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. Last Updated: 07/27/2016

Putin to Lawmakers: Be Cautious on UES

President Vladimir Putin has called on lawmakers to move cautiously on electricity industry reform with a keen eye on the effects for consumers, State Duma Speaker Gennady Seleznyov said Thursday.

"The president said these laws are extremely important for Russia, so it is unacceptable to hurry with them," Seleznyov told a news conference after he met Putin.

"It is necessary to thoroughly analyze the consequences of these laws for the country, for the population and for Russian companies," Seleznyov added.

Public opposition to the reform has been mounting since the Duma refused to debate a packet of draft laws underpinning sector restructuring and demanded amendments.

Much of the debate -- generated largely by pro-Kremlin centrists and regional blocs -- centered on rates, which are now state regulated but could spike once the market is liberalized.

The draft laws would give legal grounds for market liberalization. That is currently scheduled for mid-2004 -- just after the planned date for the next presidential elections.

Lawmakers in the Duma face re-election next year.

Analysts believe that politicians -- especially regional leaders used to having a measure of local control over power rates -- are worried about reform because the looming threat of higher rates could make voters restive in the campaign season.

But state controlled utility Unified Energy Systems has been quietly pressing ahead with its internal restructuring, which is to be completed in early 2004.

"Reforming the power sector and freeing prices are linked, but not strongly," a senior official in the Economic Development and Trade Ministry said.

"The question of ending energy price regulation is more political, so I think that liberalization could be delayed to 2005, after the presidential elections," said the official, whose ministry is in charge of the reform.

Putin has rarely spoken out publicly about power reform but has criticized UES over its requests for rate hikes.

In his annual state of the nation address, the president branded UES and other state utilities as inefficient and told them to cut costs before asking for tariff hikes.

The reform was conceived to end the state monopoly and use the promise of returns from market-priced power to lure investors in to upgrade aging electricity infrastructure.

Seleznyov's statement came a day after Putin met with UES chief executive Anatoly Chubais. The Kremlin said the two met to discuss the utility's campaign to build up winter fuel stocks and regional issues.

Kommersant newspaper suggested, however, that Putin could have been seeking delays to some stages of the power reform.

Uncertainty surrounding the reform has not helped UES's share price. UES's Moscow-quoted shares closed at $0.0844, a fraction above a one month low. It has lost more than half its value since a January peak of $0.1813.