Tariff Regulatory Reforms for the Federal Grid Company, Russia

When:                  December 2005 to April 2007

Client:                   Fichtner GmbH & Co. KG, Stuttgart, Germany

Ultimate clients:     European Bank for Reconstruction and Development (EBRD)
                             Federal Grid Company (FGC), Russia
                             Federal Tariff Service, Russia

I was engaged as the tariffs expert on this project conducted for the EBRD as part of its due diligence for a loan to the FGC, which owns and operates the high voltage power system across Russia. My involvement in the project entailed:

• Conducting interviews with relevant government agencies such as the FGC and relevant Russian regulatory authorities.
• Review and analysis of the existing tariff structure of the FGC with respect to international best practice.
• Analysis of the effectiveness of current Russian regulatory mechanisms.
• Outlining possibilities for adopting a cost-of-service methodology having a return on equity component based on the capital asset pricing model, as well as incorporating incentives for performance improvement in areas of reliability, losses and operating costs.
• Assessment of institutional, technical, financial and legal constraints that would need to be removed to achieve tariff reform.
• Leading a workshop in Russia to discuss the above issues