Restructuring the Electricity Sector in the EU and in Russia

Abstract: Power sector restructuring has been a major issue since the 1980s. The insight that only transmission and distribution are natural monopolies, whereas generation and supply are activities of a competitive nature has triggered mammoth restructuring processes in different countries. Today the efforts to liberalise electricity markets are by no means slowing-down. On the contrary, important steps to set up the necessary legal framework have been taken all over the world. This means that the interesting phase of ensuring competitive markets and effective regulation is going on now. Of all the countries undergoing power sector reforms, developments in European countries and in Russia are particularly interesting at the moment: The European Commission has just presented a proposal for the so called Third Energy Package, thus introducing further steps to accomplish the liberalisation of the European electricity markets. Russia, having launched a mammoth reform process as well, is undergoing the restructuring of the monopoly of RAO UES coupled with rising foreign investments. This contribution reviews the background and the basic steps of the reforms in Europe and in Russia. In doing so it aims to highlight some key elements of electricity sector restructuring, which are being addressed in both Europe and Russia in a more or less similar manner. Furthermore, there are lessons about power sector restructuring in general that can be learned from these experiences.