Company history

Reformation of the Russian Federation power industry

→ Purposes and problems of reformation of the Russian Federation power industry

Main objective of Russian electric power industry reforming- branch enterprises efficiency increase, creation of its development conditions on the basis of investments stimulation, maintenance of reliable and fail-safe consumers power supply.

Thereby radical changes took place in the Russian electric power industry: the system of state branch regulation changes, the competitive market of the electric power was formed, new companies were created.

In the course of reform the branch structure reorganizes: division of natural monopoly (electric power transfer, operational-dispatching management) and potentially competitive functions (production and sales of electric power, repair and service) was made, and instead of the former vertically-integrated companies who executed all these functions, the structures which specialize on different business activities were created.

The generating, sales and repair companies in the long term will become mostly private and will compete with each other. On the contrary in natural monopoly spheres, strengthening of the state control is taking place.

Thus, conditions for the electric power competitive market development were created where prices are not regulated by the government, but formed on the basis of a demand and supply, and its participants compete, reducing their costs.

The purposes and problems of the reform were defined by the governmental order d/d July, 11th, 2001 # 526 "About reforming of the Russian Federation electric power industry".

Taking into account the subsequent changes in regulatory framework the purposes and problem of were reforming been concretized in "Strategy Concepts of the RAO "UES of Russia"" for 2005-2008 "5+5".

→Reorganization of RAO UES of Russia

Reorganization of RAO "UES of Russia" becomes the logical end of the electric power industry reforming and creation of the new demonopolized branch structure. In the conditions of competitive relations development between new independent participants of the electric power market RAO "UES of Russia" stops its activity as the "state monopoly" and it would be transformed to a number of state and private companies.

1. During the first stage of reform (2003-2006) all main entities (OGC - the wholesale generating companies, TGC - the territorial generating companies, MRSC - the inter-regional distributive network companies, MRSC - a company detached from the RAO "UES of Russia" and owning shares of MRSC, FSC - the Federal network company (a united national electric network), RSC - the distributive network company, RGC - the regional generating company) were detached from RAO "UES of Russia". Public Joint-Stock Company "Territorial Generating Company #2" (TGC-2) was created by the decision of Board of directors of the RAO "UES of Russia" on February, 25th, 2005. The state registration of the company took place on April, 19th, 2005. The concept of formation of operational company TGC-2 is connection of the regional generating companies which were created as a result of reforming of AO-Energo.
2. During the second stage (the termination - on July, 1st, 2008) structural transformations of energy holding company actives will be finished, isolation from RAO "UES of Russia" of all companies of branch target structure (FSC, OGC, TGC, etc.) will occur and the activity termination of a head unit of RAO "UES of Russia".

The choice of two stage schemes was caused by the necessity of estimation during the first reorganization of the large private generating companies ability to involve investments independently, to operate its development, to participate in electric power wholesale market work, and for TGCs - in heat power segment. Consecutive, two staged, RAO "UES of Russia" reforming was also caused by necessity of development of the JSC reorganization mechanism.

The companies created during the reform represent the enterprises, specialized on certain kinds of activity (generation, electric power transfer and etc) and supervising corresponding profile actives. Created companies exceed former regional level monopolies in scale of profile activity: new companies either unite the profile enterprises of several regions, or are all-Russian.

Production actives unite in the inter-regional companies of two kinds: the wholesale market generating companies (the wholesale generating companies - OGC) and the territorial generating companies (TGC). OGC unite power plants, specialized on production of electric power only. In TGC mainly includes CHPPs which produce both electric, and heat power. Six of seven OGC are formed on the basis of CHPPs, and one ("HydroOGC") - on the basis of hydro generating actives. Heat OGCs are constructed upon an ex-territorial principle while TGC unite stations of adjoining regions.

In 2005 reforming process captured the majority of AO-Energos, and their significant part was divided by the end of the year. Same year the majority of the remained inter-regional companies were founded: last out of seven OGC was registered by March, thirteen out of fourteen TGC were registered, and four MRSC were created by August.

In 2006 and in the beginning of 2007 process of companies' formation target structure was almost finished. By the beginning of 2007 reforming projects of 70 out of 71 were approved, and formation of all six heat OGC was finished. By March, 1st 2007 target structure formation of TGC-3 (JSC "MosEnergo"), TGC-4, TGC-5, TGC-6, TGC-9, TGC-13 ("Yenisei TGC) and TGC-14 was finished; purchase and sale contracts were signed concerning generating property between KuzbassEnergo (TGC-12) and AltayEnergo, I stage of reorganization of TGC-1, TGC-2, TGC-8, TGC-10 was completed.

Process of network companies' allocation was almost finished. On the basis of the reorganized AO-energo 55 out of 56 planned arterial network companies were created.

July, 1st, 2006 Public Joint-Stock Company "Territorial Generating Company #2" (TGC-2) had begun operational work as the united Company. Kostroma, Novgorod, Tver generating and Yaroslavl power companies, Vologda CHPP, and since May, 3rd, 2007 the Arkhangelsk generating company were included in TGC-2 structure.

Since September, 1st, 2006 new rules of wholesale and the retail electric power markets work had come into action. Transition to adjustable contracts between buyers and the generating companies was accomplished and the free trade sector (SST) was liquidated, spot market launched - the "day-ahead market" (RSV) on the wholesale market of the electric power (capacity) as a result of new rules introduction since September, 1st was performed. By 2011, according to the Government of Russia decision which accepted on November, 30th, 2006, gradual replacement of adjustable contracts by free (unregulated) contracts is provided. Rules of the retail markets functioning assume gradual electric power retail markets liberalization in parallel with wholesale market liberalization, with preservation of the population electric power provision on adjustable tariffs for the transition period.

Thus, during reform the former monopolistic structure of electric power industry disappears: the majority of the vertically-integrated companies leave the market, and they are replaced by new companies of branch target structure.

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