A move from the market

A move from the market

Who removed the independent grid dispatcher and why?

Unsplash / Nikola Johnny Mirkovic
23.11.2021 Evgeny Makarchuk

At the beginning of 2020, the joint dispatch department of RUE ODU was liquidated as an independent legal entity. Who did this and why?

Earlier it was said that the energy system dispatcher became part of the Belenergo State Production Association. There is no more information available on the internet except for a post on the website of the Belenergo. From this source, it is clear that the liquidation of the independent dispatch management took place in accordance with the «Action Plan for 2019-2020 to improve the management structure of organizations belonging to the Ministry of Energy» (hereinafter referred to as the Plan).

There is no publicly available information about the Plan. It is only known that the Plan also included the creation of Gosenergogaznadzor, the Belenergostroy holding through the merger of several businesses, and suggested the inclusion of the Belarusian nuclear power plant in Belenergo’s structure.

The rest of the points do not raise serious questions, as it is a continuation of a long-existing policy in any uncertain situation to create a holding company. But the liquidation of RUE ODU raises many questions. Here is why:

First, it is important to understand that an independent dispatcher is the first step towards building an electricity market. For example, the reform of the electricity market in the Russia began with the establishment of a systems operator on June 17, 2002. «On this day, the OJSC System Operator – Central Dispatch Office of the Unified Energy System was founded, which became the first infrastructure organization of the electric power industry in the course of industry reform.»

In Ukraine, the functions of a dispatcher are performed by NEC Ukrenergo, which was established in 1996 in the first stages of the forming of an electricity market. This is essentially a general rule, that the first step in the forming of an electricity market is to create an independent dispatcher. This is confirmed by the experience of various countries.

The elimination of the Dispatcher as a legal entity is, on the contrary, a significant step back in the development of an energy system market.

Moreover, this decision was made in 2017-2018, in the era of liberalization of economic relations. The adoption of anti-market regulations is not something out of the ordinary, but in this case the forming of the market was laid out in program documents in force at that time which were violated by this action.

At the beginning of 2020, the following program documents were in force in the energy industry: the Energy Security Concept, the Comprehensive Plan for the Development of the Electricity Sector, and the Program for the Development of the Energy System for 2016-2020.

The Energy Security Concept was approved through a resolution of the Council of Ministers on December 23, 2015. A high-level program document, it contains the following provisions, which suggest «adapting the power system management structure to market conditions [including]:

  • the division of energy production by type of activity into production, transmission, distribution, and sale of electric and fuel energy with the creation of appropriate business entities;
  • ensuring transparency of costs at all stages of production, transmission, distribution, and sale of electricity and fuel.»

The Comprehensive Plan for the Development of the Electricity Sector includes points that, among other things, foresees the following:

  • Division of activities in the electric power industry (production, transmission, distribution, and the sale of electricity) in accordance with the stages of improving the organizational structure of the energy system in 2016-2025
  • Forming a wholesale electricity market in 2018-2019
  • Formation a retail electricity market in 2018-2025

The Program for the Development of the Energy System for 2016-2020 foresaw the forming of a common electric power market of the Eurasian Economic Union, the functioning of which involves the separation of market participants (producers and consumers) and infrastructure organizations (dispatchers and market operators).

These documents also assume the development and adoption of a law on the electric power industry, the draft of which is posted on the website of the Ministry of Energy and includes paragraph 5 of Article 10, according to which «interference in the operational dispatch management of the unified energy system of the Republic of Belarus is not allowed, unless otherwise provided for by law.»

So far, this is only a draft law that has no legal force, but the forming of an electricity market was planned in program documents at all levels. And the Energy Security Concept and the Comprehensive Plan are now in force. The liquidation of RUE ODU implies that all the forecast documents will not be realized. That is, in accordance with the «Action Plan for 2019-2020 to improve the management structure of organizations belonging to the Ministry of Energy,» the opposite of what is provided for through the legislation is happening. This raises the question of who developed and approved this document. If it was developed by the Ministry of Energy, then all these actions have no legal force, since they violate several resolutions of the Council of Ministers at the same time. If the Plan is approved by a resolution of the Council of Ministers, then one resolution of the Council of Ministers violates several others. This document also does not have the status of a law or a decree since it has not been published. Consequently, this Plan violates the norms of current legislation.

The liquidation then of RUE ODU was illegal, but the question of why this organization was liquidated remains. Legally, it was under the Ministry of Energy, but in effect it was financially dependent on Belenergo. However, RUE ODU as a separate legal entity opened opportunities for future reforms and the creation of a de facto independent dispatcher for the energy system.

It can be assumed that the liquidation of RUE ODU as a legal entity was necessary for one of the following reasons:

  • As a final rejection of the reform of the energy sector, signaling a return to the operating mode that in 1988 in the USSR was considered ineffective.
  • Because Belenergo will be sold to someone close to the ruling elite. The value of this asset is clearly increased if the national dispatcher is its structural subdivision, as this limits any competition from independent producers.
  • The existence of a plan for transferring the Belarusian energy system under the external control of another dispatcher. As two operators cannot be in the same energy system at the same time, one dispatcher was transformed into a structural subdivision of a company, albeit the largest in Belarus.

The article was prepared by a participant of the SlovakAid scholarship program.

Материал доступен на русском языке: Движение от рынка

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