24.03.2010 Power Engineering International
Enel Russia & CIS, a leading investor in the Russian power sector, has said regulated power tariffs are too low and suggested that the Kremlin raises them to incentivize the necessary investment as dictated by Prime Minister Vladimir Putin.
Since market liberalization in 2008, Russia’s power plant programme has stalled due to a lack of clarification over the Kremlin’s «long-term capacity market» mechanism, which would reward investors for the construction of new power plants.
Prime Minister Putin, who expects 20 GW of new capacity to be installed by 2012, signed a bill last month outlining a capacity market, but analysts say the new mechanism could amount to little more than «a tax and a lottery» and offer no long-term guarantees to investors.
Dominque Fache, general director for Enel Russia & CIS, said the only way for investors to be sure of a return on investment in new plant would be by raising regulated end-user tariffs that are often heavily subsidized.
«It is impossible to get a return on investment given existing electricity prices,» said Fache, speaking at the Russia Power conference in Moscow today.
«Tariffs are ridiculously low — Russian consumers pay four times less than the lowest level in Europe and sometimes less than the wholesale price. And in some regions consumers do not pay anything at all.
«I am not saying that they should be raised by four times overnight, but stage-by-stage in a socially civilized way,» he said. «If the government wants a quality electricity service, then people need to pay for it.»
The French former head of oil and gas group Schlumberger’s Russian unit also called for a “second wave” of power sector liberalization to deregulate transmission and distribution (T&D) in Russia.
Fache said grid losses averaged 20 per cent and the T&D sector needs ‘root-and-branch’ reform to include smart metering and energy efficiency measures to replace inefficient, obsolete infrastructure.
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