Reforming the Russian Electricity Sector

Russia's power system is enormous consisting of more than 200 gigawatts of generation capacity, most of it interconnected by 2.5 million kilometers of high-voltage transmission lines spanning an area only slightly smaller than the United States and Canada combined. In early 1997 the Russian government approved in principle the now-common model of electricity sector reform: vertically separating generation, transmission, and distribution; introducing competition where possible; strengthening the regulation of functions less amenable to competition; and divesting government ownership. This model has been implemented in many countries, and the story of the reform would be relatively routine if not for special characteristics of the Russian power system: its size, diverse ownership, high level of nonpayments, and the combined heat and power role of many generating plants. This Note outlines the challenges posed by these characteristics and reports on reform achievements so far.