Some Tariff Consequences Assessment of the Power Grid Industry Consolidation in Russia

Oksana Mozgovaya and Yulia Sheval
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Oksana Mozgovaya: Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia
Yulia Sheval: Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia

HSE Economic Journal, 2021, vol. 25, issue 4, 540–559

Abstract: Since 2014 the government of Russia proceeds the consolidation of Power Grid Industry. The consolidation aim is to reduce the number of Power Grid operators for decrease the electricity distribution tariffs. The first stage of consolidation process had been finished in 2017, but the estimation of its impact on tariffs yet has not been made. Partially this estimation is restricted by the lack of consolidation transactions data and the peculiarities of the power grids’ tariff regulation legislation. This article proposes the developed approach to quantify the impact of power grid industry consolidation on the regional total costs. The approach is based on the natural monopoly costs subadditivity condition. To demonstrate the consolidation effect on regional distribution grids maintenance expenditures we suggest to use following indicators: operational (controllable) expenses per unit; other (non-controllable) expenses per unit; total costs per unit for power grid operators, involved in the consolidation. The analysis of the data collected over the 2015–2020 in the Vologda Oblast, the Republic of Buryatia and the Udmurt Republic demonstrates, that consolidation of the power grid assets has not lead to decrease the regional total distribution costs in the short term. It could be a consequence of both the absence of cost subadditivity effect in the electricity distribution regional markets, and the special features of tariff regulation. Vologda region consolidation results make possible to assume a delayed positive effect from the Power Grid Industry Consolidation in the medium term. The proposed method could be used for estimate the tariff impact of different consolidation cases as well as for the development of measures for the second stage of consolidation.

Keywords: consolidation; tariff impact; required gross proceeds; costs; subadditivity; power grid assets (search for similar items in EconPapers)
JEL-codes: L16 L22 L51 L94 M21 (search for similar items in EconPapers)
Date: 2021
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