26 Nov 2009 18:51

Electricity market participants approve method for valuing capacity for 2010 selection

MOSCOW. Nov 26 (Interfax) - The supervisory board of Market Council has approved the final version of the methodology for evaluating bids on sale of "new" capacity (added since 2007) in the competitive selection for 2010, several sources in the sector told Interfax.

The board approved the text of the document on November 24 and reached a compromise on all remaining points of dispute on Thursday, the sources said.

It approved an Energy Ministry proposal to set the standard for the return on invested capital at 9.6%.

The board also accepted a proposal from the generating companies to apply a discount factor of 0.934 to operating expenses (OPEX). "It is analogous to the Federal Tariffs Service's coefficient that is applied in setting the tariffs and contains an inflation component, among other things," one of the sources said.

Overall the methodology classifies the value of the capacity based on several factors, including the mode of generation and the cost of construction.

For example, a 400 megawatt steam-gas turbine located in central Russia would be assigned capital expenditures of 38,000 rubles per kilowatt of installed capacity and operating expenses of 80,000 rubles per megawatt a month, Market Council said in a press release. A 330-megawatt coal-fired steam turbine (PSU) would have a capital expenditure rating of 87,000 rubles per kilowatt and operating expenses of 120,000 rubles per megawatt a month.

The methodology only applies to newly built thermal electric stations, not to renovations or new nuclear plants and hydroelectric stations.

Market Council has yet to determine how to treat renovated capacity. It previously considered the option of including fixed coefficients in setting the price. But it is now leaning toward considering the expenses for each individual project.

The market participants are generally satisfied with the new methodology. "I can say that we are for the most part pleased with the price benchmarks that have been set down," the head of Gazprom Energo Holding, Deniz Fyodorov, told Interfax.