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Social responsibility and corporate sustainability report 2015

Tariff Policy and its Transparency for Consumers

The main revenue source of Federal Grid Company ensuring the UNEG operation are funds received from grid users for electricity transmission services via UNEG grids with standard level of electricity losses in these grids. Given that this type of activity is monopoly, price setting for such services is regulated by the State, and no transition to free (market) prices is expected in the near future. Improvements are only possible of state regulation of tariffs for electricity transmission services.

State Regulation of Tariffs

Federal Grid’s core business of electricity transmission via UNEG and technological connection services is performed based on tariffs that are subject to state regulation and approved by the federal executive authority for tariff regulation.

In 2015, the Federal Tariff Service of the Russian Federation was liquidated and its functions of government regulation of tariffs for services rendered by Federal Grid Company were transferred to the Federal Anti-Monopoly Service.

Federal Grid’s services of electricity transmission over electric distribution grids (hereinafter “EDG facilities) are regulated at the regional level by executive authorities of the RF constituent entities.

Tariffs for Electricity Transmission via UNEG

Since 2010, as a part of measures to improve the investment attractiveness of the electric power industry, tariffs for Federal Grid’s services on electricity transmission through UNEG have been established based on a return on invested capital method (RABregulation).

A second long-term period of regulation began in 2015.

RAB Methodology (regulatory asset base)

To calculate tariffs for each year of the regulatory period, the required gross revenue is determined by summing a return value, return on invested capital and expenses required to provide services on electricity transmission through UNEG. In order to avoid a sharp increase in tariff rates the RAB-based method provides a smooth-running mechanism, which involves redistributing the required gross revenue during the long-term regulatory period.

The FTS Resolution No. 297-e/3 dated 09 January 2014 approved tariffs for electricity transmission over UNEG for the second long-term period under regulation of 2015–2019.

Pursuant to clause 37 of the Basic Pricing Principles for Electricity Sector Prices/Tariffs Subject to Regulation approved by RF Government Resolution No. 1178 dated 29 January 2011, the FAS Order No. 1346/15 dated 29 January 2015 amended the FTS Resolution No. 297-e/3 dated 09 January 2014 and approved adjusted tariffs for Federal Grid’s services of electricity transmission via UNEG for 2016–2019.

In connection with the entry into force of a resolution of the Government of the Russian Federation, providing for a change of the procedure for determining tariff rates for payment of standard process losses of electricity during its transmission via UNEG, from 1 July 2015, the rate for payment of standard process losses shall be determined by the formula and is calculated by the commercial operator of the wholesale electricity and capacity market (OJSC «ATS»), which allows to reduce the risk of Federal Grid’s revenue shortfall due to the increase in actual electricity/capacity prices on the wholesale market against the prices that the regulator used as the basis for setting fees for UNEG standard process losses .

Adjusted tariffs for electricity transmission services, RUB/MW‧month and their previous period growth (%)

Adjusted tariff rates for electricity transmission services for the North Caucasus Republics and Stavropol Territory, RUB/MW‧month and their previous period growth (%)

Tariffs for Technological Connection to UNEG

The Russian legislation includes a procedure for setting a fee for technological connection to UNEG facilities in two ways:

  • approval by the FTS of Russia of the individual fee for a particular applicant, if measures of capital nature are required that will be included in a fee for technological connection in accordance with the applicable law;
  • approval by the FTS of Russia of a fee as a formula based on standard tariff rate R1, which is applied by Federal Grid independently to calculate fee, in case measures of capital nature for technological connection of an applicant are not required.

Tariff regulation focusing on the maintenance of the rate of return based on certain long-term parameters implies that Federal Grid will meet indicators for the reliability and quality of rendered services.

A standard tariff rate R1 for Federal Grid Company for 2015 was approved by the Resolution of the FAS of Russia No. 2387-e dated 23 December 2014 in the amount of RUB28.61 per kW (ex VAT).

For 2016, a standard tariff rate (R1) was set by the FAS resolution at RUB25.16 per kW (ex VAT) with a breakdown by event. The rate reduction may be explained by the reduction in Federal Grid’s personnel involved in technological connection.

The legislation does not provide for differentiation of a standard rate C1 for 1 kW of connected capacity by a voltage level, connected capacity range, categorisation of power supply of applicants, territories of the Russian Federation, except for consumers that connect less than 150 kW. In this case the rate R1 does not include the cost of Rostechnadzor inspections. The rate for such category of consumers is set at RUB 24.64 per 1 kW for 2016.

Standard tariff rate C1 is set at a single level for consumers in all constituent units of the Russian Federation.

Starting from 2013, the fee for technological connection of generation facilities to UNEG includes both the costs of construction of “last mile” grid facilities and investment costs of expansion of the existing grid infrastructure to assure the delivery of generation capacity (irrespective of the type of generation – HPP, NPP or CHPP).

Trend analysis of average unit rate for capacity, RUB/kW 2011 2012 2013

2011 2012 2013 2014 2015 2016
Standard tariff rate R1 Not set Not set 27.56 27.56 28.61 25.16
Change, % - - - 0.0% + 3.8% -12.05%

Trends in the approved aggregated fee for technological connection in 2010–2015, RUB billion.

In 2015, the fee for technological connection as per individual designs was set for 11 consumers and totaled RUB22.3 billion (ex VAT).

The applicants with the largest fee are as follows.

RUB7.6 billion JSC Rosenergoatom Concern – Rostov NPP, Unit No. 3

RUB7.3 billion JSC Rosenergoatom Concern – Beloyarskaya NPP-2

RUB4.6 billion JSC DRSK

RUB1.1 billion JSC Fortum – Chelyabinskaya HPP

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