Dagestan Power Firm Attacked

An electricity grid operator in Dagestan said Saturday that police had helped it regain control over substations that had been seized by armed men after the firm cut power supplies over nonpayments.

The firm said up to 300 men, many armed with rifles, broke into five substations last week in the volatile North Caucasus republic before beating staff and switching the power back on for parts of the local capital, Makhachkala.

The incident highlighted the risks of public discontent that some investors face in the course of an ambitious reform of the country's power sector.

The operator, MRSK North Caucasus, said it had resumed power supply after the incident but vowed to cut power again soon if the debt was not paid. Several members of staff were badly injured and treated in hospital, it said.

The firm said the city of Makhachkala, with a population of about 700,000 people, owed it 600 million rubles ($25 million) and blamed the local administration for stirring up trouble. "These criminal actions were provoked by the irresponsible position of the municipal authorities," the operator said in a statement.

Makhachkala Mayor Said Amirov slammed the cutoffs and said state-controlled utility Unified Energy System, the owner of MRSK North Caucasus, was maneuvering to try to seize the city's electricity distribution network.

"Only barbarians and foreign invaders are capable of such actions," Amirov said in a statement published on the local administration's web site about the cutoffs.

Under a Kremlin-approved reform of the power sector, wholesale electricity prices are to be fully liberalized in 2011.

MRSK North Caucasus, which unites local grid operators and distributors, will be spun off from power monopoly UES as part of the reform, which will see UES broken up into generation, grid and distribution firms.

"We would like to find an investor too, but in order to do that we need to solve this nonpayments issue first," said Gennady Vykhristyuk, a spokesman for MRSK North Caucasus.