2014 Annual report

Revenue Generation

Formation of revenue
Formation of revenue

The revenue from power supply is calculated using the electricity transfer tariffs, which are set by regulatory authorities. Pursuant to the applicable regulation model, “boiler above/below”, the amount of services rendered is generated in points of grid connection of end consumers to grids of JSC IDGC of the North-West or grids of adjacent grid companies. In 2014, 35,379 million kW·h were transferred under contracts, and the revenue amounted to RUB 31,343 million not including VAT (with inclusion of the functions of guaranteed supplier at Kolenergo branch, 36,777 million kW·h were transferred under contracts, and the revenue amounted to RUB 32,759 million excluding VAT).

For discharge of its own liabilities of power supply to consumers and in accordance with the applicable regulation model, JSC IDGC of the North-West uses services of territorial grid companies (TGCo) that are located in constituent entities of the Russian Federation.

JSC FGC UES renders services of electricity transit from generating plants to electricity delivery points in the grid of JSC IDGC of the North-West via the grids of the United National Electricity Grid (grids with voltage of 220 kV and above). The border between JSC FGC UES and JSC IDGC of the North-West is a group of point of electricity supplies from the wholesale electricity market to market participants that operate in the Company’s area.

The price of services of TGC is based on individual electricity transfer tariffs which are set by regulatory authorities, and the amount of services rendered is based on the amounts of electricity that is delivered from the grid of JSC IDGC of the North-West to those of grid companies. The biggest TGCo in the area of JSC IDGC of the North-West are JSC Russian Railways, JSC Murmanskenergosbyt, and MUE Kirovsk City Electricity Grid, which together account for 57% of the total costs of grid company services.

In the process of electricity transit from points of delivery to grids to points of discharge of liabilities under electricity transfer contracts, there appear electricity losses due to the technical process of electricity transfer and losses in electricity grid equipment as well as the commercial components (unaccounted electricity and stealing). JSC IDGC of the North-West compensate the electricity losses (the difference between the amount of purchased electricity in points of delivery and grids to points of sale to end consumers) under electricity transfer contracts that are made with guaranteed suppliers.

The grid connection revenue is based on the price of completed grid connection contracts. In their turn, the price of the contracts is based on the applicable law, either by way of an individual fee that is set by executive bodies of government tariff regulation or by calculation of the price using the established grid connection tariffs depending on the declared capacity or the amount of work required to build electric grid facilities of the ‘last mile’.

In 2014, the grid connection revenue amounted to RUB 882 million (excluding VAT).

Pursuant to paragraph 4 of clause 2 of article 23.2 of the Federal Law dated March 26, 2003 No. 35-FZ On the Electricity Sector, since January 01, 2011 an investment component to cover costs of development of existing infrastructure may not be included in the grid connection fee.

These changes have had a direct effect on the growth of the grid connection revenue. According to evaluations of JSC IDGC of the North-West experts, in 2014, the share of costs related to development of existing infrastructure amounted to approximately 27% of the total costs of measures that were required for technical (not including the costs of connection electricity receiving facilities of ‘privileged’ consumers with less than 15 kW capacity).

The revenue for electricity (capacity) under energy supply contracts (sale (delivery) of electricity (capacity)) is generated in view of the following factors:

Generation of revenue at regulated and non-regulated prices: