On 7 April 2007, the Russian Federation Government adopted Resolution No. 205 to amend the regulations* which provide for stepwise increase in the volumes of electricity sold on the wholesale market at unregulated prices.

The phased liberalization of the wholesale electricity market is the prerequisite for attracting private investment needed for the development of Russia's power sector. The Government's previous regulations provided that the share of electricity traded on the wholesale market at regulated prices would be reduced once a year by the amounts to be determined by the Russian Government. The previous figure for 2007 was set at 90-95% of the total amount of electricity generation/consumption.

According to Regulation No. 205, the unregulated electricity market share will be reviewed twice every year, on 1 January and 1 July.

Furthermore, the Regulation determines the exact volumes of electricity to be sold on the wholesale market at regulated prices for the period until 2011. Specifically, they will be set at 90-95 percent from 1 January to 30 June 2007, 85-90 percent from 1 July to 31 December 2007; 80-85 percent from 1 January to 30 June 2008; 70-75 percent from 1 July to 31 December 2008; 65-70 percent from 1 January to 30 June 2009; 45-50 percent from 1 July to 31 December 2009; 35-40 percent from 1 January to 30 June 2010; and 15-20 percent from 1 July to 31 December 2010.

The fully competitive wholesale market will be launched on 1 January 2011. However, until that time, regardless of the wholesale market liberalization phase, electricity will be sold to households at regulated prices.

_____________________________________________

* Resolution of the Russian Federation Government No. 643 On the rules for the wholesale electricity (capacity) market during the transitional period, dated 24 October 2003, and Resolution No. 529 On improving the operation of the wholesale electricity (capacity) market, dated 31 August 2006.