The (Pseudo-) Liberalisation of Russia's Power Sector: The Hidden Rationality of Transformation

Abstract

This paper discusses the problems of adjustment of the Russian power sector to the challenges for building up a new institutional structure according to political and market requirements and uncovers the reasons why the implementation of a pool regulation model initiated in 1992 was not successful. It identifies the purely formal nature of implementation of the model as well as demonetarisation and the non-payment problem as the special conditions in Russia which were important for shaping the regulation model which evolved in recent years instead. In two phases of the power sector's institutional development, different incentives led to the emergence of a dual economic regulation model, in which elements of the Soviet command and supply system co-exist with elements of market and entrepreneurship. Prospects of further regulatory reform are expected to result not from political decisions, as was characteristic for regulatory reform in other countries, but from economic interest of the already established players in the power market.