5 th ERRA Annual Meeting Country News – The Russian Federation Krasnodar Territory Sergei Milovanov Regional Energy Commission – Prices and Tariffs Department Krasnodar Territory The Russian Federation Budapest, Hungary April 14, 2005

Regional Energy Commission – Prices and Tariffs Department – Executive Authority Agency of the Krasnodar Territory Main Functions Regulation of Prices and Tariffs Forecast and Projection Functions Controlling Functions © ERRA 5 th Annual Meeting Budapest, Hungary, April 14, 2005 Slide 2

Approval of tariffs in the regulated areas of activity Electricity tariffs Heating tariffs Tariffs for natural and liquefied gas supplied to the household consumers Tariffs for water supply and water discharge Tariffs for municipal and suburban automobile transportation Tariffs for suburban railroad transportation Tariffs for ancillary charged services, provided by the state institutions and organizations of Krasnodar Territory Trade mark-ups for medications Price and tariff regulation in other areas of activity stipulated in the Russian Federation legislation © ERRA 5th Annual Meeting Budapest, Hungary, April 14, 2005 Slide 3

Forecast and Projection Functions Systematic analysis of the pricing processes in various sectors of the economy Forecasts of tariff dynamics, monitoring of prices for real estate, main types of goods, services, products, purchased for the state needs. Drafting of proposals for the Federal and regional bodies of representative and executive authorities on improvement of the pricing policy and increase of taxable base. © ERRA 5th Annual Meeting Budapest, Hungary, April 14, 2005 Slide 4

Controlling functions Inspections of business activity of regulated entities Control of proper application and economic feasibility of prices and tariffs, consumption norms of utility services in municipal entities Coordination of procurement prices for goods for the needs of budget organizations during development of state and municipal orders, and their enforcement Imposing of administrative sanctions for violation of pricing procedure © ERRA 5th Annual Meeting Budapest, Hungary, April 14, 2005 Slide 5

Main events and activity within the period from May, 2004 to April, 2005 Setting of electricity and heat tariffs, and retail prices for gas for Reduction of consumption norms of natural gas by household consumers Setting of retail prices for gas with consideration of payment for wholesale intermediary services after establishment of user agents, and conclusion of agreements between “Krasnodarregiongas” and gas distribution companies Establishment of an independent electricity retail supplier, setting of unified purchase tariff for 18 electricity supply companies of Krasnodar Territory Setting of tariffs for heat energy Organization of All-Russia seminar on tariffs regulation jointly with the Federal Tariff Service of Russia and with Interregional Association of Regional Energy Commissions Program development on reduction of electricity cross-subsidies: - anticipatory tariff growth for budget and agricultural consumers - reduction of cross-subsidies for households Efficiency increase of the energy saving program implementation and its enforcement © ERRA 5th Annual Meeting Budapest, Hungary, April 14, 2005 Slide 6

Main issues and activities for the next year Regulation of tariffs for electricity transmission services provided by energy supplying companies of the Krasnodar territory Setting of tariffs for heat and electricity energy production Development of forecasts of electricity capacity balances Organization and execution of inspections of energy supplying companies on the issues related to tariffs formation and application Control of implementation and analysis of the measures aimed at reduction of technical and commercial losses of electricity in energy supplying companies Control and analysis of the activities on reformation of municipal electricity networks Development of reporting forms with the aim of optimization of electricity tariffs calculation for the next regulatory period Activity with local authorities on establishment of justified norms of utility services consumption Facilitation of the program implementation on installation of meters of utility services consumption Activities on establishment of a single company for liquefied gas sales Facilitation of housing stock inventory © ERRA 5th Annual Meeting Budapest, Hungary, April 14, 2005 Slide 7

Key issues and tariff design methodology Improvement of electricity settlement procedures Development of model energy supply agreement together with energy supplying companies of the Krasnodar Territory Drafting of proposals for methodology development of retail prices for liquefied gas for household consumers Payment for reactive energy © ERRA 5th Annual Meeting Budapest, Hungary, April 14, 2005 Слайд 8