On February 26 and March 5, the Moscow Regional Energy Commission (REC) issued regulations no. 12 and 15 on categorizing Moskvich Cultural Center (MCC) and Investstroyindustria (ISI) as budgetary consumers. As a result these organizations received tariff reliefs, as tariffs for budgetary consumers are lower than ones for private entities. The REC's decision is a gross violation of federal legislation.

AO MOSENERGO turned to the Moscow Arbitration Court asking to reverse REC's decisions. AO MOSENERGO claimed that these decisions contradicted the federal law On the State Regulation of Electricity and Heat Tariffs in the Russian Federation, as well as the law on Competition and Restriction on Monopolistic Activities in the Commodities Markets, and a number of government decisions.

In accordance with the Russian legislation, MCC and ICI cannot be put to the category of "budgetary organizations" because they are not financed from the budget. The Moscow REC has not stipulated the financing sources and mechanism either. Hence, AO MOSENERGO had to assume all expenditures in order to cover the financing gap, which is also a gross violation of the current legislation.

In addition, the Moscow REC's decisions had a number of procedural drawbacks. Specifically, regulations no.12 and 15 were not approved by the Anti-Monopoly Ministry, which violates the Government Decree No. 226 "Electricity and Heat Pricing in the Russian Federation" (April 2, 2002). In fact, it was solely REC's decision. AO MOSENERGO and other interested parties did not take part in the preparation of these decisions neither did they undergo any independent expert evaluation.

By taking these decisions, REC has violated Russian legislation and contradicted the goals of governmental regulations. These decisions discriminate against AO MOSENERGO and its other customers.

The Moscow Arbitration Court ruled in favor of AO MOSENERGO and reversed REC's decisions (regulation no. 12 on MCC was reversed on July 7, 2003, and regulation no. 15 on ISI was invalidated yesterday).