"Russia Power" Conference in Moscow

Power sector reform is ongoing in Russia with the creation of a Federal Network company, a Systems Operator and a Trade System Administrator for wholesale energy. Since November 2003 5-15 % of national energy consumption has been freely traded. The process of unbundling of the Energos and the sell-off of RAO-UES assets into several generating companies is still under discussion. Other reform issues still need to be tackled. At the PennWell "Russia Power" conference in Moscow Wynne Jones, Director in Frontier's Energy Practice, discussed the problem of market power in wholesale electricity markets and its impact on prices, investment decisions and operational efficiencies. In the light of political resistance to raise retail tariffs to cost reflective levels he emphasised the importance of a clear regulatory environment in Russia, especially given a tight capacity reserve margin that could threaten the reliability of the system. Wynne described possible remedies to relieve concerns of market power such as soft caps, plant divestments and implementing market monitoring watchdogs. Frontier (London) has worked in Russia for RAO-UES on behalf of the EBRD.