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. Last Updated: 07/27/2016

FEC Complains About Lack of Power

The Federal Energy Commission will send a letter to the government this week complaining about the lack of confidence in the body and asking for a clarification of its powers and responsibilities.

The commission, which was created by President Vladimir Putin last year to regulate energy tariffs, has found itself essentially toothless with the bulk of influence over tariff decisions actually wielded by Deputy Prime Minister Viktor Khristenko and the Economic Development and Trade Ministry.

"If the situation remains as it is, there is a risk that courts -- and not the federal body created by the president -- will be approving tariffs in the country," FEC spokesman Nikolai Zaitsev said.

Several hydroelectric power plants have filed suits in arbitration courts against the FEC for not boosting tariffs sufficiently to keep pace with a government hike in water tax earlier this year.

Fatherland-All Russia leader Vyacheslav Volodin said last week that the tax increase has rendered the majority of hydroelectric power plants unprofitable.

At the FEC's behest, independent audit and consultancy group EKFI last month analyzed tariffs at 29 federal wholesale power plants, revealing that their financial condition had worsened.

The commission concluded that tariffs on the wholesale electricity market must be increased by an average of 10 percent, which would lead to a 3 percent electricity price increase for consumers.

"The FEC is in a difficult situation," Zaitsev said. "There are obvious economic reasons to increase tariffs, but the Economic Development and Trade Ministry has adopted a position of fighting inflation by keeping electricity and heat tariffs low."

A spokesman for the Ministry of Economic Development and Trade said that all decisions on tariff increases made by the Cabinet are based on the microeconomic situation in Russia.

"The role of the FEC is not clear. It is empowered to set tariffs while in reality, Khristenko's [tariff] commission makes all the decisions," said Alexei Moiseyev, an economist at Renaissance Capital. "At the same time, the FEC totally discredited itself as an analytical body last year when it proposed unrealistic tariff increases, so it is not surprising that no one is listening to it."