Subjects and contract structure of retail markets of electric power
Retail electricity markets trade in electricity purchased on the wholesale electricity and capacity market, along with electricity produced by generating companies that are participants of the retail market of electric power (hereafter – retail market).
Basic principles governing the function of retail electricity markets were adopted by Russian Federation Government Resolution No. 442 of May 4, 2012 "On functioning of retail markets for electrical energy, complete and (or) partial limitation of mode of consuming of electrical energy" (Retail Market Rules).
The main participants of retail markets are:
- consumers of electric power;
- municipal services providers;
- suppliers of last resort;
- power retail companies, power supply companies;
- electricity producers in retail markets;
- territorial grid companies;
- operational dispatch management offices at retail market level.
Electric energy (capacity) could be supply on retail markets by concluding following types of contracts:
- Purchase and Sale (Supply) of Eclectic Energy Contract, in which case the consumer will need to make arrangements for electricity distribution services directly with the grid company.
- Power Supply Contract, which include both the conditions of electricity purchase and sale and all the essentials of electricity distribution service contracts.
Territorial grid companies provide services for distribution of electric energy with the use of the electric grid facilities owned by them (electrical networks), carried out the technological connection of power receivers (power installations) of legal entities and individuals to electric grids, as well as acquiring electric energy (capacity) in retail markets to compensation of losses of electric energy, acting as consumers. In the first place regional grid companies purchased electric energy to compensate of electrical losses in their electric networks, produced at qualified generation facilities based on renewable energy sources, which are connected to their networks.
The territorial grid companies are grid entities, that own facilities used to provide services for distribution of electric energy, and are not part of the Unified National (all-Russian) Power Grid. The structure of the Unified National (all-Russian) Power Grid as usually includes objects with voltage over 220 kV and all lines that cross the state border of the Russian Federation.
Services on electric power distribution are provided by a grid company under a contract of paid services for electric power distribution. Consumers of services on electric power distribution in the retail markets are bodies, owning power receivers and (or) objects of electric power industry, technologically connected (including indirectly) to the power grids, the organization engaged in the export (import) of electricity, as well as power retailing companies and suppliers of last resort, who have concluded a contract for services on electric power distribution in the interests of electricity consumers served by them.
Network tariffs for electricity transmission and distribution, as well as payment for technological connection to the networks of the Unified National (all-Russian) Power Grid and to the networks of territorial grid companies subject to government regulation.
Rules of activities of suppliers of last resort, energy supply (power supply) companies
Electricity is sold to ultimate consumers by suppliers of last resort , power retail companies and power supply companies, as well as electricity producers in retail markets.
A supplier of last resort (SoLR) is a retail company that is obligated to conclude a power supply contract (purchase and sale electric energy (capacity)) with any client that applies to it as long as the client is in its operation zone. The agreements that SoLRs conclude with consumers are public and their terms and conditions, including the pricing procedure, are regulated by the Russian Federation Government.
A SoLR acts within a specified operation zone. Outside this zone, a SoLR may act as a power retail company. The operation zones of suppliers of last resort do not overlap. A SoLR are selling in the retail market of electric energy (capacity), acquired by him in the wholesale market with the delivery points group(s) corresponding to its area of operations, as well as in the retail markets from power retail (power supply) companies and electricity (capacity) producers on the retail market.
Consumer (buyer) is entitled to unilaterally reduce the amount of electricity (capacity) purchasing from the supplier of last resort, through the acquisition of the electricity (capacity) volumes from electricity producer (capacity) on the retail market or to terminate the contract unilaterally, subject to absence of outstanding debts and fulfilment of other mandatory requirements..
Power retail (power supply) companies as opposed to last resort suppliers are free to choose the buyer (customer) they are willing to conclude a contract of energy supply (purchase and sale of electricity (capacity)).
Electricity producers in retail markets in price zones
Producers of electric energy (capacity), for which the wholesale market are not registered delivery points groups and the installed capacity of unit for production of electric energy (capacity) that is less than 25 MW or equal to or greater than 25 MW but which are not subject to the Russian Federation legislation requirements about selling of electric energy (capacity) in the wholesale market only, selling electricity on retail markets.
Producer of electric energy (capacity) in the retail market is entitled to sell electricity (capacity) to any customer located within the area of supplier of last resort, where the facility for production of electric energy (capacity) of the producer is located, and to supplier of last resort itself. In accordance with contracts producer of electric energy (capacity) on the retail market selling electricity (capacity) at free unregulated prices, except the case of sale of electricity (capacity) for supplier of last resort (at prices not exceeding the unregulated prices for electricity and capacity on the wholesale market for such a supplier of last resort).
Pricing in the Retail Markets
According to the Retail Market Rules supply of electric energy (capacity) to population and equated to it consumer categories carried out at regulated prices (tariffs) established by the executive regional authority of the constituent territory of the Russian Federation responsible for state regulation of tariffs.
A) Price zones:
Sale of the remaining volume of electricity (capacity) in the territories of the Russian Federation, united in the price zones of the wholesale market, made by suppliers of last resort at unregulated prices within the limits of unregulated prices, and power retail (power supply) companies and power producers in the retail markets – at free unregulated prices (except in case of sale to supplier of last resort or network companies, when the electric energy is produced on the functioning on the basis of qualified renewable energy generation facilities).
Limits are calculated by a supplier of last resort to price categories, defined in one-part or multi-part terms and are structured as follows:
- weighted average non-regulated prices of wholesale market – components of limits of unregulated prices, calculated by the commercial operator of the wholesale market for each supplier of last resort – wholesale market participant (weighted average non-regulated prices for electricity, capacity or electrical energy adjusted for capacity);
- the tariff for electricity distribution services (one- or two-part terms);
- energy retail surcharge (markup) of supplier of last resort;
- payment for other services that are an integral part of the electricity supply to consumers.
B) Non-price zone:
At the non-price zones of the wholesale market electric energy (capacity) in retail markets sold by supplier of last resort (power retail, power supply companies) to ultimate customers at regulated prices (tariffs) established by the federal executive authority in the area of regulation of tariffs adjusted for translation ratios (ratios, reflecting price of wholesale market). Translating of prices in non-price zones of the wholesale market provides bringing economically reasonable electricity (capacity) prices, taking into account changes of the wholesale market parameters, to ultimate customers.
A SoLR (power retail and power supply companies) calculate the final price for consumers, taking into account price changes in the wholesale market and the share of population and equated to it categories of consumers in the volumes of purchase of electricity and capacity of guaranteeing suppliers (retailing, supplying companies) in the wholesale market.
C) Technologically isolated territorial energy systems:
At the technologically isolated territorial power systems, as well as in the areas of technologically not connected with the Unified Energy System of Russia and technologically isolated territorial power systems, electric energy (capacity) sold at regulated prices (tariffs).