The need to reform energy marketing is a result of a downward trend in basic sales indices for energy sales in 1997—1999 — such as the level of overall payment by consumers for electricity and heat energy supplied, and the level of payments in money. Results across RAO UES of Russia as a whole show that, in 1997, payments by customers in money amounted to no more than 19 per cent, and in 1998 to 21 per cent of the amount due. This led to an increase in the AO energos’ receivables and adversely affected their financial condition.
In 1999, RAO UES of Russia began work on fundamental reform of the marketing of energy by the regional power-engineering and electrification companies within the Holding Company.
The goal of this ongoing work is to make a transition from the doctrine of «uninterrupted supply» to «electricity supply to solvent consumers».
The main task for the new concept of energy marketing is to inculcate in the managers of power systems and their customers a perception of electricity and heat energy as products which are traded, and which must be paid for in full in a timely fashion.
Priority areas in the implementation of the new concept are:
- Securing full and timely payment by customers for electricity supplied;
- Putting an end to the practice of providing long-term credit to consumers at the expense of the economic interests of AO energo and the power-engineering sector as a whole;
- A step-by-step increase in the proportion of money in settlements by consumers in accordance with Decree No. 829 of the Government of Russia (July 19, 1999) — up to a level sufficient to service AO energos’ own payments under conditions of a real reduction in mutual offsetting forms of settlement between organisations active on the market in goods and services.
Results of ongoing reform of energy marketing activity:
- In 1999, for the first time in four years, overall payments for energy consumed reached 100 per cent, which made it possible to halt the increase in payments receivable at the energy companies of the Holding Company. The level of sales of energy for money reached 35 per cent of the amount due, according to results for 1999. During 1999, full payment was made for energy consumed by industry which consumes about 50 per cent of the total output of energy of AO energos (39 per cent of the sum due was paid in money). Payment in full was also made by transport and communications companies (31 per cent in monetary form) and construction companies (24 per cent in monetary form).
- A strict administrative vertical line of marketing management began to take shape within the Holding Company RAO UES Russia, and reserves of management personnel were created for energy marketing divisions.
- Beginning from the third quarter of 1999, energy marketing activity has been planned according to unified methods. A system of standardisation and monitoring involving quarterly reports has been set in place. Calculations have been made and a valid basis provided for monthly targets for the energy companies in the collection of payments in money. An effective mechanism has been implemented for fulfilling plans and the achievement of scheduled goals has been ensured.
- A complex of measures has been introduced for implementing control over the provision of discounts both to individual companies and to groups of companies. By the end of 1999, the practice of offering discounts on the energy tariffs approved by the Regional Energy Commissions without any compensation for the lost revenue was halted.
- A data base is maintained and constantly updated on payments to AO energo by their own customers. A system for gathering information on major consumers of energy has been organised, and a standard has been developed for data on customers — a «customer passport», which has been introduced for major consumers.
- Special monitoring and control measures have been introduced for 264 «main system» customers with products that are highly liquid or export-oriented. Sales of energy to these companies accounts for about 20 per cent of total sales. Strict demands are made for this category of consumers in order to increase the proportion of monetary funds in settlements to the maximum level of 100 per cent. These companies include Krasnoyarsk Aluminium Plant OAO, Surgutneftegas OAO, Novokuznetsk Aluminium Plant AO, LUKoil-Uralneftegas OAO, Alrosa AK, AvtoVAZ AO, the railways of the Ministry of Railways of the Russian Federation etc. Results for the fourth quarter show that the value of electricity delivered to major consumers subject to monitoring was 18.6 billion rubles, of which 19.8 billion rubles (106 per cent) was paid, including 11.6 billion rubles (62 per cent) in money.