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DAVOS-UES chief sees parliament passing key power bills
By Mark Trevelyan

DAVOS, Switzerland, Jan 27 (Reuters) - The head of Russian electricity giant UES (EESR.RTS) voiced optimism on Monday that landmark power reform bills would pass their crucial second reading in parliament next month.

Anatoly Chubais said there seemed to be a "general positive compromise" between political parties, customers, shareholders and local governors on a barrage of amendments to the package of six bills on liberalising the whole Russian energy sector.

"It looks like there is a chance to get the final support in February in the second hearing in the Duma (lower house)," he told reporters at the World Economic Forum in Davos, Switzerland.

At stake is a major landmark in economic reforms: the breakup of the megalithic UES, or Unified Energy System, into a host of competing generating companies, and the freeing of energy prices.

Chubais discounted suggestions that liberalisation of the electricity sector would lead to power shortages and blackouts as happened in California in 2000, a situation he blamed on the fact that wholesale prices there had been freed while retail prices remained regulated.

"That's why we're not planning to keep retail prices under government control. There will be stage-by-stage liberalisation of both wholesale and retail prices," he said.

Under the latest amendments, he said, the target date for liberalising the power market would be removed from the law itself and would be determined by a political decision from the government.

"If the government will openly and publicly take responsibility, they have a right to fix the timing," he said.


The issue is politically sensitive in Russia, where energy prices were heavily subsidised in Soviet times and remain artificially low. Chubais said the average household still only pays about 60 roubles a month for electricity, about the price of a bottle of vodka.

He said he expected liberalisation of prices to take place in mid-2005, until which time price increases would be regulated by the government.

Prices could rise in the short term after mid-2005, but excess generating capacity in the market, and the introduction of competition, would act as a restraint.

"I believe the only way to curb prices is competition in the market. There is no other idea produced by mankind for the last 2,000 years."

Chubais, who last month accused an unidentified third party of lobbying for delays to the power reform bills in order to depress the share price and snap up stock, said he still did not know who the "mystery buyers" were.

"Definitely that's a wealthy company and wealthy people because they paid a minimum half billion dollars," he said.

He said the buyers' identity would become clear after the next shareholders' meeting in a few months, adding: "I would predict serious changes in the membership of our board because of all this."

He rejected as a lie the allegation by Alexander Lebedev, one of three independent members of UES's 13-member board, that the buyers were "oil guys with a lot of extra cash" who were acting with the encouragement of Chubais himself.

Lebedev made the comment in an interview with Reuters in Davos last week.

Chubais, a former government minister and leading light of Russian economic reform in the early 1990s, said he hoped to serve as head of UES until its break-up in 2005, or even longer -- "until the very end of the transformation -- if the timetable slipped.

Asked if he had any ambition ever to return to government, he told Reuters
flatly: "No thanks."
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