Grid Connection at a Reduced Cost

The number of grid connection requests grew by 5.6% year-on-year.

The Company faces the following problems during grid connection:

• Grid connection of the new electricity receivers owned by the applicants entitled to special benefits requires construction of PTL and installation of PTS. However current Russian legislation stipulates grid connection within 180 days. Pursuant to the City Planning Code, approval of the cost estimate documentation, obtaining of construction permits, and future start-up of a facility takes up to two years which in turn makes applicants resort to the Antimonopoly Service of Russia claiming non-compliance by the grid company with grid connection deadlines.

As resolved by the antimonopoly authority, fines of RUB 61,476,000 were imposed on JSC IDGC of the North-West in 2014 and the Company successfully challenged an amount of up to RUB 844,000.

• An increase in the Company’s costs of grid connection of the applicants entitled to special benefits. In 2014, related grid connection costs during implementation of the investment program amounted to RUB 1,408.7 million.

About 4.6% of all applicants connected to IDGC of the North-West grids in 2014 are regular electricity consumers. Other applicants are seasonal consumers with most of them consuming less than 30% of connected power.

Currently, the grid company has to spend its funds budgeted in the investment program for facilities rebuild, repair, and construction etc. for grid connection of the electrical equipment of the applicants entitled to special benefits.

This is a result of incomplete recording by executive tariff regulation authorities of a shortfall in income caused by connection of such consumer categories to grids in the electricity transmission tariff.

A growth in the number of the applicants entitled to special benefits raises a shortfall in income which in turn implies a higher burden for the electricity transmission tariff.