its actions as illegal. In violation of the above-mentioned norms of the law, the Department decided to approve the maximum level of tariffs and tariff estimates without the involvement of independent experts, as well as without a comparative analysis of the performance indicators of entities engaged in a similar type of activity. Violation of the procedure for conducting an expert examination of the draft tariff ceiling and estimates led JSC to significant savings on certain cost items in 2016-2017 and, accordingly, to an increase in the electricity tariff. As a result of violations by the Department of the procedure for conducting an expert examination of draft marginal tariffs, which resulted in conducting an expert examination without the participation of independent experts, without conducting a comparative analysis of the performance of entities engaged in a similar type of activity, without the participation of independent experts in public hearings, the rights and legitimate interests of an unlimited number of consumers are not ensured. 

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