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. Last Updated: 07/27/2016

Sparks Fly Over Electricity Tariff Liberalization

Amid heated debate with the government, the leader of the centrist Fatherland-All Russia faction in the State Duma said Tuesday it would not agree to reform the electricity sector unless household power prices are held down.

"The government says that after the reform, prices will be determined by the market," Vyacheslav Volodin told reporters in the lower house of parliament after meeting with government and officials from power monopoly Unified Energy Systems. "We are afraid prices could jump by three to eight times."

The Duma is due to debate a package of reform bills that will let the government free electricity prices, currently some of the lowest in Europe.

Despite legislative opposition, Economic Development and Trade Minister German Gref, in charge of the reform, said he was optimistic the bills would pass.

"The discussion was heated but not useless," he said.

The faction, one of the largest in the Duma, is also demanding the laws require the government to set tariffs once a year before writing the budget.

The government is proposing to free power prices in mid-2004 after it reforms UES, which currently controls the national grid and 70 percent of the country's power generation.

Parliamentary elections are scheduled for next year.

UES is pursuing an internal restructuring in preparation for spinning off power generators, which are supposed to compete on a market after prices are liberalized.

President Vladimir Putin has told Duma leaders he expects the bills to progress, but warned the parliament to keep an eye on the consequences for consumers. Putin has not spoken his mind about pricing policy, however.

The Fatherland-All Russia faction is made up of members of a political party of the same name founded by Moscow Mayor Yury Luzhkov. The party has merged with the pro-Kremlin Unity party.

Luzhkov is a populist known as an advocate of state capitalism. He is a fierce political enemy of UES chief executive Anatoly Chubais, an outspoken free marketeer.

The faction also demanded the government take a 100 percent stake in the national grid and the UES dispatch unit, which controls power flows across the country, once UES is broken up, even though UES is 48 percent owned by private shareholders.

But the legislators agreed with a government proposal to aim for 75 percent state control of the units, but did not discuss how to write it into the laws.