Tallinna Vesi Challenges Price Cuts in Court

11/10/2011 3:19 PM
Category: Economy

The latest move in the fierce legal battle between the capital's water utility, Tallinna Vesi, and the Competition Authority over pricing came on November 9 when the company opened a court case against the authority's mandated price cuts.

Tallinna Vesi is seeking to overturn an order, issued by the Competition Authority last month, demanding that it either submit a proposal by November 14 to cut its service prices or have all current prices unilaterally lowered by 29 percent.

When taking its challenge to the Tallinn Administrative Court, the company also filed a motion to block the order until the case is decided.

Tallinna Vesi's legal challenge comes as no surprise, as immediately after the regulator's demand was issued on October 10, the company had said that it would fight it in court.

Friction between the two sides began last November, when the Competition Authority first refused to approve Tallinna Vesi's proposed 3.5 percent price hike, saying that the company's application did not conform to the requirements of the Public Water Supply and Sewerage Act.

In May, it turned down the request again, citing differing opinions on what a reasonable profit for the monopoly water supplier would be. The company took the regulator to court over the refusal the following month.

Tallinna Vesi has long been criticized, including by the Chancellor of Justice, for its profit margins. The monopoly water supplier's profit margin rose from 42.8 percent last year to 64.4 percent this year. The Competition Authority has been questioning the legality of  the Tallinna Vesi's pricing policies, as well as the terms under which the company was privatized in 2001.

For its part, Tallinna Vesi has maintained that its policies have conformed to the terms of its privatization agreement, and that the authority's blocking the 3.5 percent rise constitute a breach of that contract.


Steve Roman


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