The state of payment discipline in Russia’s electric power sector. Data on the dynamics of debt in the wholesale and retail electricity markets for H1 2024.
The WECM is the place of circulation of electricity and capacity within the framework of the Unified Energy System of Russia (UES of Russia) with the participation of large producers and buyers of electricity and capacity (as well as other organizations who have received the status of a wholesale market entity). It is regulated by the Federal Law “On the Electric Power Industry”.
The results of the first half of this year show that the level of electricity consumption in Russia increased against a backdrop of declining debt in the Wholesale Electricity and Capacity Market (WECM) and the Retail Electricity Market (REM).
According to data of the Center for Financial Settlements1 (CFS), the level of settlements2 in the WECM for electricity supplied over six months of 2024 grew by 0.1 percentage points compared to the same period in 2023. Debt for electricity supplied in the WECM in H1 2023 declined by RUB 3.7 bln in absolute terms compared to the start of the year. At the same time, debt as of the end of June 2024 was higher than at the end of June 2023, but lower than at the end of June 2022 (RUB 72.2 bln, 71.9 bln and 78 bln, respectively, Fig. 1–2 and Fig. 7).
1 The CFS is a commercial infrastructure organization of the WECM, whose main task is to provide a comprehensive service for calculating the requirements and obligations of WECM participants and making financial settlements between them.
2 The level of settlements in the WECM reflects the ratio of received payments for supplied electricity to the obligations to make such payments for a specific period of time.
According to JSC System Operator of the Unified Energy System3 (JSC SO UES), the volume of planned consumption4 in the UES of Russia grew by 4.4% over the first six months of 2024 compared to the same period the year before (Fig. 3). The most growth, 5.9%, was recorded in the second price zone (Siberia), while in the first zone (European Russia and the Ural region) it was 4%.
In H1 2024, the growth in planned electricity consumption was mainly due to the construction of the Eastern Polygon, the increase in exports to China, the loading of the military-industrial complex, cryptocurrency mining, and an increase in household consumption.
3 JSC SO UES is an operational dispatch control entity (the term ‘system operator’ is also used in regulatory and technical documentation), which carries out centralized operational dispatch control of the UES of Russia. JSC SO UES is authorized to issue operational dispatch instructions and orders that are mandatory for electric power sector companies and electricity consumers, which affect the electric power mode of operation of the energy system.
4 Planned electricity consumption is the total planned volume of consumer purchases determined as a result of a competitive selection of applications for the day ahead in the WECM.
An IES is a set of several energy systems united by a common mode of operation, with a common dispatch control as the highest level of control in relation to the dispatch controls of its constituent energy systems. The UES of Russia includes seven region-based IES, one of which — IES of the East — operates separates from the other six.
The REM is a marketplace for both electricity purchased in the WECM and electricity offered by generating companies not participating in the wholesale market.
In both price zones of Russia, electricity consumption for the first six months of 2024 was higher than for the same periods in 2023 and 2022 (Fig. 4).
Total debt in the WECM amounted to RUB 72.2 bln in H1 2024, which is higher than the indicator for the same period in 2023 (RUB 71.9 bln), but lower than as of the end of June 2022 (RUB 78 bln). At the same time, it should be noted that most of the debt is formed by consumers in the North Caucasus (Fig. 5–6).
Figure 6. WECM payment discipline for H1, including assignment agreements, by federal district, %
Sources: CFS, ACRA
In H1 2024, four federal districts, including the North Caucasian Federal District, reduced their debt in comparison with the same period of the previous year (Fig. 5–6).
Most of WECM debt is formed by sales companies that buy electricity in the wholesale market and sell it to end consumers in the REM5. By the end of June6 2024, the debt dynamics in the WECM and REM were still multidirectional: WECM debt grew, but REM debt declined, while the amount of debt in the REM, as before, significantly exceeded the debt in the WECM (Fig. 7). These dynamics are mainly due to adjustments to obligations in the WECM in terms of writing off bad debts, as well as due to compensation by power sales companies for overdue payments of end consumers.
It should be noted that in H1 2024, according to Market Council NP, REM debt decreased by RUB 4.1 bln relative to the beginning of the year, while in the same periods of 2023 and 2022, it decreased by RUB 3.7 bln and increased by RUB 7.8 bln, respectively (Fig. 8).
5 REM participants: electricity consumers; utilities providers; guaranteeing electricity suppliers; electricity sales companies; electricity suppliers; electric power producers for retail markets other than wholesale market participants; electric grid companies, owners of electric power facilities; system operator.
6 REM data becomes available after WECM data.
Market Council NP (Nonprofit Partnership Council for Organizing an Efficient Trading System in the Wholesale and Retail Electricity and Capacity Market) organizes wholesale and retail trade in electric power and capacity (previously Trade System Administrator Nonprofit Partnership).
Guaranteeing Electric Power Supplier is a company that is obliged by the Federal Law “On the Electric Power Industry” to conclude an electric power supply agreement with any consumer who applies for such agreement.
In ACRA’s opinion, end consumer debt is primarily borne by electricity sales companies. This may lead to such companies going bankrupt and/or losing WECM participant status due to late payments for electric power/capacity. For example, by its resolution dated June 22, 2021, Market Council NP withdrew the aforementioned status from three guaranteeing suppliers controlled by PJSC ROSSETI: Kabbalkenergo JSC, Kalmenergosbyt JSC, and Karachayevo-Cherkesskenergo JSC, due to their multi-billion ruble debt to generating companies. In addition, consumer debt is also borne by electric grid and generating companies, which could potentially lead to insufficient cash to cover their operating and capital expenses necessary to maintain the reliability of the UES of Russia.
In the period from January 1, 2024 to September 30, 2024, the volume of planned electricity consumption in Russia, according to Market Council NP, increased by 4.1% year-on-year. The largest increase is still observed in the second price zone (Siberia) — 5.9%; growth is also noticeable in the first price zone (European part of Russia and the Ural area) — it amounted to 3.6%.
Taking into account the growth of planned electricity consumption in the first nine months of 2024, ACRA forecasts a 3.5–4.0% increase in electricity consumption this year relative to 2023. There were no periods of significant non-payments for the supplied electricity and they are not expected in the future. In this regard, ACRA assumes that the industry will maintain its credit quality.
