As in the past year, the main organizer of the conference that was held 26-27 March 2010, was the company "KRES-Alliance, engaged in energy consulting and strategic management of the two major electricity suppliers in the Murmansk region - OAO Kolenergosbyt" and "KRES" . Although the event had an international status, the main topics that were discussed at the conference were about Russia. It was caused as by the composition of the participants (Russian power companies were in an absolute majority), and by its title: " Last year of the electricity reform in Russia: natural “decline” or successful completion?”
A year ago, at the end of the first conference, Alexey Presnov, CEO of KRES Alliance, Chairman of the Board of Directors of ” Kolenergosbyt " and " KRES” , said that Saariselkä, resort town in Lapland, where the conference took place, had a lot of chances to become energy "mini-Davos", having in view the composition of the participants, the issues to be discussed in an atmosphere of informal stakeholder discussions, as well as convenience, availability of the Finnish winter resort for meetings of international format. How justified these hopes, we have learned from the conversation with Alexey Presnov at the end of the second conference.
Alexey, subjects of the conference assumed as a year ago, the discussion was mainly of Russian problems, the participants were also - 90% Russian. Would it be better to discuss these issues at home, in Russia?
You are right; in general topics were about Russia. And it cannot be in another way, because the organizer of the conference is a Russian company, which I chair. In addition, though our transition period in power is formally aims to end, overall the reform is still far from complete, and because of it we still have a lot of unsolved problems. But this does not mean that such a conference is interesting only to us and the international is only on the venue. In fact, at the first conference, and the second, we looked at all of our problems under the prism of comparison of our electricity reform with similar changes, which took place in other countries, primarily in Europe, our neighbors.
Remembering last year's conference presentation slide, where was shown the ship, symbolizing our industry in a stormy sea of reform, we can say that our neighbors have already "crossed an ocean" and are "on the other side, so we also have to get there. In this sense they provide us with a kind of beacon or compass. Therefore, it is very important, in my view, to “synchronize watches” in our reform, not only with themselves but also with advanced economically successful countries, and the presence of even a small number of foreign participants from these countries at our conference is very important.
Especially when the participants present companies of the market infrastructure of our neighbors - Fingrid Oy, managing company of the national backbone network in Finland and at the same time is a system operator, and Nord Pool Spot Oy, the Finnish operator of one of the largest electricity markets in Europe. In addition, Saariselkä was well organized in every sense for this kind of events, starting from transport access, ending by the level of service and opportunities for recreation. In this part of the arrangement of our life, we can learn from our neighbors too.
How would you answer on the basic question of the conference? What lies ahead: the decline or the successful completion of the reform?
The answer on the question depends, first of all from us. In general, we continue to move in the right direction, and this idea was heard in the speeches of participants of the first discussion panel, arguing the relationship of subjects in the electricity market. Focus of the discussion in this year was aimed at the relations of generating companies and other market participants, primarily the sales companies.
It's not a secret that the main problem in the market today is a giant non-payment, consisting of two components: non-payment at retail, reaching 140 billion rubles. And non-payment in the wholesale electricity market, range 30-35 billion rubles. Clearly, this level of defaults (non-payments) can be estimated as close to catastrophic, and it threatens the entire industry as a whole, and the process of its reform of conceived scenarios. Here is the answer to the question why this is happening, where the problem and source of payments are, and what we have to do, to solve this problem, and, not to slip back to just administrative monopolies in the industry.
Discussion was moderated by Vasily Kiselev. A presentation was made by one of the most competent and promising managers NP “Sovet Rinka“ Andrei Leontiev, speaking about the target models of the retail market, short and medium measures to remedy the situation on the market of the proposed controls. About the state look at the current situation and it’s relation to the developed market models spoke Maxim Balashov, deputy director of the Department of Electricity Ministry of Energy of Russia.
As in the past year, a memorable performance was presented by Vitaly Korolev, the head of the administration of power control FAS Russia. His observation that the industry is developing very rapidly, though not always in the right direction, became a brilliant phrase at the conference. In the debate actively took part promoted representative of power -sales, -generators, -networks. The main goal had been reached, we showed in practice that the problems of the industry lie in this model of today's market, that retail market - is an inextricable part of the overall market and that the welfare of all participants in the chain production, transmission and distribution of electricity depends on its effective operation .
In this question we’d certainly got help from a well-structured, dynamically given report of the Executive Director of "Kolenergosbyt Mikhail Popov, that was called symbolic -" View from the frontline”. We had seen with our own eyes (and for some participants, especially from the generating companies were in some extent the revelation of) what was really happening in everyday life of energy retail companies. Literally they have to fight to break through the thicket of inconsistent tariff policy, gaps in legislation, paternalistic, condescending attitude toward customers - non-payers from the authorities and law enforcement.
In this context, i would like to underline a significant remark of Natalya Boyko, a representative of Rosenergoatom, and in the past - one of the developers of the Rules of retail markets in transition, who told at the conference us that the generators "had finally deployed to the sales by face”, and ultimately they were not going to fight or compete with them but to manage them.
In fact about the need of integration, consolidation of the new market principles, through the mutual ownership sales, generation and network assets, we spoke at the last conference. Inthis integration is important to remain on the market economy, to prevent monopolies in the retail market, and this can be achieved through the creation of a truly competitive environment for retail energy companies in a particular region rather than in the whole country. In this case, on the market would stay two or three major retail energy holding companies engaged in the fight "Nanai boys" among themselves, and you could forget about the real competition about which so much had been said at the beginning of the reform . Although not very articulated, but it was suggested that the status of Guarantee Supplier in current form should be changed as soon as possible, it had to be aligned with its original sense - to supply electricity to those who have not yet determined with a commercial vendor, and to "the orphaned and the poor.GP can become an organizer of the retail market in its region, on what insists the alternative target model, briefly presented by Maria Korchagina of LLC Energostroy. But in any case, the GP should not compete with other sales companies. Then the sales will be real competitive, and therefore, the struggle for the status of GP by administrative and competitive methods would be meaningless.
In this discussion, (at first glance absolutely Russian), took part our Finnish and German colleagues - they were actively involved in the controversy, told us how this or that matter had been resolved by them.
At the second panel were discussed the problems of markets’ integration at the international level, in particular - cross-border cooperation in this area on the Kola Peninsula. We talked just about the integration of Russian site ATC markets and the Scandinavian Nord Pool, "and not just about the export of our electricity in Finland. At the meeting we saw a well-researched project of energy – corridor or energy - bridge from Russia to Finland in the g.Kovdor, assuming the first stage of reconstruction of the existing distribution network of 150 and 110 SW and the construction of insertion with direct current (VAC) with capacity of 300 MW for the parallel operation of two different power systems. VAC has been developed by Siemens, and in addition to its main task - the transfer of electricity in both directions between UES of Russia and the Nordic power system - solves other problems for the network management regimes. In fact, this is what a lot of talk today - the creation of intelligent, smart power grids on the basis of innovative technologies. As potential participants of the project on the Russian side were named Rosenergoatom, MRSK «Severo-zapad», INTER RAO ES, FSK ES, Murmansk region.
A possible participant may become Eurochem, which owns Kovdorsky GOK – it is in its interests to reconstruct lines of 150 kV. Coordinator of the project and its operator "the KRES Alliance. From the Finnish side interests in such projects have confirmed market operator Nord Pool, and network and system operator Fingrid. The representative of the latter, Mr. Risto Lindoors, made a detailed supplementary on the theme of integration of markets in Europe, which described the impressive progress in this area in the European Union, and at the same time consecrated detail the problems of interaction with Russia. The main difference between us and them is in the very of ideologies of export-import activities. We regard this activity as a kind of one-sided "pipe",on which "sits" a kind of state-owned company and "shakes" electricity "from us to them, earning on a difference in the prices of our and foreign markets. This approach, widely practiced in our country may be justified in the administrative-command economy or a weak Russian economy since ancient times, when we lived mostly in isolation, and sold our natural resources and uncomplicated products for Western manufactured goods, cannot be justified in the current period of global economic integration. If we have started market reforms, so it is obvious that sooner or later, our markets, including electricity, will be integrated with the markets of our neighbors, and therefore, the prices on them will be equalized. And this is already happening. The point is that the organization of cross-border linkages for two-way transmission of electricity and power in Europe is seen as a measure that improves the reliability of electricity supply to customers and reduces their prices due to direct competition with suppliers from different countries. We have exactly the opposite. The representative of the System Operator UES of Russia refused to participate in this conference, because he considers that a priority is to provide security in energy supplies to Russian consumers, and exports of electricity, in his opinion, is aimed at its reduction. RAO UES had also decided not to send a representative to our conference. Also there were no representatives of FGC. In this block, rather interesting and sharp was the speech of Stepan Ozornin, who represented the Russian branch of the company Siemens. He underlined the technical feasibility of the project, and warned us all against the evasion of international cooperation based on market principles, the monopolization of the whole subject of export-import operations. The results of this policy are obvious: Technological and technical backwardness and barriers for Russian companies in international markets.
Does this mean that your project on the organization of the export corridor in the area Kovdor still unrealizable?
By no means. We believe that raised at the conference sharp questions will give new impetus to its development. We are confident that we will be able to convince all interested potential participants, including RAO UES and the System Operator to join the project. It is vital for the Murmansk region, for Rosenergoatom, to increase the reliability of power supply of current and potential customers in the Murmansk region and Karelia. This project can be realized in a reasonable payback periods, technically and economically. This is its advantage. "KRES-Alliance" is ready to be the integrator of the project, a kind of developer. In consideration of the complexity of the project and the need to interact with the participants in the real marketplace, including those abroad, the operator of the project should be flexible and agile structure, and at the same time highly professional and responsible. I think today "KRES-Alliance meets these criteria.
What else was discussed at the conference?
The third block of the conference was devoted to the relationship in the electricity retail market and market of housing sector. The speakers were our leading experts in the field working with customers from the sphere of public utilities. Discussion panel was led by Tatiana Ivanova, deputy director of our company in marketing and corporate governance. She is responsible for our positive image in the eyes of consumers and executives of utilities (ICU), she is working with complaints and claims, and tries to synchronize our tactics and strategy of the ongoing processes in the field of housing management, simultaneously looking at changes in the regulatory framework of electricity reform. The main report was presented by Elena and Alyona Prisyajnyuk Zagorje - top managers of our operating companies KRES-Kolenergosbyt dealing with this topic. The report was constructed from three main parts: problem, cause - legal aspects and fork - our specific experiences, accomplishments and failures. Despite the fact that this issue does not affect directly the generators and even our Finnish colleagues, everyone lively participated in the debate.
In details were discussed issues of work with bill receivables of the population and the municipal utilities, as well as the problems of tariff imbalances. At present, the share of population in productive supply is relatively small, but the share of utilities in receivables of guaranteeing suppliers is incommensurable with it - this situation is typical for most regions of the country. Among the main causes of debt of heat- and water-supply companies - tariff imbalances - when established tariffs for heat and water, do not cover the cost of electricity for the development of these utilities. The population refuses to pay for consumed electricity for another reason - it is simply not readiness to move to the so-called commin-house accounting of consumed resources. Elena Prisyajnyuk noted that the mentality of the Russian population in the mass does not allow him to become a full-fledged master of their own homes and to be responsible not only for the apartments, which it considers to be his for a long time, but for the common property in a tenement house, which "Uncle" have to supply with power. On the other hand when the government had given a real owner-occupied apartment buildings, it didn’t take care of, to accompany the transition to a new model of housing management and related information activities. As a result, each region develops its own working practices of power supply organizations and implementing utilities, and with the population. The all-Russian legislation has been nearly four years obviously and flagrantly violated in most regions of the country, and the executives and supervisory bodies are in no hurry to restore the order in this case. The judiciary is unable to solve these complex issues, and consistently across our great country. Moreover, in our Murmansk region, we have two contradictory decisions of the regional court on the organization of settlements with a population of guaranteeing suppliers adopted with difference in 2 weeks! One consolation is that these decisions were taken by 2 different combinations of the judicial panels.
The contradictions inherent in the federal legislation governing the electricity and utilities, lead to different practice of organizing activities for energy supply of the population in different regions of the country. In discussing possible ways of developing relations of consumers, insurance of suppliers and the ICU, the panelists said that is impossible to clean up the industry without the active participation and consistent position of the various government departments and institutions. At The conference was once again highlighted the need of the planned legislative changes to improve payment discipline in the retail electricity markets - mandatory prepayment for the citizens, the responsibility of the ICU for common-house needs and restrictions. Alyona Zagorje drew attention of participants to the fact that at the same time we need to resolve issues related to the provision of public services - namely, the measures of administrative influence on the perpetrators, the responsibility for maintenance of internal networks, on the introduction of restrictions. Representatives of the Karelian Energy Sales Company Alexey Ermakov, and Tim Savin took an active part in the discussion. They shared their experience of the organization of public service, bypassing the ICU. Finnish representatives described how the interaction between the built sales companies and private customers in Finland is. The interesting thing was that an even private consumer, who lives in an apartment house, may decide to change the one-man sales company. However, once it was pointed out that this is possible only if he would negotiate with other residents of the house - all decisions are taken collectively. The representative of TGC-1 Nikolai Melnikov, suggested that while the resource providers will not have the opportunity to practice switch off of regular defaulters, and while the responsibility for such disconnection will not lie on the executors of public services – there will be no order on this market. And this is understandable. Non-payment for heat - mostly in monetary terms products of TGC-1 in the retail market - a whopping amount, and the solution of this problem have not been created. That is why all the hope of companies such as TGC-1, is on the development of the electricity market, allowing them to earn real money to maintain largely unprofitable heat generation, which works for the needs of utilities. Head control power of FAS Vitaly Korolev expressed regret that at the conference was no representatives of the Ministry of Regional Development Conference, in whose charge is the regulation of the functioning of public utilities.
Stepan Ozornin’s replica was very impressive. The idea was that as long as the payment of resources for population in payment for our housing will be so as it is, we will not be able to build any serious market in housing. You cannot ride on modern cars like the whole developed world, relax in a good resort, like the whole successful world, wear neat clothes, like the entire civilized world, but to pay for water, heat, electricity and gas, as in the poorest countries. Of course, not all of us live well, but for them we must create social programs,about which spoke our Finnish colleagues. Suppliers of the resources and implementing public services should not be the social security department. One of the important points that drew the attention of participants in this debate was the fact that market participants forms the need for a comprehensive approach to the problem of the retail market. Managing companies in the utilities, to some extent in relation to the sales companies play the role, similar to the role of themselves in relation to the generators and networks. And the failure of the Criminal Code, including the problem of adequate billing population correct tariff, which inevitably leads to the breakdown of all chains. Therefore Energosbyt has already "moved", as they say in public utilities, as well as generators "moved" in the sale. This is reflected in the active development of the market billing of utility bills, and in entering into marketable assets in utilities and municipal utilities to provide all kinds of energy services. Goes all the same market integration processes of establishing control over financial flows through market mechanisms. In the background, attempts to exclude the ICU from the chain of provision of housing services in general, and electricity services in particular, as requested by some large retailing companies, look, at least, unproductive. The same Finnish experience and, indeed, and German and American, were discussed at a conference talking about something else - should be brought up and the population of market participants and public utilities, cultivate market consciousness, not to return, in fact, in the past.
What are the prospects of this conference? Will it be annual?
Absolutely sure. We have received a high assessment of its organization, and not only from market players, but also from members of federal agencies, and now we'll work with them to include a conference in their annual plans. Do not forget that the conference - it is not only a meeting room, but also an informal interaction between participants and in the hotel lobby, and on trails, and ski lifts. The degree of confidence to each other in such circumstances is growing very rapidly. Given that we have at least three more years of post-transition period, while the population will pay the regulated tariffs, and our global problems are gradually solved, Saariselkä have a good chance to see us again in about a year. This year has already been a number of participants at the conference for the second time, and they recognized that it really was for them an event which they have been eagerly awaiting. I hope that now these people will be more.
Text is prepared by : Alyona Ivanova, EnergyLand.info
Translation : Mukhametyanov Timur, EnergyLand.info
Read continuation: Murmansk region may export to Europe light, or when will kilowatts flee abroad?