Regulation No. 226: Perestroika for Russian Energy Investment

Deck: 
The Federal Energy Commission of Russia is set to restructure the country's energy rules and make opportunities for investment attractive.
Fortnightly Magazine - February 1 2003
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The Federal Energy Commission of Russia is set to restructure the country's energy rules and make opportunities for investment attractive.

Recharge the Economy with Renewable Energy Tax Credits

Potential investors in Russian energy will be particularly interested in Regulation 226, "On Price Formation Regarding Electric and Heat Energy." Enacted on April 2, 2002, this regulation, if implemented as fully presented, provides an attractive basis for the balance of interests between investors and consumers of Russian electricity called for by Federal Energy Commission of Russia (FEC) Chairman Georgy Kutovoi.

Regulation 226 incorporates many practices found in the United States and England. For example, while basing regulation on "cost-of-service" methods, it also provides the FEC with the flexibility to introduce advanced practices of performance-based regulation (PBR) or incentive regulation (IR) by permitting the FEC to apply indexing or automatic adjustment mechanisms to rates. These PBR and IR provisions, if applied appropriately, should provide ample incentive for efficiency and investment under the contemplated future industry structure of competitive electric supply and regulated transmission and delivery.

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