Russian Power Industry Reform Concept Changed Fundamentally

State Duma deputies provided a lot of amendments for the reform

The State Duma of Russia gave the third reading to the draft law “About the Power Industry.” This law is the key document in the governmental package of the draft laws to reform the industry. Two hundred and sixty deputies of the Russian parliament voted for the draft law, 159 voted against it and one deputy abstained from the voting.

Pursuant to the draft law, two joint stock companies are to be established. One of them will be called the “Organization for Administering the Joint National Electric Network”, and the other one will be called the “System Operator of the Joint Power System.” The share of the state participation in the mentioned companies during the reform of Russia’s energy giant RAO United Energy System of Russia (RAO UES of Russia) is supposed to be not less than 52%. When the reform is over, the state share is expected to be increased up to 75% (plus one voting share in the authorized capital stock).

By the way, Wall Street Journal has recently published an article, in which it was said that the power industry reform is the most serious test for Russian President Vladimir Putin. This is an extremely relevant test for Putin, since a part of the Russian economy has been taken over by private entrepreneurs, while the rest of it suffers from the burden of state monopolies and state regulation. The American newspaper cited several specialists, who asserted that the goal of the power industry reform in Russia is to change the owner of the energy branch. Not bad, really. However, it deems that those specialists were not confused about the fact that Russian raw materials oligarchs might get the power industry in their possession. If this happens, oligarchs will provide themselves with gratuitous electric power. Yet, there should be someone to cover expenses and to bring profit. There is no one else to do it, but a common Russian consumer, of course.

The specialists, which were cited in the Wall Street Journal article about the Russian power industry reform, are confused about another aspect. They are disturbed about the issue of price regulation. According to their opinion, the price regulation is the fundamental problem. The newspaper’s specialists believe that governmental draft laws (with deputies’ amendments to them) will not allow to settle the problem for many years. Indeed, the deputies of the Russian parliament (four centrist factions and Yabloko faction) attempted to revise the conception of the reform. The deputies prepared the minimum of 1800 amendments for the second reading of all the draft laws regarding the power industry reform. In particular, there were 626 amendments submitted to the core draft law of the power industry reform package. One hundred and fifteen amendments of them have been approved. The draft law “About the Power Industry,” for example, prohibits spontaneous blackouts on a debt basis. The law stipulates that energetic companies are supposed to issue warnings of such electric power restrictions. In addition to that, companies will have to activate a private restriction order first. Furthermore, it will not be allowed to cut electric power supplies until the expiry of the term that is fixed by adequate budgets. The law also stipulates special categories of consumers, which will have special payment orders for the consumption of the electric power. However, the pricing is presumably free: prices will be formed on the base of the demand and supply issue. Yet, the government will approve yearly utmost levels of electric power tariff increase for the population. According to the conception of the Wall Street Journal, such amendments will bring the point of the reform to zero.

However, experts were right, when they said that the deputies of the Russian parliament would be very concerned about the interests of the Russian people in the year of parliamentary elections in the country. As Vladimir Pekhtin, the chief of the centrist Unity faction said to Russian media outlets, all amendments to the power industry draft law are basically meant for the protection of the population with moderate income. Deputies’ amendments are also supposed to protect the social and budgetary field from a possible growth of electric and heating power tariffs during RAO UES of Russia’s reform. This is the reason why the government was given more authorities to regulate reforms and to change the ways of power industry control. That is why the deputies of the Russian State Duma made Prime Minister Mikhail Kasyanov promise them to claim responsibility for the results of the power industry reform.

Gennady Raikov, a People’s Deputy faction member, is one of the main opponents of the governmental energy reform, which is also called Chubais’s reform, by the way (Anatoly Chubais is the head of RAO UES of Russia). On the other hand, Gennady Raikov is rather happy about the transformation of the reform concept. “The state will have the control of all four blocks: power-generating capacities, wire systems, the joint trading operator and the central supervisory control. Where is a place for Anatoly Chubais here? There is no place for him. His order vanished, so did RAO UES of Russia – it does not exist as a monopolist anymore,” said Gennady Raikov in his interview to MiK news agency.

The head of RAO United Energy System of Russia, Anatoly Chubais, keeps insisting on reforms, despite the fact that the concept of the reform has been changed. He is absolutely certain that this is a question of the strategic breakthrough for the country. Chubais believes that the Russian power industry will get its investments only after reforms start. Yet, it seems that the deputies of the Russian parliament envisage this aspect as well. They just struck the reform launching date out of the draft law (the reforms were originally planned to start in 2005). Nevertheless, one does not have to hope very much for good investments (foreign investments, at least) with the level of the state regulation, which provides the so-called cut variant of the reform. However, it seems that Anatoly Chubais is ok with that. He used to shift the blame for the failure of the privatization (in the beginning of the 1990s) on the deputies of the USSR Supreme Council. As he claimed, the deputies revised the conception that he offered. It would be good for present day deputies to recollect that.

State Duma deputies are going to consider five draft laws of the power industry reform in the nearest future. The head of the Russian government Mikhail Kasyanov warned the parliament that one would have to adjourn the laws for the minimum of six months, if they were not going to be passed at the moment. Kasyanov believes that if the reforms are not going to be launched, then the power industry will experience a serious crisis in five years. Yet, it is an open secret that the time trouble is the favorite method of the Russian government and of the presidential administration to show pressure on the State Duma in the law-making process; especially when it comes to those laws, the detailed consideration of which might cause serious objections on the part of the deputies.

On the photo: Anatoly Chubais

Akhtyam Akhtyrov PRAVDA.Ru

Translated by Dmitry Sudakov