The Appeal Court supported FAS position in a dispute with a provider of last resort
The company’s actions led to an unreasonably growth of electric power prices
On 13 October 2016, the 9th Arbitration Appeal Court pronounced legitimacy of the decision and determination of the Federal Antimonopoly Service (FAS Russia) in the case against the group of persons comprising “Dagestan Energy Supplier” OJSC, “Nurenergo” OJSC, “Kabbalkenergo” OJSC, “Karachaevo-Cherkessenergo” OJSC, “Ingushenergo” OJSC and “Sevkavkazenergo” OJSC.
In January 2012 - October 2013, these providers of last resort regularly and significantly overrated planned consumption with regard to actual consumption in an organized manner. As a result of such actions, prices increased unreasonably for other electric power consumers in the First price zone of the wholesale market of electric power and capacity, which is a sign of restricted competition.
The group of persons operates in the areas with fixed performance specifics of wholesale and retail markets. A consequence is purchasing electric power under the frame of regulated contracts at the costs considerably lower than the costs of electric power on the wholesale market, where it is purchased by other market participants.
Overrating the volume of purchasing electric power at underrated costs in comparison with the fact of consumption, the providers of last resort of the group of persons were able to sell the remaining volumes at the balancing market price, which is on average 25% higher, generating a positive economic effect and influencing the market price.
The impact upon the market price was an increased volume of electric power in demand, which resulted in loading more expensive generating equipment and seeking more expensive electric power generation. In view of the applied marginal pricing model (the price is determined by the last, the most expensive output volume demanded by the market), it influenced not only the purchasing price of these providers of last resort, but also the price for other buyers on the wholesale market of electric power and capacity.
In the period in question, unlawfully gained income for the companies of the group of persons reached nearly 700 million RUB.
In 2016, the Supreme Court of the Russian Federation confirmed legitimacy of FAS decision and determination on a similar violation of the antimonopoly law committed by a group of persons in January 2011 - December 2012.
Deputy Head of FAS Vitaly Korolev:
“We deal with such circumstances when a granted benefit not only did not improve the market situation but helped gaining unlawful income and increasing prices for consumers”.
The Head of FAS Department for Regulating the Electric Power Industry Dmitry Vasiliev:
“Overall it’s a systemic situation: FAS considered a similar case covering a different time period. The companies are issued conduct requirements to accurately plan their consumption, which will enable avoiding such violations in the future”.