Russia Likely To Cap Domestic Energy And Gas Prices

Russia said it probably will cap price rises for power and natural gas at less than the increases that the national electricity utility Unified Energy System and the gas producer Gazprom say that they need to cover their costs.

Russia is considering raising electricity prices by two to three percent and gas prices by at most by ten percent in the second half, Economy Minister German Gref said. UES and Gazprom said earlier this year that the twenty percent price rise allowed by the state in March was not enough to stem losses on some domestic operations.

The government sets electricity and gas prices low enough to win political favor with citizens who pay the lowest prices in Europe. Gazprom has up to now been forced to rely on exports for about eighty percent of its revenues. UES, with less scope for sales abroad, is dependent on government pricing policies for profit growth.

“If electricity prices were increased by just three percent it would be disappointing for UES and lead to lower profits,” said Hartmut Jacob, an analyst at Renaissance Capital in Moscow. “There hasn't been a government meeting yet and UES will continue to lobby.”

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