The Agreement was signed by St.-Petersburg Governor Valentina Matviyenko and Chairman of the Management Board of RAO "UES of Russia" Anatoly Chubais in the presence of the Minister of Industry and Energy of Russia Victor Khristenko.

Over the recent years, St.-Petersburg's has seen a dramatic increase in electricity consumption. In the winter of 2005-2006, the all-time record peak load of 1990 was exceeded by 10.3%. The energy system is operating on the verge of its physical capacity. The system's generating and power grid equipment is characterized by a high degree of depreciation.

The Agreement providing for priority measures for the period 2006 through 2010 seeks to improve the reliability of power supply to customers, increase the network capacity, create the conditions for connection of new customers to the power grids, increase the capacity of the existing consumers, and prevent power shortages as the city's electricity consumption grows.

The Agreement provides for the construction of over 3900 MW of generation capacity, 5500 MVA of transformer capacity in the bulk transmission grids and over 5860 MVA of transformer capacity in the distribution networks of St.-Petersburg, both through new construction and modernization of the existing substations in all voltage classes. Also 545.6 km of new transmission lines will be built and 144.2 km of the existing lines will be revamped.

The projects to be implemented under the Agreement are estimated at RUB300 billion. One third of that amount will be used to develop the generating assets, and the rest will be invested in the development of the power grids and dispatch facilities. The projects will be financed with own resources and borrowings of RAO UES companies operating in St.-Petersburg, appropriations from the federal budget, the St.-Petersburg budget, off-budgetary resources, and private investments.

The Agreement constitutes an understanding between the St.-Petersburg Government and RAO "UES of Russia" in respect of financing of the top priority measures.

Under the document, the city government will make annual adjustments of the heat and electricity tariffs for the companies involved in the Programme taking into account the sources needed to finance the measures designed to develop and modernize the energy facilities, including the cost of services and repayment of the money borrowed to fund the projects.

Also, to ensure financing of the projects, the St.-Petersburg Government plans to set an economically justified connection fee for the city's power grids taking into account the criterion of accessibility for customers.

Moreover, the city government and RAO "UES of Russia" will prepare a forecast of growth of electricity consumption and electricity loads by power grid nodes in St.-Petersburg for the period until 2020.

This forecast will be used as a basis for the Master Plan for heat and electricity supply development in St.-Petersburg, which will be coordinated with the city's master plans for gas and water supply and sewage systems.

The Agreement further provides that the companies taking part in the Programme will be treated as strategic investors by the city authorities, and will be entitled to income tax and property tax deductions. Besides, their projects will be given green light in obtaining approvals and land use permits, and the companies will benefit from reduced land costs.

The St.-Petersburg Government and RAO "UES of Russia" also believe it is necessary to set up a joint power grid company in the city.