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Unified Energy System

March 24, 2003

RAO UES faces growing consumer indebtedness

24 March 2003. Indebtedness of heat and electricity consumers to the regional energos, i.e. subsidiaries and dependent companies (SDCs) of the Holding Company of RAO "UES of Russia", increased 17.6% in January/February 2003 to RUB89,166,842 thousand as of 1 March, according to reported data.

Throughout the Holding Company, the consumers settled only 92% of their bills for electricity and heat consumed in the first two months of 2003. Despite the insistent demand from energy companies to ensure timely payment for electricity and heat, 55 regional energos have failed to collect 100% of the payments owed for the power sold. The biggest shortfalls in payments from power consumers in February were in the following SDCs: AO "Kamchatskenergo" (where consumers paid only 55% of the total value of electricity used), AO "Sverdlovenergo" (68%), AO "Kurganenergo" (70%), AO "Ingushenergo" (71%), AO "Ulyanovskenergo" (74%), AO "Karachaevo-Cherkesskenergo" (77%), AO "Amurenergo", AO "Yantarenergo", AO "Smolenskenergo", AO "Khabarovskenergo (81%).

As of the end of February, energy payments by some consumer groups broke down as follows: forest enterprises 82%, woodworking and pulp and paper enterprises 85%, agribusinesses and farms 87%, housing and public utilities 89%, building companies 86%, wholesale consumers-resellers 85%, and residential consumers 86%. Enterprises financed from the Federal Budget paid 73% of the amount owed for the energy supplied to them, those financed by regional authorities paid 84%, while those financed by municipalities paid 79%.

According to reports in February, payment discipline of consumers in 24 regions of Russia deteriorated compared to January. For instance, the energy sales at AO "Kamchatskenergo" fell to 55% in February from 89% in January, at AO "Vladimirenergo" to 83% from 98% , at AO "Sverdlovenergo" to 68% from 81%, at AO "Tverenergo" to 87% from 100% , and at AO "Kubanenergo" to 87% from 98%.

In 25 regions, energy consumers are 3 to 14 months in arrears in payments to the regional energos, with indebtedness exceeding the average monthly energy consumption.

The housing and public utilities account for 42%, industrial enterprises for 21%, farms and agribusinesses for 9%, households for 6% of the total amount owed for electricity and heat.

Poor payment discipline among energy users puts SDCs of RAO "UES of Russia" in an extremely difficult situation. Because of shortage of funds, energy companies have to reduce the volume of repairs and adjust their programs for modernizing their worn equipment; they are unable to timely pay suppliers for the fuel and energy purchased from FOREM. Because of consumer delinquency in Chelyabinsk Region, AO "Chelyabenergo" failed to fully and timely pay for the gas and electricity purchased from FOREM suppliers, which, in their turn, decided to limit the amount of electricity sold to AO "Chelyabenergo" by 150 MW. At the same time, OOO "Chelyabinskregiongas" reduced the gas supplies to the company's power plants by 50%.

Other energy companies are experiencing similar problems. In this connection, regional energos have to limit the heat and electricity supplies to habitual non-payers. For instance, AO "Kostromaenergo" had insufficient funds to purchase fuel and had to reduce heat supplies to the municipal housing and public utilities. In February, the entities financed or subsidized by the Kostroma city administration settled only 63% of their electricity bills (as of 1 March, the arrears were RUB71,413 thousand) and 29% of their heat bills (as of 1 March, the arrears were RUB144,198 thousand). As a result, AO "Kostromaenergo" had to rescind the heat supply contracts with Kostroma's housing and public utilities effective 1 April 2003 and to stop the heat supplies, which actually means that the heating season is over.

Ensuring reliable energy supplies to disciplined consumers is viewed as a priority by energy companies. At the same time, they see no way to influence those who do not consider it necessary to fully and timely settle their electricity and heat bills other than limit heat and electricity supplies to such consumers in full accordance with the laws in force. All such limits will be imposed on supplies in a completely open and public manner. RAO "UES of RUSSIA" supports the efforts taken by its SDCs, which strictly fulfil the requirements of the Russian Government not to permit energy to be used without payment. Besides, RAO "UES of RUSSIA" plans to regularly publish lists of companies that have huge arrears in payments for energy, and announcements of scheduled cuts in power supplies.



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