Liberalisation of the Russian power strongsectorstrong [EBRD - Working.pdfVIP

ab0cd Liberalisation of the Russian power sector David Kennedy Abstract The paper discusses the Russian power sector reform plan, approved by the government in July 2001, which outlines the framework for competition and changes in ownership structure. The paper focuses on the following issues related to the plan: restructuring of regional energos and large generating companies; restructuring of transmission and system operation; the mechanism for introducing competition; competition for residential consumers; and reform sequencing. A key message of the paper is that the restructuring of energos should not create companies with market power. Ideally, local generation and distribution companies would be owned separately with multiple generators in each region. At a minimum, commonly owned companies should keep separate accounts. Regarding transmission and dispatch, common ownership would not be a problem given that transmission and generation are separately owned. On competition, a fully-fledged pool may not be appropriate in the case of Russia, with the alternative of a market based on bilateral contracts functioning better in a context of non-payment, and providing security for investments. Regarding competition for residential consumers, this is not a priority in the short to medium term. Lastly, on sequencing, it is key that price re-balancing to erode cross subsidy from industrial to residential consumers takes place before competition begins. Keywords: power sector; ownership; competition, reform sequencing. JEL Codes: D40, L10, L33, L41, L51. Address for correspondence: Euro