Today, April 20, 2010, IDGC Holding Director General Nikolay Shvets participated in a meeting held at the Office of the Plenipotentiary of the President of the Russian Federation in the North Caucasian Federal District (NCFD), Aleksandr Khloponin. The meeting addressed issues relating to the implementation of Federal Law No. 261-FZ of November 23, 2009, “On Energy Conservation, Enhancement of Energy Efficiency, and Introduction of Amendments into Certain Legislative Acts of the Russian Federation,” and development of electric facilities in NCFD.

The meeting participants included representatives of the Russian Ministry for Economic Development of the Russian Federation, Ministry for Energy, Ministry for Regional Development, Federal Tariff Service, heads of the constituent entities of the Russian Federation that are part of the North Caucasian Federal District, and senior executives of the largest electricity companies operating in NCFD.

Addressing the meeting, IDGC Holding Director General Nikolay Shvets focused on the main challenge faced by the electric distribution grid sector—a high level of equipment depreciation reaching 69%.

In NCFD, more than 80% of electric networks are low voltage. These are the main networks used to supply electricity to households, budget-funded and budget-dependant entities. Losses in the NCFD IDGC grids reach about 17%, which is about twice as high as average levels across the nation.

“High levels of equipment depreciation and electricity losses adversely affect reliability of the grid infrastructure in the North Caucasian Federal District. To normalize the situation with electricity supply for the North Caucasian Republics, it is necessary to make substantial investments,” said Nikolay Shvets. The Director General of IDGC Holding also addressed such vital issue as insufficient electricity billing metering. At present, more than half of households in the NCFD region have no meters. This results in increasing transmission and economic losses for IDGC of the North Caucasus, an operating subsidiary of IDGC Holding.

Developed on the initiative of IDGC Holding, the Integrated Program for Reducing Above-Standard Electricity Losses in the NCFD Distribution Grids, is currently under interdepartmental consideration, Nikolay Shvets said. The required financing is about 5 billion rubles. Specifically, this purpose-oriented program is expected to make it possible to decrease losses by 10% and reduce them to standard levels within three years by installing modern meters.

IDGC Holding Management Company prepared and submitted to the federal authorities another equally vital purpose-oriented program, which is aimed at restoring the electricity sector in the Chechen Republic and rehabilitating dilapidated and dismantled electric grid facilities. The implementation of this program requires financing reaching about 4.4 billion rubles within three years. It is expected that the program implementation will result in a considerable enhancement in reliability and quality of electricity supply for customers in the region.

Investment in the renovation of electric grid equipment in NCFD, according to Nikolay Shvets, is restrained due to not always reasonable tariff and balance-related decisions by the public executive authorities of the constituent entities of the Federal District. “Imbalanced tariff policy is most typical of the Republic of Daghestan, which is the main reason for the critical situation in the Republic’s electricity sector,” said the Director General of IDGC Holding.

According to Nikolay Shvets, “at present, the utilities managed by IDGC of the North Caucasus have accumulated accounts payable preventing from financing the development of electric grid sector.” As of April 1, 2010, accounts payable to guaranteeing suppliers in NCFD exceeded 12.5 billion rubles. The accounts payable to the guaranteeing suppliers managed by IDGC of the North Caucasus are due to the failure by customers to pay for electricity. In the same period, accounts receivable reached 11.6 billion rubles in six NCFD regions, including 3.9 billion rubles falling on wholesale reseller in Daghestan and Chechnya.

“Owing to the adoption of special wholesale price regulation for guaranteeing suppliers in NCFD, the situation has somewhat improved for the utilities managed by IDGC of the North Caucasus,” Nikolay Shvets said. “To maintain normal operation of the electric grid infrastructure, it is advisable to retain until 2015 special conditions of functioning in the wholesale market for guaranteeing suppliers in the North Caucasian Federal District.”

IDGC Holding Director General Nikolay Shvets completed his trip to Northern Caucasus with a visit to IDGC of the North Caucasus, where he held a meeting with the company management.