Vitaly Korolev: the electric power industry has a significant impact upon economic development

Russia moved up significantly in the Doing Business ranking due to the plan on providing accessibility and making technological connection to electric power networks cheaper for all categories of consumers

On 24 April 2017 a training course of the Energy Regulators Regional Association (ERRA) started in Kazan. It was opened by Deputy Head of the Federal Antimonopoly Service (FAS Russia) Vitaly Korolev. He pointed out that the electric power industry has a significant impact upon economic development.

“We delineate some types of activity in this field into natural monopolies and competitive operations. The natural monopolies include: electric power transmissions while its production and buying-and-selling are competitive activities. The law of the Russian Federation prohibits combining those types of activities”, said Vitaly Korolev.

“In the past several years Russia has moved up significantly in the Doing Business ranking in the field of technological connection to electricity grids”, indicated Deputy Head of FAS. “It was achieved through continuous efforts, when FAS jointly with representatives of the federal authorities found a possibility to create more favourable conditions for some types of consumers, particularly, small and medium business”.

“It should be emphasized that Russian energy companies have become more customer-oriented. It is related to the current global processes. The thing is, technologies are getting so advanced that consumers may obtain electric power independently, without using centralized systems”, added Vitaly Korolev. “In Russia renewable energy sources have found a wide use. Another prospective area in the industry is developing large energy accumulators. A lot of consumers are already using them rather efficiently for the household needs”.

“Such development of new technologies will undoubtedly make good competition with traditional energy sources, which will lead to tariff reduction”, stated Vitaly Korolev.

Peter Kaderiac, the training course supervisor, said that swift rates of economic growth and dense population, for instance, in BRICS countries, trigger reforms in the electric power sector, contrary to OECD member-states. Electric power prices for end-consumers in the economies in transition are lower that in OECD countries.

Then Head of FAS Department for Control over Electric Power Industry, Dmitry Vasiliev outlined preconditions for reforming the sector. The main goals of the reforms have become enhancing efficiency of electric power generation and consumption as well as achieving sustainable performance and development of the economy.

“The essence of the reforms was to create competitive segments in the electric power industry, introduce efficient regulation and control in the environment of natural monopolies”, said Dmitry Vasiliev.

He drew attention of the course participants to the specifics of antimonopoly control in Russia, which can be instrumental for representatives of the international community to employ in their work. Dmitry Vasiliev gave examples when actions undertaken by Russian competition authority cut down on the number of unfair market players.

Then Tatiana Basova, Head of Tariff Regulation Unit, FAS Department for Control over Electric Power Industry discussed the results of the work of FAS Board in 2016. FAS representative reported that in 2016 there were 47 meetings of FAS collegial body, over 8000 decisions were made, of which 7943 on the field of electric power industry. Tatiana Basova pointed out that FAS is robustly and efficiently employing the principle: “below-inflation tariff growth”. Last year, against 7.4% inflation, the growth of tariffs in the electric power industry was:

- 6.5% for non-regulated prices on the wholesale market

- 3% for grid companies for all categories of consumers except the population

- 5% for the population.

Finally, she presented the findings of procurement analysis and stated the FAS regularly exposes non-target use of funds by natural monopolies.

“Procurement analysis shows clearly where monopolies can cut their costs and exclude unreasonable expenses”, summed up Tatiana Basova.