The YABLOKO faction in the State Duma will not support the package of draft laws on reform of the electricity sector submitted by the Government to the State Duma.

The draft laws dictated by RAO UES of Russia do not provide the guarantees required to prevent the creation of local natural monopolies under the rigid control of RAO UES in Russia's closed energy regions.

The owners of the uncontrolled local energy monopolies could obtain absolute control over entire regions.

The new owners of the most profitable assets in the electricity sector would guarantee their high incomes by fixing their monopolistic position together with their right to raise consumer tariffs any number of times. The social consequences of uncontrolled tariff increases resulting from implementation of the drafts are unpredictable.

In addition, the draft laws submitted to the State Duma envisage the possibility of the economically unviable operation of the Federal Grid Company and the System Operator. Refusing to raise the state's share in the Federal Grid Company and the System Operator to 75-100%, the Government abolishes efficient state control over these structures.

The authors of the government's variant are striving to implement reforms, which debar the subjects of the Russian Federation and local government from participation in the reform of the electricity sector, thereby violating the rights of minority shareholders in RAO UES.

The YABLOKO faction considers it necessary to implement the following:

• create a reliable legal basis for reform, paying special attention to clear and transparent guarantees for consumer rights and protection of the population from groundless tariff increases;
• provide efficient control over the monopolistic sector through the decisions of a regulatory agency that establishes limits on tariff increases to prevent an artificial overstatement of costs;
• merge the Federal Grid Company and the System Operator and fix the state’s share in their capital at 75-100%;
• develop and adopt a special federal law guaranteeing open and transparent privatization of the state’s share in the generating companies, and also determine stages of this privatization
• to prevent the formation of a strata of "electricity tycoons", 10 united power generating companies should be established: they should have equal starting conditions in each energy zone through the transfer of different types of electricity power stations with different capacities to their ownership;
• introduce in law provisos that would make it impossible for one structure to accumulate control over 40% of the facilities in closed energy regions;
• guarantee participation of the regional authorities and local government in joint control together with the Federal Grid Company over local electricity lines;
• create a system of targeted subsidies to citizens as compensation for electricity payments.

The YABLOKO faction considers that without the aforementioned measures electricity reform will become another demonstration of political adventurism.

Head of the faction

Grigory Yavlinsky

"The Government's variant for reforming the sector is virtually a political issue, instead of an economic idea. If this "package" is adopted, a politically dangerous system will be created. The government will be able to dictate its conditions to Russian business and control and manipulate via monopolistic structures and tough control by RAO UES of Russia the functioning of Russian business, as well as regions." This is how the leader of the YABLOKO party Grigory Yavlinsky explained the position of the faction at a briefing on Tuesday October 8, 2002.

According to Yavlinsky, if the Duma adopts the draft laws, a powerful mechanism would be created that would be used to resolve many economic and political tasks in the interests of a narrow group of people.

Deputy Head of the YABLOKO faction Sergei Ivanenko also said that Duma deputies faced "unprecedented pressure" during the drafting of the package of YABLOKO's draft laws, including "both stick and carrot".

Speaking about the position of the Union of Right-Wing Forces (SPS) faction, which expressed its readiness to support the "package" of draft electricity laws, Yavlinsky stated that "if the SPS votes "for the "package", this will be a fundamental moment for our relations."

The Duma will discuss the government's "package" of draft laws on reform of the electricity sector on Wednesday October 9, 2002. Previously the left-wing opposition had also stated its categorical rejection of the "package".

See also:
Energy Sector Reform