OREANDA-NEWS. March 15, 2013. The Federal Antimonopoly Service (FAS Russia) held a meeting of the Expert Council on Electric Power Industry to discuss pressing issues of developing competition and antimonopoly regulation on the wholesale and retail markets of electric power and capacity.

“The antimonopoly authority brings up for discussion by the expert community draft methodological and regulatory documents of FAS Russia for preliminary consideration”, said Deputy Head of FAS Anatoly Golomolzin, opening the meeting of the Expert Council.

The key item on the agenda was draft changes to the Wholesale Market Rules prepared by the Antimonopoly Service and aimed at creating equal conditions for operations of wholesale market participants. At the meeting, members of the Expert Council and invited participants discussed the project for creating a “common delivery point cluster “. The project was supported by buyers of electric power and energy suppliers. In their opinion, creating possibility to trade electric power and capacity using the same point cluster in the region reduced prices for end-customers due to decreased deflection costs that constitute an essential element of the price for the end-customers. This mechanism will help improve competition, exclude intermediaries and facilitate technological process in power supplies.

As a result of the discussion, members of the Expert Council decided to take the draft project for creating the “common delivery point cluster” devised by FAS as a basis.

The second item on the agenda was Draft Techniques for determining conformity of price bids for selling electric power and capacity to economic feasibility. The Draft Techniques are aimed at revealing incidents of price manipulation on the wholesale market of electric power.

The Expert Councils focused primarily on discussing the technique for determining conformity of price bids for selling electric power and capacity to economic feasibility. The antimonopoly body proposed to use the “real costs” principle to the suppliers’ price bids for selling electric power that have a step structure. In other words, every subsequent price in a step of a supplier’s price bid must be formed on the basis of the average weighted variable (fuel) costs corresponding to the energy generated at this and previous steps.

A representative of the Ministry of Energy, the “Market Council” Non-Commercial Organization and representatives of generating companies addressed the issue of Draft Techniques emphasizing the importance of using a different pricing method at steps of bids for selling electric power: average marginal costs for each step. Consumers of electric power commented that prices in the bids filed under the marginal costs principle are several times higher that the level of reasonable expenses of suppliers for power generation and, therefore, prices formed using such bids on the day-ahead market also are unjustified.

Representatives of electric power consumers supported the position of the antimonopoly body indicating that the Drat Techniques contribute to considerable reduction of prices in the bids of generating facilities on the wholesale market of electric power and capacity, which, in its turn reduces prices for end-customers and the risk of price manipulation on the wholesale market of electric power and capacity. The Drat Techniques also help choose the most effective generating equipment.

“Currently generating companies file price bids based on the costs of expensive fuel, for instance, residual fuel oil used for generating “close” megawatt hour. Expenses for the main volume of generated electric power, generators incur at low costs of regulated gas. The result of such policy is an increased overall level of electric power and considerable price volatility that adversely affect consumers while the overall price conditions change insignificantly”, the Chairman of the Expert Council Anatoly Golomolzin commented the situation on the market.

As a result of the discussion, members of the Expert Council made a decision to take the Draft Techniques devised by FAS as the basis. Participants agreed to send proposals for improving the Draft Techniques.