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07.11.2007 17.44

Russian Electricity Reform is on its Way!

Can the investors (Russian or European) be accused of profiting law and regulated electricity tariffs?

The Centre proposes a new study in order to provide Russian and European investors in Russia a legal ground to defend their interests against unfounded accusations of benefiting regulated tariffs.

The scope of this study addresses various misperceptions about the Russian electricity sector. These misperceptions are mentioned by the Council Regulation No 2229/2003 of 22 December 2003 concerning imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of silicon originating Russia has stated that: electricity prices in Russia are regulated and that the price charged by this electricity supplier was very low, even when compared to other suppliers of electricity generated by hydro-electric power stations in the analogue country Norway and also in Canada, it was decided to reject this claim and to confirm the provisional decision to use the electricity price charged by another electricity supplier in Russia. This price was found to be in line with the lowest price of representative electricity producers found in the Community.

Similar claims still exist and are based on outdated facts, as the wholesale market structure in Russia has gradually evolved towards a competitive cost-effective market. In turn, the electricity company RAO UES has been restructured and is in process of partial ownership unbundling. A legislative framework is put in place to ensure a gradual liberalization.

The EU is often worried about insufficient steps taken by Russia in its electricity reforms. In order to refute this claim, this study suggests a comparative analysis between the power markets of Russia and the EU. In fact, historically, the power sector was exempted from the competition policies in both Western and Eastern Europe. In many countries, such as France, Greece, Hungary, Portugal, Spain as well as all the new EU Members have longtime treated the electricity sector as the domain of an exclusive regime. Government ownership is not a sole and decisive factor, which characterizes the special regime accorded to the electricity sector. Exclusive rights or privileges could have been allocated also to a private commercial electricity supplier. At the same time, the state ownership is not considered as a barrier for the market liberalization. Full ownership unbundling is an exception rather than a rule in the competitive electricity markets.

With the changing governance of the electricity sector from vertically integrated structure to competition approach, both EU and Russian electricity sectors are in transition process. The transition process is generally characterized by a gap between policy objectives and their effective implementation. In majority of the EU Member States, the gap is very high: either states or companies delay the reforms. In Russia, in spite of the initial difficulties, the process became irreversible. We also point out reasons of the price increase in the EU within the European market itself. Russia, by contrast, has a competitive advantage due to domestic gas supplies.

You want to know more? Please check out the study

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Russian Electricity Reform is on its Way!

Can the investors (Russian or European) be accused of profiting law and regulated electricity tariffs?

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