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. Last Updated: 07/27/2016

Another Major Reform Project Delayed

The government will miss another deadline for implementing a major reform as it grows increasingly concerned of possible jolts to the economy ahead of elections.

Russia's first competitive wholesale electricity market was supposed to begin Oct. 1, but there is no consensus yet on how it will be regulated, First Deputy Economic Development and Trade Minister Andrei Sharonov said Friday.

"Apparently, several departments within the government" still need to be consulted, Sharonov said, without elaborating.

The government had planned to liberalize between 5 percent and 15 percent of the wholesale power market in April, after all six bills needed to jump-start industry reform were signed into law. But the date was pushed back to June and then again to Oct. 1 amid intense lobbying from big business and regional leaders.

Other major reform deadlines put off in recent weeks include the introduction of private management of individual Pension Fund accounts and the creation of a new company to handle the commercial functions of the Railways Ministry.

"I think we will submit [the regulations for the wholesale market] to the government today, after agreeing on a few final points with the Federal Energy Commission," Sharonov said.

"The most serious disagreements we have with the Energy Ministry concerns pricing policy for the free market and the specifics of direct contracts [between large producers and consumers of electricity]," he said.

The plan is to create three electricity markets -- regulated, liberalized and one for excess supply/urgent needs -- that will operate concomitantly until 2006, when the market is due to be fully liberalized.

The regulations needed to launch the liberalized market spell out which power generating companies will be able to sell at market rates, how much they can sell, and other details.

Anatoly Chubais, head of Unified Energy Systems, said last week that UES is ready to launch the liberalized wholesale market and urged the government to meet the Oct. 1 deadline. He said opening a deregulated market would make it possible to lower electricity tariffs.

Analysts, however, said a deregulated market would no doubt push prices up, and for that reason is being delayed.

"The launch of the free market is being delayed for one simple reason -- no one is interested in tariff increases either before or during elections," said Sergei Suverov, utilities analyst at Zenit bank.

"When large power consumers buy on the free market, regions will have no one left to subsidize prices for the population.