HOW WILL RUSSIA’S GOVERNMENT RESHUFFLING AFFECT NATURAL MONOPOLY REGULATION?

While the on-going government reshuffle in Moscow is generally regarded as likely to improve prospects for economic reform in Russia, in the specific area of natural monopoly regulation the chances for reform may be getting cloudier. The departure of Economics Minister Yevgeny Yasin removes the main institutional force behind the push to restructure such corporate giants as the Gazprom natural gas and the UES electrical energy monopolies; and Yasin’s designated replacement, Yakov Urinson, has yet to take a clear stand on the matter. The same can be said for deputy prime minister designate Boris Nemtsov, in whom responsibility for natural monopoly regulation has been vested.

Representatives of the energy monopolies seem to be stepping into the policy vacuum and downplaying the need for bold steps in natural monopoly regulation. Vitaly Bushuyev, an official in the Fuel and Energy Ministry, said on March 19 that these firms are themselves undertaking restructuring activities, and that government "intervention" would endanger the ability of Gazprom and UES to perform their energy-supply functions. (Interfax, March 19) Bushuyev described as "absurd" Yasin’s program for restructuring UES and introducing competition into the production of electrical energy — a program which the government has promised the IMF will be introduced. Instead, Bushuyev said, these firms should be kept intact but the government should force them to reduce their prices. This is despite the fact that the prices consumers pay for electricity are only about half of the levels paid by industrial users, and that both sets of prices remain well below world-market levels. However, Bushuyev’s call for lower energy prices in fact echoed Nemtsov’s initial policy statement on natural monopoly regulation made on March 17.

Goskomstat