Russia to bury its power monopoly

Russian authorities have decided that electricity monopoly RAO UES will cease to exist in July 2008 as the final act in a long-running reform process leaving generating capacity in private hands.

However, some investors have been so keen to acquire that capacity, that the government has taken steps to prevent the emergence of a new electricity monopoly.

Ahead of the last Russian winter, with RAO UES in place, head Anatoly Chubais said generators are ready to meet growing demand for power.

Consumption will rise by 8% next year, placing additional demands on gas and coal-fired generating capacity.

“In order to meet this rising demand we need the same growth of gas and coal supplies for generators. In terms of gas we can expect only 3% growth of supply so we will mainly rely on coal,” Chubais underscores.

New monopoly to be avoided

With a bigger role in heating the nation, gas and coal suppliers want to get into the electricity business.

Gazprom is planning a joint venture with leading coal producer SUEK and already has effective control of four major power producers. It is aiming to control 40% of Russia's gas-and-coal-based electricity output.

That has prompted the government to head off the emergence of a new monopoly in the sector.

According to Russia's Energy Minister Viktor Khristenko, “After the restructuring of RAO UES the anti-monopoly service will get more power to control competition on the market to prevent monopolisation. It will even be able to split up a monopolist.”

The government has already tightened its definition of a monopoly. Now any company that controls more than 20% of the market is regarded as dominating the sector.