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Russian Duma approves main power reform law
By Melissa Akin and Olga Popova

MOSCOW, Feb 14 (Reuters) - Russia's State Duma lower house of parliament on Friday approved a crucial law opening the way to a big shakeup of the nation's massive but ailing electricity industry.

The law passed on a crucial second reading with 260 votes in favour and 159 against and one abstention in the 450 seat chamber. The Duma is expected to approve five more laws later today underpinning the electricity reform.

Approval of the law, which opens the way to a big shake up of the ailing power generation and distribution industry, is seen as a breakthrough for the government of President Vladimir Putin.

Putin is committed to modernising the economy, but some feared his reforming zeal was running out of steam with the approach of presidential elections next year.

The vote on the power law follows the announcement earlier this week by British oil group BP that it will invest $6.75 billion in Russia's third-largest oil company TNK.

That move was also seen as a shot in the arm for Putin's government, which had struggled to attract big ticket investments by major international corporations.

Earlier on Friday, Prime Minister Mikhail Kasyanov told an assembly of senior energy regulators and industry chiefs he was sure the law would pass, despite threats from some legislators to vote against the laws in the second reading.

"All the complaints, concerns and minor failings have been discussed. The government will now do everything it can. We are ready to move forward." Kasyanov said. "Now we begin the transition to the stage of real structural reform."

The laws clear the way for the government to break up the lumbering state power monopoly Unified Energy System and launch a free power market later in the decade.

The second reading was the principal remaining hurdle and there were doubts until the last minute that it would pass, as the Kremlin showed signs of wavering, and lawmakers, facing elections this year, feared they would be blamed for higher electricity bills.

The laws are expected to sail through a third reading, seen as a formality, then through the upper house, which has already voiced support for the reform. The laws will then go to President Vladimir Putin for signing.

UES chief executive Anatoly Chubais made a fresh plea on Friday for reform, speaking alongside Kasyanov at the Energ ty technology, we are behind the rest of the world by a generation or two," Chubais said, adding the industry needed billions of dollars to revive. "This is not a matter of raising tariffs by one or two percent."

"This is a problem we cannot solve without reform."

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