OREANDA-NEWS. January 11, 2011. The Ministry of Justice of the Russian Federation registered No.515 Order of the Federal Antimonopoly Service (FAS Russia) “On Approving the Technique for Verifying whether Capacity Price Bids are Economically Justified” of 10th September 2010. In the near future the Order will be published and come into effect.

The technique to verify economic justification of capacity price bids was developed and approved by FAS Russia in accord with Clause 5 of No.238 Resolution of the Government of the Russian Federation of 13th April 2010.

The antimonopoly authority requires this technique to control capacity price manipulations (in competitive capacity outtake) on the wholesale market of electric power (capacity).

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In 2011 (by 1st June) there should be organized four procedures for competitive capacity outtake, with capacity supply based on the bidding outcome starting on 1st January 2012, 1st January 2013, 1st January 2014 and 1st January 2015. Starting from 2012 competitive outtakes will take place once a year.
According to the new technique, economic justification of a capacity price bid is verified by comparing the bid of the capacity supplier with the economically justified capacity price in each free power transfer zone and the value of an economically justified bid of a supplier in the free power transfer zone.

A capacity price bid is economically justified if the bid price (per 1 MW) does not exceed the economically justified price in the free power transfer zone and economically justified bid of a supplier in the free power transfer zone.

The value of an economically justified supplier’s bid is determined using the return on invested capital method, with due account to specific characteristics allowed by the technique.

The economically justified price in the free power transfer zone is calculated using the criterion of minimizing total capacity cost with regard for information and data about market prices for capacity, the costs of alternative investments projects (for instance, network construction projects) and energy saving arrangements.