Author(s)

L. D. Gitelman

Abstract

The article takes a look at the issues of the market-oriented power sector reform and the experience that is of interest in the process of reforms in any country. Organizational models might, however, vary quite substantially in different countries in terms of basic characteristics. The article studies the difference between idealistic notions that underlie the existing market model and real economic relations that are directly connected to the technological features of the industry. It validates proposals for alternative energy market models and a management mechanism for the industry. Keywords: power sector reform, energy market, electricity prices. 1 Introduction Over the past ten years, profound market transformations have been accomplished in Russia's electric power sector. A complex energy market infrastructure has been created; vertically integrated utilities have been unbundled and new joint-stock companies have been established in various areas of business; a whole cluster of market-oriented professionals has emerged. Nevertheless, the changes in the industry have not been supported by the public. Analysis shows that a number of serious mistakes were made when implementing the transformations. The qualitative characteristics of the macroeconomic environment that the industry exists in were ignored. The environment has so far been extremely ineffective; it is determined by a very bad investment climate and an underdeveloped finance and credit system; a considerable impact of external factors on electricity prices; the low capacity of mass market consumers to pay; Energy Production and Management in the 21st Century, Vol. 1 19 www.witpress.com, ISSN 1743-3541 (on-line) WIT Transactions on Ecology and The Environment, Vol 190, © 2014 WIT Press doi:

Keywords

power sector reform, energy market, electricity prices.