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. Last Updated: 07/27/2016

Sverdlovsk Governor Stands Up for RusAl

The Sverdlovsk region government said Thursday that it sent a letter to Prime Minister Vladimir Putin asking him to help United Company RusAl by lowering electricity rates, a request dismissed by electricity sector experts and regulators as unfair and illogical.

"RusAl is in the worst situation among all the metal producers in our region," Sverdlovsk Regional Governor Eduard Rossel said at a news conference broadcast on his administration's web site. "I have sent our suggestions to Vladimir Putin on helping RusAl cope with electricity prices," he said.

RusAl, the world biggest aluminum producer, has said electricity costs constitute a third of its production cost in Russia. "This is not only a headache for the Sverdlovsk region, but a headache for all cities where aluminum is produced," Rossel said. "So the decision should be made for all of them."

The governor's spokeswoman, Natalya Ponomaryova, said it couldn't disclose the details of the letter but said a rate reduction was proposed.

Putin's spokesman Dmitry Peskov did not answer phone calls placed Tuesday, and the Energy Ministry did not return an e-mailed request for comment.

RusAl's press service confirmed in an e-mail Thursday that "it was holding negotiations with the Sverdlovsk administration and other regions on a possible reduction of electricity prices."

"[A reduction] will allow us to significantly lower production costs and preserve production in the economic downturn," RusAl said.

Aluminum prices have fallen by about 60 percent since their peak in July, while the Federal Tariffs Service has increased average electricity prices by 19 percent since the beginning of the year. Sverdlovsk region prices were increased by 12 percent to 13 percent.

The Federal Tariffs Service and sector experts said Tuesday that RusAl's goals were unreasonable.

"If you discount electricity prices for an enterprise in a region, you have to increase them for someone else in the region, according to federal law," a Federal Tariffs Service spokeswoman said.

The service sets price limits for each of the regions at the beginning of the year, and the local tariff commission then redistributes the price burden among households and industrial consumers. By law, the government approves the prices once a year but may change them throughout the year.

"RusAl is no better than any other industrial producer that is suffering from a fall in demand and falling product prices," said Sergei Pikin, head of the Energy Development Foundation.

Pikin said Rossel was trying to defend RusAl because the region's budget is dependent on the aluminum producer.

"RusAl is one of the main taxpayers and a major employer for several towns," Pikin said. "So it obvious that Rossel doesn't want it to collapse."