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. Last Updated: 07/27/2016

Power Sector Revamp Gets Final OK

The government on Thursday finally adopted a plan for reforming the power sector in the 2003-05 transitional period, First Deputy Economic Development and Trade Minister Andrei Sharonov said after a Cabinet meeting.

"It is time to start implementing electricity reform," Prime Minister Mikhail Kasyanov told the Cabinet at the start of the meeting, according to reports.

The plan sets the schedule for the legal and corporate steps needed to overhaul the industry by spinning off UES's generation and distribution arms, but it keeps the transmission grid and dispatch center under state control.

Unified Energy Systems CEO Anatoly Chubais, who attended the Cabinet meeting, called finally getting the government's approval "a momentous event."

"In point of fact, for the first time we have stepped over the stage of political and theoretical discussion and have started the real work."

All six bills needed to jumpstart power reform and begin creating a free market for electricity have already passed through parliament and been signed into law. As a result, Kasyanov said, the government now has "wide authority" to begin the overhaul of the sector in earnest.

However, 49 more government rulings, bills and decrees have to be adopted to finish laying the legal basis for restructuring under the plan, which was drafted by the Economic Development and Trade Ministry. The list includes regulations for the electricity market in the transitional period, regulations for the wholesale market, a decree creating 10 wholesale generating companies and drafting a charter and choosing the board of directors for ATS, the wholesale market administrator.

Chubais said there is "a tremendous amount" of additional legal and corporate work to do and that UES was prepared to help the government get it done.

"Behind each document [is] the destiny of [UES's] assets, the destiny of consumers," Chubais said.

Sharonov said the government might sign the document creating the wholesale generating companies, or gencos, within a week. In all, 10 gencos, the prized assets of UES, will be set up, six of which will incorporate assets of thermal power plants while four will include assets from hydroelectric stations. The government commission on power sector reform has discussed the draft ruling four times already, but there are still some issues that need to be clarified, he said. In addition, the first experimental free-market power transactions have been delayed again.

"The situation surrounding the [electricity power exchange] is not solved. We cannot at the moment say that the system administrator has resolved its internal contradictions and is ready to become a fully fledged power exchange."

Starting in 2006, all power traded on the wholesale market is to be sold at non-regulated prices.

Kasyanov said the main target of reform is to reduce the industry's reliance on the government and create the conditions to lure major private investment into the sector.

For months, Chubais has been pushing for the creation of a government fund to guarantee private investments in the sector -- an idea the Economic Development and Trade Ministry and minority UES shareholders have staunchly opposed.

But economics minister German Gref on Wednesday reversed course, saying he now supports the idea. Only days before, his deputy, Sharonov, called the idea "non-market" and said it would fuel corruption.

Meanwhile, UES submitted to the government its proposal for the creation of the fund and a new agency to oversee it. Chubais said the proposal "will definitely be discussed by the Cabinet."