Reformation of transmission and distribution sectors

In electricity transmission sector “The Federal Grid Company (FGC) is a company acting as a manager of the Unified National (all-Russian) Electric Grid (UNEG) for the purpose of assuring the integrity of UNEG technological management and rendering contractual services in transmission of electrical energy via the UNEG.” (The 5+5 Strategy 05)

According to the Federal Law #35-FZ the basic functions of FCG UES:

• management of the Unified National (all-Russian) Electric Grid (UNEG);

• rendering of services of electrical power transfer and connection to the grid to wholesale electricity market participants;

• investment activity in the area of UNEG development;

• maintenance appropriate condition of UNEG;

• engineering supervision of network subjects.

The company was established in May 2002 as a 100% daughter enterprise of RAO UES. It is planned that by the year 2008 it would be an independent company and will own almost all of the backbone transmission lines (5+5 Strategy).

After the delivering of FGC from RAO UES it has been planned to increase the Government share by up to 75% plus one voting share. This however will take place after the restructuring of the industry. Within the period 2003-2008 the share of Russian Government is expected to be no less than 52%. FGC UES 05, 5+5 Strategy)

The transfer of electrical power is the natural monopoly activity, which is based on the UNEG. The formation of the UNEG as well as the delivery of the FGC form RAO UES is a very complicated process and there are several ways to do it. First of all it is complicated due to the need for maintenance of shares and transference of AO-Energos assets. The reform object is to unite the transmission line with a capacity of more than 220 kV under the control of the FCG. In the previous structure of the power industry, the backbone transmission lines were controlled by RAO UES with some control belonging to the AO-Energos. In order To form UNEG it is necessary to detach part of the 220 kV lines from AO-Energos (Expert Ural 05).

Due to the complexity of the task, the transference of the property rights is being implemented step by step. The plans of this process are constantly changing but it is not within the priority of this work to describe them all in details. Nevertheless, it is important to know that during the process of restructuring the Transmission Companies (TC) and Interregional Transmission Companies (ITC) companies will be established and they will be sole owners of the transmission lines (FSK EES 03a). Then these companies will be merged to FGC UES, but again there is a continuing discussion about the practical part of this process. The series of restructuring may be represented in the

simplified way: AO-Energos’ transmission lines are transferred to TCs, then TCs are united in ITCs, and then ITCs are added to FCG UES (FSK EES 03a). It is also not clear whether ITCs would be united in one main ITC which would be added to FCG or whether each ITC would be added to FGC directly without forming the main ITC.

The increase of Governmental share in FCG UES up to 75% plus one voting share is planned to be done with applying of all means that are allowed by law. In February 2007 it was suggested to transmit governmental shares in generating companies to FCG UES and only then sell them; by this way FCG will get money directly without transferring them through the budget of the country (D’ Journal 07).

The main income of FCG UES will come from the electricity transmission tariffs (5+5 Strategy).

Reform also concerns the distribution sector. The restructuring on the basis of AO-Energos regional Distribution Grid Companies (DGC) will be carried out. According to the 5+5 Strategy these distribution companies will be merged into holding companies – interregional distribution grid companies (IDGCs) which will operate within the IPSs boundaries.

In April 2004, four IDGCs were established: IDGC-1 within the Central and North Caucasus IPSs, IDGC-2 within the North West IPS, IDGC-3 within the Ural and Middle Volga IPSs, and IDGC-4 within the Siberia IPSs. In August 2006, Southern Grid Company was established.

Figure 3.4 The interregional distribution grid companies (Informational Bulletin 2006).

The IDGCs were established as 100% daughter enterprises of RAO UES. Later it would be proposed to the shareholders of regional DGCs to change their shares for the share of IDGCs. By that RAO UES share in IDGCs will be lowered to the level 49% (but not less) and IDGC’s share in regional distribution companies increased up to 100%.

In November 2005 RAO UES Board of Directors decided to transfer the shares of IDCGs to trust management by FCG UES. This was done in order to build centralized management, ensuring of reliability, and effective functioning of distribution sector in the period of restructuring. (FCG UES 05)

Functions of FGC UES in the distribution sector are:

• Strategical and corporate management;

• Forming of methodological basis of regional DC functioning;

• development of distribution sector decision-making. (FSK EES 03b)

Functions of the IDGCs:

• Strategical and corporate management within its boundaries;

• decision-making on the tactical level of management;

• control of regional DGCs methodology observance;

• regional DGCs activity operative control;

• exercising of some function of regional DGCs. (FSK EES 03b)

There are almost 60 regional DGCs that manage distribution lines within the territory of four IDGC and FGC. Main functions of regional DGC (on the example of KirovEnergo) are:

• electricity delivery and distribution;

• consumer connections to distribution lines;

• construction of the new and the maintenance of existing distribution lines.

(KirovEnergo)

At the end of 2007, if it is be approved by the Russian Government, the number of IDGCs is increased up to 12 on condition of the comparable assets (Information Bulletin 06).