Market reform approaching in Russia
Enforcement of heat production legislation, which took effect at the beginning of 2011, is continuing in Russia. Meanwhile, the elimination of cross-subsidies has been advanced between electricity and heat production as well as between residential and big industrial customers. The country has also taken into use long-term heat tariffs, but, as with the legislation on heat production, their implementation is still unfinished.
Modernisation of the heat sector in Russia is vitally important, as it would be very difficult to achieve the national targets for energy efficiency without it. As the first step, a change from cost plus-pricing of heat to pricing based on alternative forms of heating is under consideration. This would encourage investments in improved efficiency and especially in combined heat and power (CHP) production.
Modernisation of the heat sector in Russia is vitally important.
In 2013, the Ministry of Energy stated that a heat reform should be developed before changing the current electricity and capacity market model. Therefore, at the end of the year, the Ministry of Energy proposed a new heat market model (for public discussion), which is supposed to ensure the transition to economically justified heat tariffs by 2020 and to attract investments into the heat sector. The new regulation concept is at an early stage and is expected to be further developed during 2014.
Quarterly reviews for gas prices
Since the beginning of 2013, wholesale gas prices (except
for private household and industrial consumers) have been reviewed quarterly. In February 2013, the Board of Russia's Federal Tariff Service (FTS) adopted a decision according to which the wholesale gas price for industrial consumers decreased by 3% as of the second quarter 2013, compared to first quarter.
As of 1 July 2013, the Russian Government increased gas prices by 15% compared to June 2013. Further increases were done in August and October in order to reach the planned total increase of approximately 15% in 2013 compared to 2012. According to a forecast made by the Russian Ministry of Economic Development, Russian gas price indexation will not take place as of July 2014. However, year-on-year gas price growth is estimated to be 7.6% in 2014.
In 2013, 1,026 (1,037) terawatt-hours of electricity was used
in Russia. The corresponding figure in Fortum’s operating area, in the First price zone, was 767 (769) terawatt-hours.
In January-December 2013, the average electricity spot price, excluding capacity price, increased by 10% to 1,104 roubles (2012: 1,001) per megawatt-hour in the First price zone.