Russia forges ahead with power market liberalisation

The freely-traded portion of the electricity market in Russia was increased from 30% to 50% on July 1. The rise is in line with the state's plans to achieve 100% free pricing by 2011 and sends a positive signal to the market that it will follow through with complete liberalisation, according to utilities analysts at investment bank Otkritie.

Otkritie analysts say the volume of electricity traded on the liberalised domestic market went up from about 25% in June to about 41% on July 1. The spot electricity price went up by 9.6% in the Europe-Urals price zone and went down by 20.3% in the Siberian price zone. In addition, July 2 prices on the day-ahead market showed a further 1.7% increase and a 0.9% decrease, respectively.

Although it is too early to draw forward-looking conclusions based on 1-day data, Otkritie says the upsurge in electricity volumes traded on the market has not sparked drastic price hikes and it does not intend to change its forecast of average free electricity prices for 2009.