In his opinion, one of the main reasons for the absence of the forecast is “the danger that, as soon as the market begins operating, its main task will be to raise the incomes of such companies”. “And this means a rise in tariffs,” Mr. Pustoshilov added.

“Today, regional power companies determine the level of tariffs for residential consumers using a mechanism of cross-subsidizing, in other words, by raising tariffs for industrial users. But in the future, tariffs are expected to rise uncontrollably, which will lead to negative social consequences. Federal authorities will have to react,” he stressed.

“After the state stops regulating tariffs and wholesale generating companies are created, residential consumers may find themselves unprotected against a rise in tariffs on the retail market,” said Anatoly Tikhonov, Deputy Governor of the Krasnoyarsk region. “Laws connected with energy sector reforms should reflect the interests of all market participants,” he noted.

Anatoly Chubais, the head of RAO Unified Energy Systems of Russia, submitted a directive on the creation of wholesale generating companies to the government. The document should be signed by Russian Prime Minister Mikhail Fradkov. However, Mr. Fradkov told reporters on Thursday evening that he had not yet seen the directive.

Also on Thursday, a committee on the reform of RAO UES did not approve the mechanism of privatizing wholesale and regional power generating companies. According to the members of the committee, more work should be done on the program to create wholesale power generating companies. In the opinion of the committee’s chairman David Hern, it is necessary to determine the mechanism for distributing revenues from the sale of RAO UES assets among shareholders. According to Vadim Kleiner of Hermitage Capital Management, the proposed privatization mechanism will lead to a reduction of the company’s value, due to low prices.

The directive was expected to be signed by the Prime Minister before a RAO UES annual general meeting scheduled for June 30, but Mr. Fradkov decided not to hurry. Now, a new RAO UES Board of Directors will consider the wholesale power issue, and it might come to a new decision.