2014 Annual report

Last Mile Issues

Amendments were made to legislation in 2013 to solve the last mile issues.

Federal Law No. 308-FZ dated November 06, 2013 amended Federal Law No. 35-FZ dated March 26, 2003 on Power Industry which extended the period of last mile agreements for an approved list of regions. Last mile agreements were extended till July 01, 2017 in the Company’s catchment area in the Republic of Karelia and Vologda Region.

Additional voltage level OPL1 was introduced in 2014 for the consumers at the last mile. The settlements between consumers and grid companies at this voltage level at a separate tariff starting from 2014 and till the expiry of the last mile agreements established by the federal law: electricity (power) transmission rate for UNPG + cross-subsidy rate.

The said federal law approves cross-subsidy rates:

The approved cross-subsidy rate is applied for settlements with consumers for OPL1 voltage level in 2014. Later, before expiry of last mile agreements, the cross-subsidy rate will be sustainably reduced every year. By July 01, 2017, electricity (power) transmission tariffs at OPL1 level will be equalized against the electricity (power) transmission tariffs in UNPG.

In order to compensate for a shortfall in income of grid companies, legislation stipulates an additional 7% growth of tariffs for electricity (power) transmission from January 01, 2014 in the list of approved regions.

The regulator in the Vologda Region and Republic of Karelia fully used their right to additionally raise tariffs.

In the long-term perspective, additional compensations for a shortfall in income of grid companies resulting from the termination of the last mile agreements by July 01, 2017 are considered at the federal level. One of these mechanisms is an additional 2% growth of tariffs for electricity (power) transmission each year when the last mile agreements are valid from July 01, 2015.