Last Friday, the Russian Deputy Prime Minister Victor Khristenko presided over a meeting on organising the Administrator for the Trade System (ATS) into the wholesale market of electric power. A compromise was reached during the meeting between the company Rosenergoatom, controlling all nuclear power plants in the Russian Federation, and the Russian joint-stock company Unified Electrical Systems (UESR).

The compromise involves that UESR will have 50% of the votes in the Supervisory Council. 50% is less, than UESR asked for (about 80%), but it is higher than the ATS regulation, prepared by Rosenergoatom, required (25%).

The paperwork required to launch ATS should be completed in two months, and it is not clear, whether the armistice between the energy jumbos will be sustained.

Today UESR covers 80% of the electric power market (the Federal Wholesale Market of the Electric Power (FOREM)). The remaining 20% belong to Rosenergoatom).

Nuclear power plants produce about 15% of the total energy supply in Russia, while the thermal stations generate up to 60%.

Conflict between Rosenergoatom and UESR
In the beginning of September, Rosenergoatom stated that UESR, controlling 75% of the Russian energy infrastructure, limits the access of “cheap electric power from nuclear power plants to the wholesale market”. The company’s representatives also accused UESR of hampering Rosenergoatom’s export of electricity to Georgia and Ukraine.

The press centre of Rosenergoatom released a statement saying that due to the artificially set grid limitations, the nuclear power plants failed to generate about 4 billion kWh of electric energy in the period from January to August 2001. The main reason for the limitations was allegedly the UESR’s monopoly on both sales and transportation of electricity, which was claimed to limit the access of cheap electric energy on the wholesale market. Rosenergoatom also stated that these limitations were set by UESR in an attempt to protect the thermal electric stations, owned by UESR.

Rosenergoatom also threatened UESR with a trial, but the threat was never carried out.

In an interview with Bellona Web, the head of the UESR press service, Yury Melikhov, said:

– The company intentionally reduced the grid capacity for its nuclear power plants in order to raise the prices on electricity later. As concerning their threats, we are sure that they will not go to court, despite of the harsh PR-campaign. Furthermore, Rosenergoatom, when realising the futility of their claims, withdrew the plea that we allegedly hampered nuclear energy export to Georgia and the Ukraine. As to the accusations, they are far-fetched and baseless. It is necessary to remember that it is not UESR’s duty to sustain the production of nuclear energy.

The grid limitations
Mr Melikhov persistently denounced the statements made by the Rosenergoaton about UESR not providing the energy production companies with equal access to the electricity grids. According to regular practice, nuclear power plants, as well as the other FOREM participants, have full and equal access to electrical networks of the integrated power system. Rosenergoatom intentionally decreased the generating capacity of the nuclear power plants in order to raise the prices and consequently earn the future excess profit.

On the other hand, Rosenergoatom officials say they were not aware that the repairs on several power plants would be finished ahead of schedule, and consequently producing more kilowatts of energy than what was expected. The company’s officials also said that they substantially assisted the thermal stations in saving large amounts of fossil fuel.

One can, however, hardly say that tonnes of oil were saved thanks to the nuclear power plants, because transferring energy produced in Rostov in the southern Russia to Arkhangelsk in north-west, which suffers from the shortage of fuel, is simply out of the question because of the long distance.

Previously, Rosenergoatom have expressed their intention to reduce supplies of electric power produced by nuclear power plants to the FOREM market since July 16th. This threat was not fulfilled either. The reason for such a step was low payment capabilities of some customers.

But the low payment capability were caused by Rosenergoatom itself, by lobbying an 54% increase in prices on electricity produced by nuclear power plants, in the first six months of 2001.

UESR claimed earlier, that nuclear management itself had dispelled the myth about cheap nuclear energy. The 68% increase of the fares on nuclear power plants production in the year 2000 and of more than the double in 2001, resulted in the current price of nuclear power being higher than the energy produced by thermal plants owned by UESR.

The energy production plan for the nuclear power plants for the last quarter of 2001, approved last week, suggests a production of 41,2 billion kWh. That is 3,1 billion more than the original plan provided by the government in May 2001.

Failed export
In compliance with the agreement between Rosenergoatom and RWE Trading GmbH (Germany), the supply of electricity to Georgia was supposed to begin in July 2001, but UESR refused to provide grid management services and energy transport.

Mr Melikhov explained that the conflict began when Rosenergoatom failed to meet the requirements given by the export legislation. UESR says that the governmental decree issued 12.07.96 N793 stipulates that the energy export can be carried out only by UESR or by the de facto non-existing Ministry for the Foreign Economical Relations.

But as the nuclear energy company sees it, UESR is mentioned in the decree, but that does not mean that it is the only possible exporter.

The decree N793 reads in particular, “Rosenergoatom co-ordinates the activity of exporting electricity produced at the nuclear power plants and distributes foreign currency earnings between them”, and UESR “executes export – import of electrical energy (power).”

Mr Melikhov says, Rosenergoatom offered export of its electricity at dumping prices, which is lower than internal Russian tariffs for nuclear power plant produced energy.

The nuclear energy company officials claimed earlier that the prices UESR asked for while exporting electricity to Georgia were lower than proposed by Rosenergoatom.

Nuclear kilowatts not so cheap after all
The UESR press service representative says, the fares for electricity from nuclear power plants are low, and that allows nuclear lobbyist to speak about the “cheap nuclear energy”. A kilowatt of energy, produced at nuclear power plants costs from three up to ten kopecks. At thermal stations the cost exceeds ten kopecks, and at hydro plants it amounts to 15 kopecks. However, in reality the nuclear power plant’s fares are complemented by the taxes of Rosenergoatom, boosting the cost of nuclear electric power to between 23 and 28 kopecks per kilowatt.

UESR believes the nuclear power plant’s fares are scheming. Neither the cost of building nuclear power plants, nor indispensable means for minimisation of the damage from a possible nuclear accident, nor the cost of decommissioning the nuclear power plants are included in the fares.

“And that is millions of dollars! In 5-10 years the service life of the majority of the nuclear power plants expires. They do not build new power plants, except for Rostov Nuclear Power Plant. Rosenergoatom tries to extract the excess profit, because they know, that their future will not be free of struggle,” Mr Melikhov says.

Rosenergoatom grows through reorganisation
On September 8th, shortly before the negotiations on creating ATS, the government approved Rosenergoatom reorganisation. In particular, Leningrad Nuclear Power Plant, being earlier in direct subordination to the Ministry for Nuclear Energy (Minatom), joined the concern.

There is a great probability that Rosenergoatom slowly will transform into a giant. RBC news agency reported that on September 25th, Ashot Madoyan, the director of the Research Institute for Ecological Problems of Energy Industry said that the new structure of the company will comprise, apart from the Russian nuclear power plants, also the Armenian nuclear power plants. The Armenian nuclear power plants will become “half Russian.” Mr Madoyan said that the respective decision was taken at the intergovernmental level. He pointed out, that this way Armenia would partly pay off its national debt to the Russian Federation.

The Armenian nuclear power plant (or Medzamor nuclear power plant), located near the country’s capital Yerevan not far from the Turkish boarder, has two first generation VVER-440/270s (seismically improved VVER-440/230s) reactors put in operation in 1976 and 1979. The plant is built in a seismically active area, but designed to withstand an earthquake with a force of up to 9 points on the Richter scale. It actually withstood the Spitak quake (Richter point 7-8), but was nevertheless shut down and partially discharged of fuel early in 1989.

In 1998, the European Bank for Reconstruction and Development (EBRD) promised a 10m ECU loan to the plant given its shutdown by the year 2004.