Inter RAO seeks to factor export duty in sales margin at expense of Russian customers

MOSCOW. Oct 11 (Interfax) - Inter RAO , the sole operator for Russian electricity exports has proposed to factor the new export duty into its operating margin abroad, which would reduce subsidies for energy consumers in Russia's Far East, national daily Kommersant reported on Wednesday.

This refers to subsidies for equalizing rates in the Far East with the national average, which are essentially paid for by the wholesale energy market.

Until last year, the margin on electricity exports to China was 30%, but then it dropped to 5% due to rates in the Far East at which Inter RAO buys electricity for exports. Therefore, with the new export duty of 7% Inter RAO's exports to China now generate a loss.

Kommersant, citing sources, said the company's proposal has been backed by the Energy Ministry and Deputy Prime Minister Alexander Novak has agreed to have it considered at a meeting of the Market Council's supervisory board. The paper cited a letter Deputy Energy Minister Pavel Snikkars sent to Novak in which he said that increasing Inter RAO's margin "will make it possible to maintain and, possibly, increase energy supplies to China," which now account for about 35% of Russia's total electricity exports.

Inter RAO said earlier that it had notified its customers of price increases due to the duty and warned them that supplies would be restricted if they did not agree. The company subsequently said it had begun restricting supplies to China.

Kommersant, citing Snikkars' letter, reported that China demanded supplies be continued due to the influence on the energy system, and they were maintained at a level of 120 MW for a certain isolated area in China.

The paper said that if exports stop, Russian consumers' payments for power capacity will increase by 6 billion rubles and their payments for electricity transmission will go up by 2.5 billion rubles.

Inter RAO wants to backdate its proposal to when the export duty went into effect on October 1.

The Russian government recently approved a resolution to impose export duties from October 1, 2023 to the end of 2024 on a broad range of goods in the amount of 4-7% when the U.S. dollar's exchange rate is 80 rubles or more; the duty increases as the ruble weakens. Commodities that are exempt from the duty include oil, gas, grain and forest products.

Inter RAO also said earlier that it planned to ask the government to exempt electricity from the new export duty. Energy Minister Nikolai Shulginov subsequently said that his ministry would support "such an appeal to the government."