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. Last Updated: 07/27/2016

St. Pete Seeks to Smooth Static Over Power Supply

MTT.G.I. Friday's had to pass up prime space on Nevsky Prospekt due to slow processing of its request for increased wattage.
ST. PETERSBURG -- Four new power substations will boost St. Petersburg's electricity infrastructure and solve the problem many potential investors currently face when buying city property, officials said.

Speaking at the unveiling of new power substation 36A, Governor Valentina Matviyenko stated that this was the first of a series of four substations that would satisfy realtors by relieving the electricity shortage for businesses in the central areas.

"The new substation gives us the possibility to provide connections for more new users," Matviyenko said at the opening. She added that construction of another new substation will start this year, while negotiations for two more were underway.

Substation 36A officially began providing electricity for downtown St. Petersburg two weeks ago.

How much the new substation's 126-watt capacity will benefit investors looking at central business property is still unclear. Industry insiders say that the substation's capacity had been distributed long before the official completion of construction; now it is just a case of getting the subscribers registered on paper.

Although Alexander Kholopov, director for connection issues and business development at power monopoly Lenenergo, could not be reached for comment, the company gave an appraisal of the situation.

"We are not able to disclose the list of users and whether any more capacity will be left [for new subscribers]," Lenenergo spokesman Valentin Shushovsky said, revealing only that two users were strategic objects under state operation.

Lenenergo plowed 325 million rubles ($11.6 million) into the construction of 36A after several financing schemes between it and City Hall fell through in the late 1990s.

The costs are to be recovered from users, Shushovsky said, with rates being set as "according to the scheme and prices regulated by the regional energy committee."

Lenenergo said a new substation to cover the Mariinsky Theater and Novaya Gollandiya island may be constructed in the area of Rizhsky Prospekt. No further details of other construction plans can be disclosed because negotiations are underway, the company said.

Considering that it took 17 years to carry out plans to build substation 36A, the plausibility of Matviyenko's promise -- three more substations in the near future -- is doubted by industry insiders, with many realtors retaining a skeptical view.

"We've heard all these fairy tales before. Nonetheless, neither the Mariinsky Theater nor the Admiralteiskiye Verfi, not to mention Apraksin Dvor, has stable electricity," said Alexander Shabasov, general director of Apraksin Dvor, a 14-hectare outdoor shopping complex in the city center.

The shortage of electric capacity has long been a major problem for many potential investors in the city center. In one example, food chain T.G.I. Friday's had to pass on a prime property on Nevsky Prospekt due to Lenenergo's slow processing of its request for increased wattage at the site.

"The answer on whether we would have the right level of electrical output was crucial for our decision, and we waited over four months for [Lenenergo's] reply," said Alexander Remizov, St. Petersburg representative for Rosinter, the holding that operates restaurant brands such as T.G.I. Friday's, Rostiks, Planet Sushi and Il Patio in Russia.

In terms of the new substation, Remizov said it was hard to judge its helpfulness in solving the center's power problem. "Another 20 or 30 watts won't do much," he said.

Remizov added that the company's headline chain, Rostiks fried chicken restaurants, still has not entered the St. Petersburg market because it relies heavily on high-wattage electricity.

New developments at the federal level may be able to help speed things up in the region. At the beginning of the year, the government finally released guidelines to clarify various aspects of energy policy. Among them was an outline of the steps necessary for new user connections.

"It's a positive development, if only for the fact that now we have a legal basis for dialogue, whereas there had been no such basis before," said Natalya Dyatlova, a consultant at Ernst & Young. "It sets up the rules of the game."

As for making Lenenergo reply more quickly, the new guidelines stipulate that a request has to be answered within 30 to 90 days; however, there are many grounds for refusal that can be used to prolong the reply period, Dyatlova said. In another theoretical improvement, there will be a government body responsible specifically for the technical supervision of whom the power station provides connection for and at what wattage level -- something that is currently decided by Lenenergo.

Whether it will be a wholly new body or an added function of an already existing one remains to be seen. However, it should help investors negotiate reasonable electricity connection costs, Dyatlova said.