RAO "UES of Russia" has released the results of operation of the new liberalized model of the wholesale and retail markets for electricity (capacity) inaugurated on 1 September 2006 pursuant to the Russian Government's Resolutions On Improving the Functioning of the Wholesale Electricity (Capacity) Market and On the Rules of Operation of the Retail Electricity Markets.

The previous arrangements for the sale and purchase of electricity and capacity in the regulated market segment were replaced with a new system of regulated bilateral contracts.

In 2006, regulated contracts between suppliers and customers were made for a term until the year-end. In September through December 2006, the number of such contracts totalled 5,175, and 13,780 regulated contracts have been concluded for 2007.

As provided by the Russian Government Resolution of 30 November 2006, the share of electricity sold at unregulated prices will increase stepwise, from 5 percent of the forecast balance prepared by the Federal Tariffs Service of Russia for 2007, 1 January. The liberalization of the wholesale electricity (capacity) market is scheduled for 2011.

One of the key arrangements for trading at unregulated prices is the day-ahead market, which is based on the selection by NP "ATS" of competitive price bids and offers submitted by sellers and buyers one day before the actual delivery of electricity.

In September-December 2006, the average weighted price of electricity in this market within the price zones of the European part of Russia and Siberia stood at RUB385 per MWh. The average weighted price in the day-ahead market during the first two months of 2007 was RUB442 per MWh.

In the price zone of Siberia, owing to the high water levels on the rivers, the hydropower plants were able to increase their electricity deliveries to the market, "forcing out" the electricity generated by the thermal power plants. As a result, the average price of electricity in this zone in September 2006—February 2007 was as low as RUB148 per MWh. For comparison, the average regulated wholesale rate for electricity purchase in Siberia was RUB235.4 per MWh in 2006 and RUB254.4 per MWh in 2007.

The electricity prices on the day-ahead market vary not only by zone and season, but also by time of day. During the period since the launch of the new market model, the prices during the minimum load (mostly between 00:00 and 04:00 hours) were lower by 50%-33% than the peak load prices.

This means that the price dynamic on the day-ahead market is in line with the changes in the demand and supply of electricity. The price signals generated here incentivize consumers to save electricity and change their consumption patterns, while the producers are encouraged to optimize the utilization of their generation capacity.