On forced reorganization of the «IvGES» Municipal Unitary Enterprise

In February - March 2007, the Ivanovo regional office of FAS Russia (OFAS Russia) inspected whether the «IvGES» Municipal Unitary Enterprise (MUP) observed the ban on combining natural monopoly (transmission) and competitive (sales, marketing) activities in power generation industry, established from 1st April 2006 under Article 6 of № 36-FZ Federal Law of 26.03.2003 «On specific features of power generation industry особенностях in the period of transition; and on amendments to some legislative acts of the Russian Federation due to adoption of the Federal Law «On Power Generation» in its current edition (further on referred to as № 36-FZ Law).



The inspection revealed the following:



«IvGES» MUP possesses economic jurisdiction over the property used for supplying, distributing and selling electricity to the outside customers;

«IvGES» MUP offers power supply services (electricity transmission and sales) to its 2 205 subscribers, which is forbidden under Article 6 of № 36-FZ Law;

Under Clause 2.3 of the Company Statute, it is involved, in particular, in production, transmission and distribution of electricity, and supplying electricity to the population, коммунально-бытовых and other customers. Clause 2.4 of the «IvGES» MUP Statute provides for other types of activities that are not forbidden by the law;

Ivanovo Regional Tariff Services (further on referred to as - RTS) set and approved the electricity transmission rates for «IvGES» MUP from 01.01.2007 (№ 55-e/2 RTS Regulations of 29.12.2006);

№ 29-gp/2 RTS Regulations of 29.10.2006 confirmed the status of «IvGES» MUP (not on a tender basis) as a guarantee supplier;

Article 6 of № 36-FZ Law is not applicable to «IvGES» MUP is not listed as an economic entity to which Article 6 of № 36-FZ Law is not applicable.



Therefore, «IvGES» MUP does not observe the ban established by Article 6 of № 36-FZ Law.



Under Article 6 of № 36-FZ Law, economic entities that fail to observe fulfill the requirements set in above Article within the designated period, are subject to forced reorganization (in form of separation or split off) according to a decision of the federal executive body, authorized by the Russian Government, within the period designated by this body under the legislation of the Russian Federation.



In accordance with № 355 Decree of the Government of the Russian Federation of 6th June 2006, the Federal Antimonopoly Service is the federal executive body authorized to control execution of Article 6 of № 36-FZ Law by economic entities.



Under Clauses 1 and 10 of the Regulations on control of the за соблюдением legal persons and individual entrepreneurs the ban for combining activities of electricity transmission and operational dispatch management in the power industry with power generation and electricity buying/ selling activities, approved by № 628 Decree of the Government of the Russian Federation of 27.10.2006, Ivanovo OFAS Russia obliged «IvGES» MUP to stop combining activities of electricity buying and selling with electricity supplying activities by 1st October 2007. It means reorganizing a legal person (in form of separation of splitting off), which would prevent combining electricity buying and selling activities with electricity transmission.