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. Last Updated: 07/27/2016

Chubais Calls Tariff Plan 'Weak'

ReutersUnified Energy Systems CEO Anatoly Chubais has plans for a pan-Europe grid.
Unified Energy Systems CEO Anatoly Chubais slammed the government's tariff policy Tuesday, saying it failed to give the natural monopolies' customers a clear idea of prices for the entire year.

Setting up new tariff rates that only cover the first half of 2002 was simply a failure, Chubais told reporters. "As a result, I do not understand what will happen with tariffs after June. ... This is not a strategy, it is a weakness."

The Cabinet last month approved a 16 percent hike in rail cargo tariffs starting Feb. 15, a 20 percent increase in electricity rates starting March 1 and a 20 percent increase in natural gas prices starting March 15.

The decision followed a heated debate with the natural monopolies that was overshadowed by concerns over growing inflation. The government promised to return to the debate in the second quarter.

Even with the uncertainty related to tariffs, UES seems to be doing better than ever -- thanks in part to a complex scheme late last year between the power monopoly and obscure Czech company Falkon Capital that reduced Russia's debt to Prague by $2.5 billion to $1.1 billion.

"A major, serious deal took place, and as a result, UES considerably improved its financial position," Chubais said, adding that the release of second-quarter financial results in the summer will shed some light on UES's part in the deal.

The scheme resulted in the elimination of all of UES's unsettled debt to Gazprom, Rosenergoatom and the federal budget as of Jan. 1, Chubais said. Debt previously owed by UES's production units to various structures outside the holding is now owed to UES itself, he said.

The debt swap, however, will not lead to any increase in UES's stakes in regional energos, Chubais said, adding that UES wants to reduce its stakes in production units. UES can now proceed with restructuring without the risk of its debt being brought up and used against it, he said.

Meanwhile, UES is planning to hold a tender before the third quarter that could result in the arrival of Russia's first strategic investor into the power industry, Chubais said.

He is also masterminding a grandiose plan to unify all the power systems of the former Soviet Union and Europe.

"So far there are no energy systems of such scale in the world -- from Tashkent to Murmansk and Chita to Madrid -- all united in one system," he said.

The basis for the unification is the 50 Hz frequency, which is used by both of the currently separated systems. Although the grids would have to be synchronized, joining them would give the capacity to freely transport power across the continent, opening a whole world of cost-saving and import-export opportunities.

The plan -- which would cost "tens of millions of dollars" to bring to life -- is still at a very early stage. A vast range of technical as well as political issues would have to be tackled and settled before any work on the ground can be done, Chubais said.

If realized, the plan would benefit domestic consumers since UES and the entire CIS electricity production and transportation system would have to meet higher European standards, he said.

Chubais has yet to take the plan to industry leaders in other countries. President Vladimir Putin discussed such cooperation with the European Union, and the plan was approved in principle.