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Expert: Energy Market of Russia Needs Clear Rules

Moscow, August 8

Russian energy market needs a transparent system of relations between its participants, says Sergey Pikin, Director of the Energy Development Fund.

Tenders for the status of Guaranteeing Suppliers (GS), organized pursuant to an order of the Russian Ministry of Energy, were launched last week in 11 regions where the previous guaranteeing suppliers lost their status because of their debts. The content of tender inquiries immediately raised concerns, particularly with grid company Rossiyskiye Seti (Rosseti). The tender participants were offered to repay the debts of the previous retailers, but only to the generators. The arrears to the grid operators were left out of the equation. This stirred a new wave of discussions over the role of grid companies in the national energy market.

"When analyzing the Russian energy sector a range of factors needs to be considered. They key factors are the ever growing arrears of retailers to the generators and grid operators and the still lacking system of financial guarantees. In many regions these issues are exacerbated by the arrears in the retail market. Therefore, to my mind, it was good that a large grid company was acting as a guarantor of solvency for the retail companies. This is particularly relevant for the troubled regions riddled with non-payment. At the same time, we are not necessarily talking about assigning the functions of guaranteeing suppliers to the grid operators," noted Energy Development Fund Director Sergey Pikin.

He stressed that "it is important to build a level playing field for the grid operators without allowing them to take advantage of their position, hinder competition or impede supplier switching." "Actually, the latest decisions on the regional retailers where the GS status was awarded to Rosseti shows that this operator is willing to develop competition in the retail market and prepared for consumers switching to alternative power suppliers. Rosseti can act as retailer of 'last resort' providing the function of social support for the key consumer groups who do not have access to the wholesale power market. This includes the population, small and medium businesses," explained Sergey Pikin.

He thinks that the next biggest issue is the scope of Ministry of Energy's requirements for the candidates for the guaranteeing supplier status. The grid operators and the generators are equal in their status in the power market. Biasing the tender inquiries and obliging the new retailers to repay the arrears to the generators leaving out the grid operators is not correct. The financial discipline, according the Sergey Pikin, in this case is a guarantee of reliable power supply to consumers in generation and in transmission as well.

"Overall, the main task now is to develop a system of transparent relations between the grid operators and the guaranteeing suppliers. And the efficiency of this model should be determined not by the organizational structures but clear rules of operation," concluded the Director of the Energy Development Fund.

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