On February 13, 2003, the Board of the Moscow District Regional Energy Commission (MDREC) approved electricity and heat tariffs for AO MOSENERGO consumers in the Moscow region. In the tariff list MDREC has illegally introduced a new category of electricity consumers, so called "power suppliers of municipal entities.” MDREC has established a lower tariff for these consumers equaling 48 kopecks/kWt-h (against current 113 kopecks/kWt-h for "other consumers").

This decision violates AO MOSNERGO's legal economic interests, as well as discriminates against other AO MOSENERGO consumers that will have to carry the burden of cross-subsidies.

In May 2003, AO MOSENERGO went to the Moscow Region Arbitration Court asking for an overturn of the MDREC decision. In the filing AO MOSENERGO pointed out numerous violations, which accompanied the MDREC decision. For example, AO MOSENERGO showed that the MDREC has not specified a financing mechanism or sources for the new category of electricity consumers and has not received approval from the Anti-Monopoly Ministry.

MDREC has both illegally introduced lower tariffs and a new category of consumer. In accordance with Decree No. 226 of the Government of the Russian Federation (April 2, 2002), only the Federal Energy Commission (FEC) can introduce new categories of consumers. By its decision, the MDREC has exceeded its powers under the current legislation.

Through illegal tariffs and unlawful creation of a new consumer group, MDREC violated AO MOSENERGO's rights and damaged AO MOSENERGO's profitability.

Yesterday the Moscow Regional Arbitration Court weighed arguments from both parties and ruled that MDREC's decision was taken in violation of the law on State Regulation of Electricity and Heat Tariffs, the Law on Competition and Limitation of Monopolistic Activities in the Commodities Markets and Decree No. 226 of the Government of the Russian Federation (April 2, 2002). Finally, the Court ruled that MDREC's decision was illegal and that AO MOSENERGO should charge "power-suppliers of municipal entities" at the rate which is set for the category "other consumers."