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Regulation of Prices and Tariffs Established for Generating Companies in the Wholesale Electricity and Capacity Market
 
PIIS231243500023546-8-1
DOI10.18254/S231243500023547-9
Publication type Article
Status Published
Authors
Nadezhda V. Koropets 
Affiliation: Moscow State Law University (MSAL)
Address: Russian Federation, Moscow
Journal nameEnergy law forum
EditionIssue 4
Pages30-38
Abstract

The article deals with legal issues of pricing on the wholesale electricity and capacity market (hereinafter referred to as the WECM). The author reviews doctrinal approaches to price and tariff setting for generating companies, regulatory control, and judicial practice. The problem of determining the price for electricity and capacity transmission services rendered to generating companies is noted. Special attention is paid to the issue of defining the criteria of economic reasonableness of price bids submitted to the WECM. Proposals on the content of the methodology for determining the compliance of price bids with the economic reasonableness requirements are formulated. The research was conducted with the financial support of the Russian Foundation for Basic Research as part of scientific project No. 20-311-90034.

Keywordsenergy law, legal status of generating companies, price regulation in the electric power industry
Received23.12.2022
Publication date27.12.2022
Number of characters28687
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1 A number of scientific researches [1] focuses on the issues of pricing on the wholesale electricity and capacity market (hereinafter referred to as the WECM), however, it would be wrong to think that this topic has been fully studied. Rapidly changing laws and an increasing number of court proceedings focused on regulated price (tariff) setting disputes as well as violations of pricing procedures by generating companies in the wholesale electricity and capacity market detected by the antimonopoly authority show that the study of this issue is relevant.
2 The wholesale electricity and capacity market differs from other energy markets significantly: specific commodities (electric power and capacity) are traded on this market; NP Market Council Association has formed an unparalleled system of contracts; private law relations are heavily influenced by public law regulation.
3 Specific features of pricing should be mentioned separately.
4 For example, A.N. Varlamova [2] proposes to divide prices on the wholesale electricity and capacity market into three independent groups based on the applied contractual structure:
5 1. The price is set based on approved tariffs. This group includes regulated contracts, must-run generation, and trade in electricity and capacity at free (unregulated) prices to compensate for losses in power grids.
6 2. The price is set upon mutual agreement of the parties. This group includes electricity and capacity trading at free prices as well as electricity trading in amounts corresponding to deviations.
7 3. The price is determined by bids. This group includes competitive selections of day-ahead price bids, competitive selections of bids for system balancing, and competitive capacity auctions.
8 Taking into account the regulation in force, this list can be supplemented with a group of prices, when an extra charge established by a regulation is imperatively added to the price.
9 For example, as per clause 119 of the Wholesale Market Regulations, [3] since 2015 the price for the capacity of nuclear power plants sold via competitive capacity auctions shall include funds needed to ensure the safe operation of these plants. [4] The amount of the said extra charge is determined by the Federal Antimonopoly Service of Russia. So, an extra charge in the amount of the funds needed to properly maintain power generation facilities is added to the price determined by way of bidding.
10 In this regard, the point of view shared by V.F. Popondopulo, O.A. Gorodov, and D.A. Petrov [5] is worth mentioning. The scholars propose to establish an extra charge to be added to the equilibrium wholesale market price to determine the price of electricity produced at qualified generating facilities operating based on renewable energy sources in order to support generating facilities operating based on the use of renewable energy sources. The said extra charge shall be calculated based on the need to achieve the target volumes of generation and consumption of electricity produced at qualified generating facilities operating based on the use of renewable energy sources established as per the key areas of the state policy for improving the energy efficiency of the electric power industry.
11 Let’s review the first category, the regulated prices (tariffs) on the wholesale electricity and capacity market, in more detail. The provisions on regulated prices (tariffs) on the wholesale electricity and capacity market are stipulated in Art. 23.1 of the Law on the Electric Power Industry as well as in Section II of the Basic Principles of Pricing and include the following groups of regulated prices (tariffs):
12 - prices (tariffs) on the wholesale market (clause 2 of Art. 23.1);
13 - prices (tariffs) for services rendered on the wholesale market (clause 4 of Art. 23.1).
14 The price (tariff) system also includes payment for technological connection to power grids and/or standardized tariff rates that determine its amount.
15 The list of prices (tariffs) provided in Art. 23.1 of the Law on the Electric Power Industry is exhaustive as per clause 5 of the Article. This means that new types of prices (tariffs) should only be introduced by amending Art. 23.1 of the Law on the Electric Power Industry. At the same time, a number of prices (tariffs, extra charges to prices) on the wholesale market may be set according to paragraph 3 of clause 2 of Art. 23.1 of the Law on the Electric Power Industry based on Russian laws in the manner prescribed by the Government of the Russian Federation. [6]
16 Thus, Decree of the Government of the Russian Federation No. 1178 dd. December 29, 2011, and Decree of the Government of the Russian Federation No. 1172 dd. December 27, 2010, provide additional lists of prices (tariffs) and extra charges in the electric power industry subject to government regulation.
17 In addition to prices (tariffs) for electricity and capacity on the wholesale market, prices (tariffs) for services rendered by organizations ensuring the operation of the technological and commercial infrastructure of the wholesale electricity (capacity) market as well as by other electric power industry entities are subject to government regulation.

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1. Izotova A.V. Specific Feature of State Regulation of Prices (Tariffs) in the Electric Power Industry // Energy Law Forum. 2015. No. 4. P. 12-20; Koropets N.V. Wholesale Electricity and Capacity Market: Problems and Tasks of Legal Regulation // Energy Markets: Problems and Tasks of Legal Regulation : Monograph / edited by V.V. Romanova, LL.D — Moscow : Yurist Publishing House, 2018. — 91–106 p.
2. Varlamova A.N. Competition Law and Industry-Specific Commodity Markets: Electricity Market // Competition Law. 2019. No. 2. P. 9–13.
3. Decree of the Government of the Russian Federation No. 1172 on Approval of the Wholesale Electricity and Capacity Market Regulations and Amendments to Certain Acts of the Government of the Russian Federation Regarding the Arrangement of Wholesale Electricity and Capacity Market Operation dd. December 27, 2010 // Official Gazette of the Russian Federation, April 4, 2011, No. 14, Article 1916.
4. See: Kashlikova I.A., Chernoshtan Yu.V. Legal Features of Participation of Nuclear Power Plants in Electricity and Capacity Purchase and Sale in the Wholesale Market // Energy Law Forum. 2016. No. 3. P. 46–56.
5. Popondopulo V.F., Gorodov O.A., Petrov D.A. Renewable Energy Sources in the Electric Power Industry // Energy Law. 2011. No. 1. P. 23–29.
6. Izotova A.V. Features of State Regulation of Prices (Tariffs) in the Electric Power Industry // Energy Law Forum. 2015. No. 4. P. 12–20.
7. Case No. A40-47573/22-21-364// https://ras.arbitr.ru/ 
8. Varlamova A.N., Krasnova V.A. Legal Problems of Combatting Price Manipulations in the Electricity and Capacity Market // Law. 2014. No. 3. P. 116–132.
9. Case No. A40-47573/22-21-364// https://ras.arbitr.ru/ 
10. https://www.np-sr.ru/ru. 
11. https://www.np-sr.ru/ru.

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