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Unified Energy System

November 24, 2003

Deputy Chairman of RAO UES Management Board Yakov Urinson holds regular meeting of Electricity Reform Roundtable

Moscow. 24 November 2003. Today, the Deputy Chairman of the Management Board of RAO "UES of Russia" Yakov Urinson held a regular meeting of the Electricity Reform Roundtable with members of the Russian scientific elite. The Roundtable was attended by Academician of the Russian Academy of Sciences (RAS) A.A. Makarov, Director of the Central Economics and Mathematics Institute (CEMI) of the RAS, Academician-Secretary of the RAS V.L. Makarov, Director General of the Scientific and Research Institute for Electricity Industry Economics V.I. Edelman, Deputy Director of the RAS Institute for Economic Forecasting A.S. Nekrasov, other scientists, and the Chairman of the Management Board of Non-Profit Partnership "Administrator of Trading System" D.V. Ponomaryov. The Roundtable participants reviewed the first results of the operation of the competitive segment of the wholesale electricity market, which began its work on 1 November this year.

The scientists noted that the two-segment (transitional) model of the wholesale electricity market is unique and has no equal in the world. Its mathematical model developed by the leading Russian specialists has proved to be correct: the competitive segment of the wholesale electricity market is developing as forecast. On the first day of trading, 1 November, the average price in the competitive segment was RUB264.20 per MWh, which is 4.8% lower than the electricity tariff used in the regulated segment of the Federal Wholesale Electricity Market (FOREM), RUB276.94 per MWh. By 21 November the price declined to RUB259.78 per MWh. Over the three weeks of operation, the volume of the wholesale market's competitive segment grew by more than 60%, from 12,870 MWh to 20,650 MWh.

Those present at the Roundtable agreed that the economic benefits from the launch of the competitive segment are evident. There has been an increase in the share of electricity supplied by the thermal power plants which have relatively low production costs, whereas the electricity supply by the "more expensive" generators has decreased.

The Roundtable participants stated that the transition to a fully liberalized electricity market scheduled for 2006 will require significant amendments to the current regulatory framework.

The next Roundtable meeting to review the results of the wholesale market's competitive segment is scheduled for late December.

* Pursuant to Resolution of the Government of the Russian Federation No. 643 of 24 October 2003 "On rules of the wholesale electricity market for the transition period", with effect from 1 November, a competitive segment of the wholesale electricity market began working in parallel with the regulated segment. The competitive segment provides for trading electricity on an hourly basis at free market prices. Each power company may sell up to 15% of its generating capacity in the competitive market, whereas each consumer may purchase up to 30% of its planned consumption on a competitive basis.





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