High Voltage

Gazprom subsidiaries are conquering wholesale electric power markets. Such companies as “Orenburggazprom”, “Volgatransgaz” and “Astrakhangazprom” were the first to purchase electrical energy. These companies lack straight access to the federal market of energy. Therefore, they have no other choice but to work through various inexperienced intermediaries. First month results were negative. “Astrakhangazprom” for instance lost more than 3,3 million rubles. 
Strange things are happening in Gazprom. While Alexy Miller was struggling to return government’s property along with other assets from “Zapsibgazprom” and “Sibur”, some of his employees exhibit a rather strange work ethic. How else would one explain the fact that “Nizhnegorodsk electric company” that does not possess electric mains of its own, managed to sign a lease with Volzhsky gasmen to use their electric mains. None of the mains belong to the subsidiaries. Government owns them all. Therefore, subsidiaries are not legally entitled to lease any of the mains without the main company’s knowledge. They were leased nonetheless. “Gazprom” was left uninformed. In addition, total sum of leased equipment was not recorded. As it can be seen, Gazprom’s main officials are located somewhere far away. It does not matter to them who owns the equipment, the government or some private company. Interestingly, “Nizhegorodsk electric company” will be unable to pay off its debts even with its entire capital of insufficient energy supply. Nevertheless, energy supply for “Volgatransgas” will be 4 billion kilowatt/hr in 2004.  
Gazprom’s partner in Astrakhan has strong business ties with ESN-Energo. Head of ESN-Energo is Grigory Berezkin, who is also a shareholder of RAO “UES of Russia”. Rumor has it that Mr. Berezin controls about 5% of all shares of RAO.
While loosing big potential suppliers in the face of Gazprom, regional AO-Energo is lacking substantial profits. One should also take into account such fact that in case of keeping regional subsidiaries part of those subsidiaries sponsored by Gazprom will be transferred to other organizations. Obviously, the rest of the regional companies will be unable to pay for the ones belonging to Gazprom. In the end the situation might get out of hand.      
Gazprom needs cheap electricity from RAO “EUES of Russia.” RAO in turn is in need of cheap gas from Gazprom.
Many analysts cannot help but wonder why both of these companies cannot cooperate without mediators and intermediaries. RAO “EUES of Russia” considers Gazprom its “golden” client. Their spending equals to 15 billion kilowatt/hr which cost nearly $500 million annually. This constitutes 7% of all Gazprom’s spending.   
Today, there already exist two Gazprom subsidiaries: “Astrakhgazprom” and “Orenburggazprom.” Both of them use services of “Rusenergosbit” energy supplier. It is expected that ESN-Energo subsidiary will soon supply “Mostransgaz” and “Volgogradtransgaz.” Didn’t Gazprom already create a 100% subsidiary “Gazpromenergo” in order to supply its own organizations with energy?
Gazprom can purchase electricity at wholesale markets at a relatively reduced cost, thus decreasing consumer spending. This was the main reason for major reforms in power industry.
As it can be seen, cooperation between RAO “EUES of Russia” and Gazprom turned out to be of no use of Gazprom. Aside from obvious losses, the company had to increase its gas supply to the local market, while charging four-five times less than when shipping to Europe. This is not just Gazprom’s losses, but of the entire country.
Today Gazprom wants to use “Rusenergosbit”’s services. This will most likely result in price increase on energy markets as well as gas price increase. Gas price increase will simultaneously lead to price increase on electricity for all consumers in the European part of Russia at least (where up to 80% of gas is used). 
In the end, it is the invisible hand of electricity market that possesses the ultimate control over the situation.

N. Nikiforov