The increase is caused by several factors. January gas payments have risen by 18 percent, lease of the Russian UES networks have gone up by 16 percent since the first of January, and costs of other materials have increased as well. Analysts forecast 3.1 percent growth of power consumption, while heat consumption will rise by 2.9 percent compared to figures in 2000. This in turn would lead to increased fuel consumption-this year MOSENERGO will consume 4 percent more fuel oil since purchases of natural gas are limited by quotas, though fuel oil is 3.5 times more expensive than gas.

Furthermore, the Moscow energy supplier jointly with the Moscow government has developed a Program for the MOSENERGO Power Sites Construction, Reconstruction and Development. The company plans to spend 4.2 billion rubles out of the forecast profit to implement thisProgram.

To account for future expenditures MOSENERGO plans to increase prices for its products on average by 25 percent. In 2001 this will enable the company to obtain a profit margin of 6 billion rubles. In 2000 the company's net profit was 3.8 billion rubles. Currently Muscovites get power for .35 - .5 rubles for kWh (electric and gas stove owners respectively), while residents of the Moscow region pay .28 - .40 rubles for kWh.

To compensate for the increased power rates MOSENERGO has developed a program for reducing the burden of payments for lower income families. This year the company will donate 103 million rubles in subsidies to families unable to pay full price for power and heating.

"We'd like to stress that we have to raise our rates because fuel prices continue to go up while we need to renovate our production capacities in order to prevent energy crises like the ones taking place in other regions. Our calculations for rate increase and profit are based exactly on MOSENERGO costs," said A.Rayev, head of MOSENERGO's Planning and Economics Department.