News

On October 6, 2006 Vegas-Lex Law Firm held the Conference "The New Model of the Wholesale Electricity Market". The participants of the Conference represented companies producing, marketing and transporting electricity and those engaged in operational dispatch management in the power industry. Considered at the conference The basics of the new model of wholesale electricity and capacity market, the system of adjustable bilateral long-term agreements, antimonopoly control and tariff regulation, civil law and tax aspects of the cost imbalance of the New Electricity and Capacity Market and other issues of interest were considered at the Conference.

The conference information partners included industry publications and Internet media, such as  ”Energy Market” and “Electro-Info” journals, Information Bulletin of the Federal Tariff Service and Energotrade web-portal.

The Conference was opened by Mr Albert Eganyan, Managing partner of Vegas-Lex Law Firm. In his opening speech Mr. Eganyan noted high importance of the event to the power generation industry– the entry into force of the new rules for the wholesale electricity and capacity market and, consequently, the emergence of a numerous questions regarding their application.

The first report was delivered by Mr Pavel F. Makarkin, Head of market support department of OAO SO-CDU UES. In his report he set out the basics of the new wholesale market model, told about the system of agreements for sale and purchase of electricity, mentioned the main development phases of the power industry reform, specified the goals of the reforms and the proposed time for reaching them and described the structure of the wholesale market sectors.

The next report was presented by Mr Alexander A. Pirozhenko, Head of Department for supervision and control over fuel and energy complex of the Federal Antimonopoly Service of Russia. In his report Mr. Pirozhenko spoke about the activities of the Federal Antimonopoly Service of Russia during the  formation stage of free electricity wholesale market and dwelt on the role of the Federal Antimonopoly Service of Russia in the power industry reforms, the authority of the Service in respect of  enforced reorganization of power generating entities and the risks of pricing manipulations on the New Electricity and Capacity Market.

Further description of the antimonopoly authority’s activities was presented by Ms Anna B. Nesterova, Deputy Head of Department for supervision and control over fuel and energy complex of the Federal Antimonopoly Service of Russia. In her report  Ms Nesterova dealt with such areas of activity of the Service as determining bad faith conduct of market participants and discovering pricing manipulation in electricity trading. Ms Nesterova also outlined main directions for the development of the state antimonopoly regulation in the field of wholesale electricity trading. 

The next speaker was Ms Ludmila A. Novoselova, J.D., judge of the RF Supreme Court of Arbitration who gave a detailed account of the status of judicial acts of the RF Supreme Arbitration Court forming judicial and arbitration practice. Her report also contained detailed descriptions of common cases of infringement of rights of legal entities in economic activity. The report was illustrated  by examples of enforcement activities of the RF Supreme Arbitration Court and lower arbitration courts and suggested practical recommendations on how to avoid common mistakes made by lawyers defending company interests. 

The attendees showed a great interest to the report  of Ms Irina S. Migunova, Head of law-drafting Department of the supervision and legal division of the Federal Tariff Service devoted to the role of the tariff authority in the creation of a new model of the electricity wholesale and retail market. Ms Migunova’s report vividly and concisely described the tariff issues of the wholesale electricity market, tariff-setting mechanisms, procedures and principles. Special attention was paid to tariff regulation after the transition period of the power industry reforms. 

The report of Mr Semion V. Mikhailov, J.D., senior associate of Vegas-Lex Law Firm listed the main legal risks that companies may face in their operations on the wholesale electricity market. Mr Mikhailov analyzed, from the standpoint of possible legal consequences, the new contractual system  of the wholesale market, and, first and foremost, the accession agreement .

Mr Oleg. I. Bazhenov, Head of Tax Arbitration and Consulting Department of Vegas-Lex chose as the subject of his report the tax aspects of the new wholesale market model, including the negative consequences of accrued cost imbalance. Mr Bazhenov reviewed various situation development options in the field of taxation of power sector companies, paid considerable attention to the issue of mandatory payment of VAT on the amounts of accrued cost imbalance, and analyzed possible solutions to the problem. Additionally, the speaker advised on tax risk reduction in certain typical situations. 

During the Conference the participants arrived at a conclusion that it was necessary to continue co-operation in order to discover and solve legal issues related to the functioning of the wholesale electricity market.