OREANDA-NEWS. The meeting discussed the draft strategy for developing Russia’s electricity grid system and the work on setting up a single management organisation for the sector, Rossiyskiye Seti (Russian Grid).

Rossiyskie Seti company was established by the Presidential Executive Order of November 22, 2012.

* * *

PRESIDENT OF RUSSIA VLADIMIR PUTIN: Good afternoon, colleagues,

We are here to look at the draft strategy for developing the country’s electricity grid. I remind you that we decided this last autumn and agreed that the strategy would set out the main development goals and tasks in the electricity grid sector and the deadlines for reaching these objectives.

Economic growth and increase in industrial production clearly require synchronised development of the electricity grid system and indeed the energy system and generating capacity in general. I will say a few words about all of this now. If we want Russian business to be competitive we must have a reliable energy supply system with fair and justified prices for the final users. We have already done a lot over these last years to develop energy capacity. Solid private investment has also come into the sector, including from important and respected foreign actors. We should give them their due - they are working effectively.

We need to make decisive steps to improve the sector’s situation so as to put an end to the problems that consumers still face today: whole apartment buildings, neighbourhoods and even entire settlements have had their power turned off, as have healthcare faculties, strategic installations and so on. It was for this reason that we decided last October to establish the Rossiyskiye Seti (Russian Grid) company. Today, we will discuss the state of progress on this work.

We expect this company to act competently to modernise the sector and ensure synchronised development of the mainline and distribution networks and infrastructure, and to cut the costs and raise the quality of electricity facility construction. These tasks are among the objectives the draft strategy has outlined.

I think that we should focus our discussion today on the following issues:

First, our key priority is to improve the quality of service the sector provides. As I just said, whole settlements have had their power cut off due to repairs or breakdowns. To minimise the chances of this sort of thing happening, we need to make the grid companies more responsible, improve the performance evaluation process, and introduce international service quality standards and special systems for collecting information on the companies’ reliability. But how can we make them more efficient when we have 3,000 or more of them. This is also an issue we need to think about.

The large number of local grid organisations – several thousand around the country as a whole – does nothing to improve service quality. For comparison, as the specialists already know, Germany with its big economy has 800 such organisations, and Britain, which is certainly not the smallest Eurozone country, has only 16, while we have more than 3,000.

Another important efficiency indicator in the electricity sector is the straightforward procedure of technical connection to the grid. This is not the first time we are addressing this issue. Unfortunately, getting connected to the grid is still much too bureaucratic and opaque a procedure. You know very well that this is one of the things that drags down Russia’s overall rating for ease of doing business. We cannot but agree with the international organisations that point out this factor as one of the main problems they see when it comes to doing business in Russia. 

This is a serious matter. It takes nine months or more to get all the necessary permissions. There are also possibilities for all kinds of abuses within this system. Let me say again that we must fundamentally change this situation by improving the laws, toughening the fight against corruption, and simplifying the grid connection procedure itself. Consumers should be able to complete the whole process with maximum speed.

According to the plans I have seen, the time it takes to get connected to the electricity grid should be gradually reduced to 6 weeks by 2018. But why take so long about it? Can’t we do it any faster?

We need to be active about modernising the sector and building and upgrading mainline and distribution infrastructure, and we need to do so faster than the installations’ natural wearing-out process. In this work we need to make greater use of modern innovative methods, buy the equipment needed to implement them, and use smart technology. All of this requires big investment of course, serious financing, but the sector needs this investment.

We should use comparative analysis of grid organisations’ work. This method would enable us to determine benchmark efficiency levels for companies’ operations and investment activities and prevent unjustified cost increases from being passed on to consumers, which as we know often happens.

Reconstruction of existing facilities and commissioning of new grid infrastructure and generating facilities should be coordinated with the regions’ development plans and plans for building new residential districts and industrial facilities. Over time this will help to balance the load on the grids and avoid local electricity shortages. As things stand now, we have too little in one place and too much in another. We know that there are regions with obvious surpluses, and they don’t know what to do with them. They come up with various ideas about where they could export the electricity instead of thinking ahead about how to develop Russia’s own economy and put existing capacity to use in building up our own industry.

I would like to hear today about what is being done in all of these different areas.

On the matter of cross subsidies, this practice leads to a situation in which for many industrial consumers the cost of electricity from the unified grid is close to what it would be if they were generating it themselves, even with the cost of building generating facilities. I ask our Government colleagues to take a careful and balanced approach and settle this matter of cross subsidies.

Of course, all of this must be done very carefully and after thorough reflection. The Government has the relevant powers in this area. We will discuss today what mechanisms you plan to use.

Talking about the need for a careful and balanced approach here, I stress too that our main objective remains as before: to prevent any unjustified rise in electricity costs for the general public and small businesses.

Finally, the grid development strategy must take into account our plans to build up international cooperation in the electricity sector, including with the Customs Union and Common Economic Space member countries. Of course we are in constant contact with our European partners too on this matter. We need to continue this dialogue. There are some difficulties and conflicts of interests, but I believe that we need to hold talks and find common ground and areas in which we can work together.

I hope the strategy will be approved very soon. Unfortunately, its preparation and all of the work and discussions on the various issues involved have all dragged on too long. We need to move faster to complete this work and start its practical implementation as soon as possible so that citizens, business and investors see that we are carrying out a clear and consistent policy to improve the situation in the sector.

Of course, we also need to develop common standards for all of the organisations working in the sector, consolidate the companies, draft common standards and make sure the companies implement them in their actual operations and economic activity.