Annual report 2010

JSC IDGC Holding. Annual Report 2010(approved by Order the Federal Tariff Service ofthe Russian Federation No. 183-e/1 of July 18,2010).The procedure for providing concurrence for transitionto RAB-based tariff regulation defined theprincipal requirements for the Company wishingthe switch to this method. The requirementsinclude the following indicators:— the value of the companies’ assets of at leastRUB 3 billion or the share of conventionalunits of distribution grid company exceeding10% of all conventional units of all grid companiesof the constituent entity of theRussian Federation;— considerable portion of borrowings in thestructure of financing of long-term investmentprogram (at least 30% of long-terminvestment program or at least 20% of thevalue of capital employed as of the end oflong-term period of regulation);— turnover of accounts receivable for the yearpreceding the first long-term period of regulationof not more than 135 days.Method of regulation based on long-term parameters(hereinafter, the “Long-term IndexingMethod”) provides for restrained rates of investmentactivity and applies to the regions in whichbusiness growth is not projected.RAB-regulation, in its turn, provides for the implementationof large-scale investment projects andwas developed for the regions whose economy isdeveloping successfully.For the purposes of preventing sharp changes intariffs, the RAB-regulation method includes a“smoothing” mechanism which allows offsettingthe investment activity of distribution grid companieswithin one period of regulation.18.2. Tariff Campaign ResultsThe goal of the 2011 tariff campaign specified inDirective of the Government of the RussianFederation No. 30-р of January 19, 2010, is toimplement long-term tariff regulation, specificallyusing the RAB method in respect of thebranches of the SDCs of JSC IDGC Holding.The outcome of this work is the transition of 36branches of the SDCs of JSC IDGC Holding to longtermtariff regulation using RAB method for theperiod 2011–2015. For example, to date, RAB-regulationhas been implemented by 85% ofbranches of the SDCs of the Holding Company.Only 7 regions in which IDGC Holding functionshave implemented long-term indexing regulationmethod: Komi, Buryatia, the Arkhangelsk,Murmansk, Volgograd, Kemerovo and KaliningradRegions.The Republics of Daghestan, Chechnya andKarelia, due to challenging socio-political situation,have delayed transition to long-term tariffregulation until 2012.168