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Russian Industry, Energy Minister Reports on Electricity Sector Reform

Posted on: Thursday, 8 December 2005, 09:00 CST

Excerpt from report by Russian news agency RIA Novosti

Moscow, 8 December: The reform of the Unified Energy System of Russia [national electricity grid] will be completed at the end of 2008, Viktor Khristenko, the head of the Russian Industry and Energy Ministry, said at a government meeting on Thursday [8 December].

"The general timescale for the completion of transformations at the Unified Energy System of Russia is 2008," he stressed.

Delivering a report on how the reform of the Russian electricity sector is proceeding, Khristenko noted that the key tasks of energy reform for 2006 are the consolidation of main assets in the federal network company and hydroelectric power stations in the unified hydro generating company, and the allocation from the Unified Energy System of Russia of three to five generating companies.

Among the main tasks he also named the gradual handover of functions from the Unified Energy System of Russia to the state and to infrastructure companies and preparations for the introduction in 2006 of regulated bilateral agreements on the wholesale electricity market.

Khristenko also stressed that in 2006, through additional emissions of shares, four to five generating companies can be brought to 5bn dollar investments.

According to the minister, it is essential to prepare and implement a programme for the development of the electricity sector for the development of energy capacities in the regions.

"The Industry and Energy Ministry has prepared a general plan for the deployment (of energy capacities) up to 2020," Khristenko said. The development of energy capacities in the regions is essential to cover for the energy shortage forecast for 2008-2010.

Summing up results for 2005 in the sphere of electricity reform, Khristenko noted that division in terms of types of activity of the energy joint-stock company had almost been completed; the formation of generating companies had been completed and work was continuing on monitoring risks arising during the reform.

The minister noted that the Industry and Energy Ministry had worked out a number of measures to lower risks during the reform. "One of the risks is the risk of lowering the energy system's current work. To resolve it, it is essential to change the rules of trade in energy capacities on the wholesale market and to introduce trade in systems services," Khristenko said.

In his words, draft resolutions to change the rules of trade in energy capacities and to introduce trade in systems services are in the stage of development.

Khristenko also noted that cross-subsidies in the electricity generating sector "make the sector unattractive". In his words, to resolve this problem it is proposed to introduce a social norm of electricity use. At the same time he noted that restraining prices for energy "is not possible without introducing a compensation mechanism for losses for consumer companies". [Passage omitted]

Source: BBC Monitoring Former Soviet Union

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