According to the Concept of RAO UESR's Strategy for 2003-2008, the target model of retail markets has the following main features:
End consumers have the right to choose any retailing company from which they are going to buy electricity at free unregulated prices;
There are suppliers of last resort – they are obliged to enter into contract with any consumer who applies to them;
Unregulated prices are freely set by all market participants except for suppliers of last resort;
The price offered by a supplier of last resort shouldn't exceed unregulated wholesale prices by more than the amount of his sales markup, and the cost of other regulated services, execution of which is essential for electricity supplies, shouldn't exceed the cost of transmission services.
Retail market participants:
Electricity consumers;
Power sales (retailing) companies;
Suppliers of last resort;
Transmission organizations and other owners of transmission facilities that provide transmission services;
Producers of electric power – those that don't correspond to wholesale market rules, or other organizations having the right to sell, buy etc. electricity.
Operation mechanisms
Retail markets will involve the whole range of participants – consumers receiving services from power sales companies or suppliers of last resort, who will compete with each other.
Activities performed by suppliers of last resort (with regard to the sales markup of these suppliers) and transmission companies (with respect to calculation of transmission tariffs) will be regulated by the state.
Suppliers will be able to choose any sales company that is functioning in a certain region of the Russian Federation.
Pricing and the system of contracts
We are supposing that during the first three years of functioning of the target model, those electricity volumes that are within the limits of the "social norm of consumption" will be sold to the population at regulated prices (in other words, regulation of pricing in this field will remain).
The following components of the free end price of electricity will also remain regulated:
The cost of services provided by a supplier of last resort (the sales markup);
The cost of services provided by transmission organizations;
Tariffs for services supporting the work of the wholesale electricity (capacity) market;
Prices (tariffs) for services ensuring system reliability.
Besides, payments for technical connection to the grid will also be regulated.
Moreover, the Russian Federation Government will define groups of electricity consumers, which may undergo a special procedure of execution of their obligations concerning payments for electricity if these consumers receive services from a supplier of last resort.
The end price of electricity supplied to consumers will be calculated proceeding from conditions of contracts for electricity supplies (purchase and sale of electricity) and fluctuation of electricity prices in the wholesale market.
Formation of retail markets according to their target model will help to encourage investment attractiveness of retail market entities and create economic incentives for saving energy.
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