The Energy Regulation and Markets Review - Stikeman Elliott

Russia
or property). Exercise of state anti-monopoly control (obtaining prior approval from
and subsequent notification of the Federal Anti-monopoly Service) for the purpose of
protecting competition depends on the way the authorised capital is paid at the time of
incorporation, on the dominant provision, the total value of the assets or revenues of the
organisation (or group of entities), and the size of the stake acquired in the organisation.
The legislation provides for negative implications of violating the procedure for obtaining
prior approval or submitting a subsequent notification. 44
For example, in relation to the electric power wholesale and retail markets, it
is established that anti-monopoly regulation applies to prices, economic concentration
on the wholesale market, redistribution of the shares (stakes) and property of wholesale
market participants, and so on. 45
III
TRANSMISSION/TRANSPORTATION and DISTRIBUTION
SERVICES
i Vertical integration and unbundling
The reform of the Russian electric power industry set the aim of dividing up the spheres
of activity within it, depending on their nature, into ones with competitive potential
(production, sale and consumption of electric power) and ones relating to natural
monopolies (transmission of electric power, operational dispatch management in the
electric power sector). In the main, this has been successfully completed, since the
division has been carried out and organisations have been set up with horizontal rather
than vertical integration in the relevant spheres.
Production of electric power has been concentrated in wholesale market generating
companies and territorial generating companies engaged mainly in thermal generation.
Generating companies are, however, very big, with all electric power production at
big hydropower plants belonging to a single company. The nuclear power industry,
including generation of electricity, remains a unified production complex, again of a
single company.
The reform has also made possible foreign participation in Russian organisations
producing electric power, the stakes of foreign companies in a number of cases being
dominant. For instance, the company E.ON holds 82.3 per cent of the shares in the
wholesale generating company E.ON Russia (formerly OGK-4), Enel holds 56.43 per
cent of the wholesale generating company Enel OGK-5 (formerly OGK-5), and Fortum
holds 94.51 per cent of the territorial generating company Fortum OJSC (formerly
TGK-10) and 25.66 per cent of the territorial generating company Open Joint-Stock
Company TGK-1.
At the same time, there has been a strengthening of state control and unity of
management in the natural monopolies – transmission of electric power and operational
dispatch management in the electric power sector.
44 Chapter 7 of Federal Law dated 26 July 2006 No. 135-FZ on Protection of Competition.
45 Article 25, Clause 2 of the Federal Law on Electric Power.
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