Annual report 2014

RU Go to Lenenergo

Electricity transmission

Volumes and structure of electricity consumption

Key indicators of electricity transmission in 2014
Indicator Supply to networks, mln kWh Supply from networks to consumers and third-party TGOs within the borders of balance and operational responsibility, mln kWh Losses
mln kWh %
St. Petersburg 20,982 18,646 2,336 11.13
Leningrad Region 12,265 10,924 1,341 10.93
Lenenergo, total 33,248 29,570 3,677 11.06

In 2014 33,248 mln kWh of electric power were supplied to the Company grid from the networks of FGC UES and electricity producers. Lenenergo transmitted 29,570 mln kWh of electric power out of this amount to consumers and territorial network companies. Electricity losses accounted for 3,677 mln kWh, or 11.06% of total electric power supplied to Lenenergo networks.

The volume of electricity transmission services (productive supply) decreased by 3.2% y-o-y to 933 mln kWh.

This decrease is linked to the fact that in 2014 St. Petersburg and the Leningrad Region were excluded from the list of regions on the territory of which the so-called “last mile” mechanism continues to operate. There was a drop in the volume of Lenenergo services resulting from the conclusion by consumers connected to UNEG facilities of direct contracts with FGC UES.

In 2013, the volume of electricity transmission services rendered to these consumers amounted to 1,497.7 mln kWh. The leaving of these consumers was included in the tariff-balance decision for 2014 and has not resulted in lost income for Lenenergo.

The volume of rendered services on electricity transmission in 2014 increased by 487 mln kWh regarding 2013 under comparable conditions (including the so-called “last mile” consumers).

Dynamics of productive electricity supply, mln kWh

Dynamics of productive electricity supply
Electricity supply by groups of consumers in 2014, mln kWh
Category 2013 2014 Change, %
Industrial consumers 7,892 8,210 4.0
Transport 625 594 –5.0
Agriculture and food industry 362 344 –5.0
Nonindustrial consumers 4,762 4,644 –2.5
State (municipal) organizations and other budgetary consumers 261 267 2.4
Population and equivalent consumer categories 6,150 5,921 –3.7
TGOs 10,460 9,590 –8.3
Total 30,513 29,570 –3.1

In 2014, electricity consumption by industrial consumers grew driven by redistribution of some consumers between the groups of Industrial consumers and TGOs.

Decreased electricity consumption by other categories was the result of signing “direct contracts” by industrial consumers with FGC UES (1,420.3 mln kWh).

Breakdown of electricity supply by groups of end consumers in 2014, %

Breakdown of electricity supply by groups of end consumers in 2014
Electricity transmission by voltage levels, mln kWh
Category 2013 2014 Change, %
HV 8,046 7,461 –7.3
MV1 756 784 3.8
MV2 11,099 10,890 –1.9
LV 9,712 9,544 –1.7
Total 29,613 28,680 –3.2

The largest share in the structure of electricity supply by groups of consumers is supply from Lenenergo networks to the networks of TGOs — 32.4% for Lenenergo, including 25.7% across St. Petersburg and 43.9% of total electricity consumption in the Leningrad Region. New TGOs are primarily formed on the basis of large enterprises (industrial sites) that transfer their own grid facilities in the use of TGOs.

In 2014, there was a drop in electricity consumption at the low voltage level primarily due to the lower consumption by the group “Population and equivalent consumer categories” and at the high voltage level due to the leaving of the “last mile” consumers.

Breakdown of electricity supply by voltage levels in 2014, %

Breakdown of electricity supply by voltage levels in 2014

The structure of electricity supply by voltage levels is similar to the structure of electricity supply by groups of consumers: the main volume of services rendered to industrial consumers is rated at HV level, to non-industrial consumers — at MV2 level, and to the population — at LV level. The lowest amount of productive supply — 3%, is the share of MV1, as equipment 20-35 kV accounts for an insignificant share in the Lenenergo network equipment.

Electricity consumption by major consumers from Lenenergo networks in 2014
Consumer Consumption, Mln kWh Share in the volume of services, %
Productive electricity supply 28,680 100
St. Petersburg JSC PK Baltika 29 0.10
JSC Admiralty Shipyards 69 0.24
JSC PK Energia 84 0.29
JSC Svetlana 65 0.23
JSC Shipbuilding Plant Severnaya Verf 48 0.17
JSC MZ Arsenal 23 0.08
Leningrad Region LLC Cement 166 0.58
LLC PG Fosforit 64 0.22
LLC BaltNefteProdukt 160 0.56
FSUE Scientific Research Technological Institute (NITI) named after A.P. Aleksandrov 46 0.16
JSC VLK 205 0.71
CJSC Tikhvin Ferro-Alloy Plant 268 0.93
JSC St. Petersburg Cardboard and Printing Plant 143 0.50
Total for major consumers 1,368 4.77

Data on electricity consumption only by major industrial consumers of St. Petersburg and the Leningrad Region are specified in the table. Overall, the number of consumers with installed capacity of over 670 kW is more than 2,000 across the two regions.

Electricity losses

Dynamics of electricity losses
Indicator 2012 2013 2014 2014 / 2013
mln kWh % mln kWh % mln kWh % % p.p.
St. Petersburg 2,334 10.70 2,270 10.45 2,336 11.13 2.9 0.68
Leningrad Region 1,245 9.80 1,161 9.51 1,341 10.94 15.5 1.4
Lenenergo, total 3,578 10.37 3,431 10.11 3,678 11.06 7.2 0.95

In 2014, actual electricity losses in Lenenergo networks amounted to 3,678 mln kWh, or 11.06% of total supply to networks, and increased by 246 mln kWh, or 0.95 p.p. y-o-y.

Dynamics of electricity losses under comparable conditions
Indicator 2012 2013 2014The analysis of changes in the relative amount of losses is provided considering the transition to definition of supply to the network in line with indications of AIMS CEM under comparable conditions. 2014 / 2013
mln kWh % mln kWh % mln kWh % % p.p.
St. Petersburg 2,334 10,70 2,270 10.45 2,103 9.61 –7.4 –0.84
Leningrad Region 1,245 9,80 1,161 9.51 1,222 9.45 5.3 –0.05
Lenenergo, total 3,578 10.37 3,432 10.11 3,326 9.55 –3.1 –0.55

Dynamics of losses in Lenenergo networks, mln kWh

Dynamics of losses in Lenenergo networks

The growth of losses was driven by the change from 1 June 2014 of the method for determination of the amount of electricity supply from UNEG networks. Earlier, during formation of the actual balance of electricity on Lenenergo networks the amount of electricity received from UNEG networks in Lenenergo networks was formed by the approved calculation method. The application of this method was due to the lack of accounting system on the perimeter of FGC UES-Lenenergo. The calculation method principle consists in reduction of overflow volume of electricity that is defined by the metering devices (telemetry) installed on the upper borders of UNEG facilities on the high side from 220-330 kV, to the points of delivery at the border of FGC UES-Lenenergo by reducing the rate of losses (5.27%).

Commissioning of AIMS CEM at the border of FGC UES-Lenenergo has entailed a sharp increase in electricity supply to Lenenergo networks. The increase in losses driven by the changes in the applied method for determining the size of electricity supply in cross section of Lenenergo-FGC UES amounts to 352 mln kWh. The amount of electricity losses in Lenenergo networks in 2014 under comparable conditions was 3,326 mln kWh (or 9.55% to supply in the network), which is 0.41 p.p. lower compared to the volume of losses under comparable conditions in 2013 (3,432 mln kWh, or 9.96 % to supply in the network).

Energy saving and increase of power efficiency. Decrease in losses

Lenenergo conducts work on energy saving and increase of power efficiency in line with federal and local regulations, and pursuant to the Program of energy saving and increase of power efficiency of Lenenergo for 2014-2019 (hereinafter the Program), approved by the Board of Directors on 30 April 2014.

Objectives of the Program:

Introducing the power management system in Lenenergo

Improving the electricity transmission process: upgrade and construction of a new model of smart grid on the basis of innovative technologies and equipment, implementation of the systems for process control and network operation

Reducing losses by 2019 under comparable conditions by 21% from the level of 2013

Equipping by devices for electricity metering of commercial connections and transiting to automatic generation of the volume of services rendered in the full volume

Reducing energy consumption for utility and business needs by 15% and upgrade of the systems for water and heat supply of the buildings belonging to the Company

Planned and actual targets of the Program for 2014
Indicator Unit Plan Fact
Electricity losses, including mln kWh 3,416 3,677
% to fixed assets 10.2 11.1
power for utility needs mln kWh 43 39
Consumption for business needs, including by types of resources: RUB mln 200 192
fuel and energy: tons of equivalent fuel 5,946 5,966
RUB mln 194 185
tons of equivalent fuel per m2 of the premises area 0.10 0.06
electric power mln kWh 24 21
RUB mln 74 63
heat power Gcal 13,794 10,900
RUB mln 16 15
other (diesel fuel, kerosene, gasoline, etc.) thous tons of equivalent fuel 5,936 5,958
RUB mln 104 108
cold water supply thous m³ 276 273
RUB mln 6 6
Equipment by modern devices for electricity metering in the retail market % 15 9

Reasons for variation of the actual target for the indicator “Equipment by modern devices for electricity metering in the retail market” from the planed one are caused by shortage of electricity supply and counteraction from management companies and homeowner associations, and the emergency condition of electrical devices owned by consumers.

Activities in energy saving and increase of power efficiency

The Program of energy saving and increase of power efficiency consists of sections, target subprograms (activities) and accompanying measures which are subdivided into activities for decrease in losses during electricity transmission and distribution over electric networks and activities for decrease in energy consumption for production and business needs and are further subdivided into organizational and technical activities.

Target activities include those implementation of which ensures reduction of energy consumption (including electricity) and/or water for at least 15% of the annual consumption of the corresponding resource, with a payback of 80% of investments over five years for energy consumption and/or water used for production and business needs and a payback of no more than ten years for the activities ensuring decrease in losses during electricity transmission and distribution.

The activities which have positive power efficiency and are not corresponding to the criteria of reference to target activities are related to accompanying measures for optimization of consumption for production and business needs and measures for electricity losses reduction.

Identification of non-contractual consumption, switch-off of transformers in the modes of small loads at the substations with two and more transformers, switch-off of transformers at the substations with seasonal load, optimization of disconnection places with bilateral power supply, and alignment of phase loads in the distribution networks 0.38 kV are annually performed and related to the activities supporting the existing level of electricity losses and not affecting the indicators of the electricity balance of the Company.

Key activities aimed to reduce electricity losses in 2014
Activities Annual effect of reducing losses due to the implemented activities, mln kWh
Organizational activities 206
Identification of non-metered consumption 49
Identification of non-contractual consumption 157
Technical activities 22
Switch off in the modes of small loads of transformers at substations with two and more transformers 0.10
Switch off of transformers at substations with seasonal load 0.20
Alignment of phase loads in electric networks 0.50
Decrease in electricity consumption for own needs of substations 2.10
Installation and commissioning of devices for compensation of reactive energy in electric networks 0.01
Replacement of wires by bigger section on overloaded OTL 13.2
Replacement of overloaded transformers 5.80
Replacement of branch lines with SIW in residential buildings 0.03
Load redistribution on the main network by switchings 0.20
Activities to improve electricity metering 74
Total 302

In 2014, cumulative effect was expected in the amount of 195.7 mln kWh, or RUB 510.9 mln. By the end of 2014, the effect amounted to 302 mln kWh, or RUB 964.1 mln. The effect of activities supporting the existing level of losses amounted to 160.03 mln kWh, or RUB 219.9 mln.

Decrease in energy consumption for business needs

The main target activities reducing consumption of resources for business needs are as follows: use of energy efficient lamps, replacement of mercury street lamps with led and sodium, replacement of windows with plastic or wooden ones with multi-chamber glazing, sealing of buildings, thermal insulation of flat roofs, and insulation of ceilings of the upper floors.

By the end of 2014, the effect of implementation of the target activities for decrease in energy consumption for business needs over the Company amounted to 5,966.5 thousand tons of equivalent fuel (273 mln liters of cold water) for RUB 185.4 mln at the plan of 5,946.1 thousand tons of equivalent fuel (276 mln liters of cold water) for RUB 193.8 mln.

Identification of illegal electricity consumption

The volume of identified non-metered consumption in 2014 amounted to 49,382 thousand kWh that is 29,746 thousand kWh above the level of 2013. The cost of the identified non-metered consumption in 2014 totaled RUB 150,310 thousand (including VAT).

The volume of identified non-contractual consumption in 2014 amounted to 351,527 thousand kWh, and compared to the fact of 2013 it decreased by 458,167 thousand kWh. The cost of the identified non-contractual consumption in 2014 totaled RUB 1,703,494 thousand (including VAT).

RAB regulation. Transmission tariffs

Normative and legal base regulating electricity transmission using RAB:

  1. Order of the Federal Tariff Service of Russia of 30 March 2012 #228-e “About approval of Methodical instructions on tariff regulation using the RAB-method”;
  2. Order of the Federal Tariff Service of Russia of 18 August 2008 #183-e/1 «About approval of the Procedure for approval by the Federal tariff service of the offers of Executive authorities of subjects of the Russian Federation in the field of tariff regulation, concerning transition to regulation of tariffs using the RAB-method and decisions on extension of the validity term of the long-term regulation period».

RAB (Regulatory Asset Base) is a system of long-term tariff formation aimed to attract investments in the expansion and modernization of infrastructure.

Advantages of RAB

  • stimulating attraction of investments;
  • increasing capitalization of regulated entities;
  • improving the quality of strategic planning of Company activities;
  • ability to smooth tariff consequences of investment programs for consumers;
  • creating economic motivation to cut costs and increase reliability and quality of services;
  • lack of «item-by-item» control of expenses by regulators.

According to the Federal Law of 23 November 2009, #261-FZ «About energy saving and increase of power efficiency and modification of certain legislative acts of the Russian Federation» and Decree of the Government of the Russian Federation of 19 January 2010, #30-R Lenenergo after coordination with the Federal tariff service of Russia performed the transition to regulation of tariffs for services on electric power transmission in the form of establishment of long-term tariffs on the basis of RAB since 1 January 2011 (Order of the FTS of Russia #487-e/4 of 28 December 2010).

Pursuant to the Decree of the Government of the Russian Federation of 29 December 2011 #1178 (as amended by the Decree of the Government of the Russian Federation of 30 June 2012, #663) previously approved parameters of long-term tariff regulation were revised for Lenenergo, and the control period was extended until 2017 (Order of the Committee on tariffs of St. Petersburg of 13 July 2012, #181-R, Order of the Committee on tariffs and price policy of the Leningrad Region of 13 July 2012, #88-p). These parameters were coordinated by the FTS of Russia (Orders of 12 June 2012, # 471-e, 472-e, 473-e and 474-e) and have been applied since 1 July 2012.

When coordinating the tariff-balance decisions for 2014 with regional and federal executive authorities individual conditions of regulation on the growth of joint-operation tariffs for electricity transmission for 2014 were approved for Lenenergo at the level exceeding specified by the Government of the Russian Federation, as provided for in the forecast of social-economic development of the Russian Federation for 2014 across St. Petersburg and the Leningrad Region and is caused by execution of the large-scale investment programs.

Key RAB parameters
Indicator St. Petersburg Leningrad Region Lenenergo, total
Invested capital (residual) as of 01.01.2014, RUB mln 64,668 24,236 88,904
CAPEX considered at tariff regulation, RUB mln 87,247 23,915 111,162
Rate of return on invested capital — old capital, %
2011 6 6 6
2012-2016 1 1 1
2017 11 11 11
Rate of return on invested capital — new capital, %
2011 12 12 12
2012 12 12 12
2013 and further 11 11 11
Term of return on investment capital, years 35 35 35

Tariff-setting for electricity transmission services by regulators

Tariffs for electricity transmission services were approved for 2012 within the levels coordinated by the Federal Tariff Service under the joint-operation principle that is uniform for the entire subject of the Russian Federation.

Since 2008, single (joint-operation) tariffs for electricity transmission services have been approved for all consumers, irrespective of the point of connection to urban networks in the region (item 42 of the Rules of non-discriminatory access to electricity transmission services and rendering of these services of 27 December 2004, #861), and individual tariffs for electricity transmission for calculations between network companies.

Tariffs for electricity transmission across the Leningrad Region were approved under the scheme «cost plus». According to this scheme, all payments collected by sales companies arrive in the higher territorial grid organization of Lenenergo which pays off with the subordinate territorial grid companies.

Tariffs for electricity transmission across St. Petersburg were approved under the scheme «mixed cost». According to this scheme, all payments collected by sales companies arrive in the higher territorial grid organization of Lenenergo which pays off with all subordinate territorial grid companies, except CJSC KirovTEK. An individual double-rate tariff under the principle “cost minus” was set for CJSC KirovTEK (this company pay Lenenergo for electricity transmission services).

Besides Lenenergo, electricity transmission activities are performed by 19 territorial grid organizations in St. Petersburg and 31 organizations in the Leningrad Region.

Dynamics of approved joint-operation required gross revenue and average joint-operation electricity transmission tariffs (including tariffs for the group «Other consumers») by regions
Indicator Unit 2012 2013 2014
1st half 2nd half 1st half 2nd half 1st half 2nd half
St. Petersburg
Joint-operation required gross revenue RUB mln 9,070 9,984 10,139 12,713 13,970 12,456
Growth rate of the joint-operation required gross revenue, 2H/1H % 10 25 — 11
Average joint-operation tariff kop/kWh 94 103 104 131 142 141
Growth rate of the average joint-operation tariff, 2H/1H % 10 27 — 1
Tariff for the group “Other consumers” kop/kWh 107 119 118 153 168 168
Growth rate of the tariff for the group “Other consumers”, 2H/1H % 11 30 0
Leningrad Region
Joint-operation required gross revenue RUB mln 6,308 6,645 6,493 7,693 8,360 7,710
Growth rate of the joint-operation required gross revenue, 2H/1H % 5 18 — 8
Average joint-operation tariff kop/kWh 114 121 103 127 132 131
Growth rate of the average joint-operation tariff, 2H/1H % 6 24 — 1
Tariff for the group “Other consumers” kop/kWh 109 117 108 140 141 141
Growth rate of the tariff for the group “Other consumers”, 2H/1H % 8 29 — 1
Lenenergo, total
Joint-operation required gross revenue RUB mln 15,378 16,629 16,633 20,406 22,330 20,165
Growth rate of the joint-operation required gross revenue, 2H/1H % 8 23 — 10
Average joint-operation tariff kop/kWh 101 110 103 130 138 137
Growth rate of the average joint-operation tariff, 2H/1H % 8 26 — 1
Tariff for the group “Other consumers” kop/kWh 108 118 114 148 157 156
Growth rate of the tariff for the group “Other consumers”, 2H/1H % 10 30 — 1

The average transmission tariff in the second half of the year is calculated as the ratio of required gross revenue in the second half of each year to the amount of productive supply on the relevant groups of consumers, including other consumers.

Other consumers is a group of consumers who, in accordance with the Guidelines on calculation of regulated tariffs and prices for electric (heat) power in the retail (consumer) market approved by Order of the Federal Tariff Service of 6 August 2004, #20-e/2, are not included in the basic group of consumers under which the maximum value of customer contract demand is equal to (or more than) 20 MW, and its use per year is more than 7,500 hours (group 1) and the population and equivalent consumer categories (group 2).

Absence of the excess level of electricity transmission tariffs in the second half relative to the first half of 2014 was due to implementation by the regulators of St. Petersburg and the Leningrad Region of the Resolution of the Government of the Russian Federation of 11 June 2014, #542 “About amendments to certain acts of the Government of the Russian Federation regarding compensation to network organizations of the lost income related to technological connection to electric networks, and adoption of tariff decisions”.

Dynamics of joint-operation required gross revenue and electricity transmission tariffs in St. Petersburg

Dynamics of joint-operation required gross revenue and electricity transmission tariffs in St. Petersburg

Dynamics of joint-operation required gross revenue and electricity transmission tariffs in the Leningrad Region

Dynamics of joint-operation required gross revenue and electricity transmission tariffs in the Leningrad Region

Detailed information about electricity transmission tariffs in the regions of the Company’s presence set for 2014-2015 is provided in the online version of the Annual Report at www.ar2014.lenenergo.ru

Revenue from electricity transmission

The amount of actual revenue from electricity transmission services excluding reduction on the value of loading losses in 2014 totaled RUB 37,133 mln, up by RUB 3,099 compared to 2013.

Dynamics of approved required gross revenue on electricity transmission services
Indicator 2012 2013 2014
Total Company’s Total Company’s Total Company’s
St. Petersburg 19,050 7,273 22,852 9,096 26,425 12,348
Leningrad Region 12,953 3,657 14,130 5,896 16,070 5,191
Lenenergo, total 32,003 10,930 36,982 14,992 42,495 17,539
Dynamics of actual revenue from electricity transmission
Indicator Unit 2012 2013 2014 2014 (fact) / 2014 (approved), % 2014 (fact) / 2013 (fact), %
Fact Fact Approved by REC Fact
Leningrad Region
Revenue1 RUB mln 12,577 14,490 16,070 15,818 — 1.6 9.2
Productive electricity supply mln kWh 10,902 10,530 10,492 10,528 0.3 — 0.02
Average tariff kop/kWh 115.4 137.6 153.2 150.3 — 1.9 9.2
Growth rate of average tariff % 6 19 11 — 2
St. Petersburg
Revenue1 RUB mln 16,954 19,545 26,425 21,315 — 19.3 9.1
Productive electricity supply mln kWh 19,104 19,083 18,676 18,152 — 2.8 — 4.9
Average tariff kop/kWh 88.7 102.4 141.5 117.4 — 17.0 14.6
Growth rate of average tariff % — 8 15 38 — 17
Lenenergo, total
W/o reduction on the value of loading losses.Revenue RUB mln 29,531 34,034 42,495 37,133 — 12.6 9.1
Productive electricity supply mln kWh 30,007 29,613 29,168 28,680 — 1.7 — 3.2
Average tariff kop/kWh 98.4 114.9 145.7 129.5 — 11.1 12.7
Growth rate of average tariff % — 2.5 16.8 26.8 — 88.9

Decrease in actual revenue from electricity transmission concerning the revenue approved on the both regions of the Russian Federation amounted to RUB 5,363 mln driven by the following factors:

  • overestimate by the largest sales companies of St. Petersburg, JSC Petersburg Sales Company and LLC Energia Holding, of the customer contract demand accepted for calculation of joint-operation tariffs for electricity transmission relative purchased capacity on the wholesale and retail market, therefore inadequate single-rate and double-rate tariffs for electricity transmission were formed which leads to a decrease in actually received revenue relative to the approved revenue;
  • structure of productive electricity supply by voltage levels and half-year periods developed upon 2014 different form the approved structure;
  • drop in productive electricity supply concerning the approved indicator.

The reasons for variation of actual revenue from the revenue considered in the tariff-balance decision are as follows:

  • decrease in the amount of rendered services by 488 mln kWh, or 2%, which resulted in the revenue drop by RUB 687 mln;
  • decrease in the average tariff by 11%, which resulted in a drop of revenue by RUB 4,675.5 mln. The decrease in the average tariff was due to the difference in the amounts of revenue for electricity transmission services calculated using single-rate and double-rate tariffs approved by the regulators in respect of the single sales company. As a result of application of the approved tariff-balance decisions due to the possibility of sales companies to choose the type of tariff for calculations, lost income of Lenenergo in 2014 amounted to RUB 5,362.5 mln.

Dynamics of actual revenue from electricity transmission, RUB mln

Dynamics of actual revenue from electricity transmission
Structure of actual revenue of Lenenergo from electricity transmission services, RUB mln
Indicator 2012 2013 2014 2014/2013, %
St. Petersburg
Revenue, total 16,954 19,545 21,315 9
Own revenue of Lenenergo 5,856 7,105 8,853 25
FGC UES 4,576 5,126 4,987 — 3
Other TGOs 3,363 4,010 4,063 1
Losses in Lenenergo networks 3,159 3,304 3,412 3
Leningrad Region
Revenue, total 12,577 14,490 15,818 9
Own revenue of Lenenergo 4,058 6,198 5,848 — 6
FGC UES 2,259 2,416 2,450 1
Other TGOs 4,666 3,764 5,103 36
Losses in Lenenergo networks 1,595 2,112 2,418 15
Lenenergo, total
Revenue, total 29,531 34,034 37,133 9
Growth rate, % 1 15 9
Own revenue of Lenenergo 9,914 13,303 14,700 11
Growth rate, % 4 34 11
FGC UES 6,834 7,542 7,437 — 1
Growth rate, % 7 10 — 1
Other TGOs 8,029 7,774 9,166 18
Growth rate, % 1 — 3 18
Losses 4,754 5,415 5,829 8
Growth rate, % — 11 14 8

Dynamics of structure of required gross revenue from electricity transmission in St. Petersburg, RUB mln

Dynamics of structure of required gross revenue from electricity transmission in St. Petersburg

Dynamics of structure of required gross revenue from electricity transmission in the Leningrad Region, RUB mln

Dynamics of structure of required gross revenue from electricity transmission in the Leningrad Region

Dynamics of revenue from electricity transmission services by regions, RUB mln

Dynamics of revenue from electricity transmission services by regions

Structure of revenue from electricity transmission services in 2014, %

Structure of revenue from electricity transmission services in 2014
Breakdown of actual revenue from electricity transmission services of Lenenergo by the groups of consumers net of loading losses in 2014, RUB mln
Indicator St. Petersburg Leningrad Region Lenenergo, total
Other consumers 11 353 364
Third-party network organizations 135 135
Power supply organization 817 2,346 3,163
Guaranteeing supplier 19,808 12,791 32,599
Total 20,771 15,490 36,261

Cost of electricity transmission services

The cost of electricity transmission services in 2014 totaled RUB 38,756 mln and increased by RUB 2,853 mln, or 7.9% y-o-y. Controllable costs were up by RUB 231 mln, or 3.7% y-o-y, and non-controllable costs — by RUB 2,622 mln, or 8.9% y-o-y respectively.

Cost of services on electricity transmission on networks, RUB mln
Indicator Indicators for 2012 and 2013 are given according to the annual accounting statements for 2014 including retrospective data.2012 Indicators for 2012 and 2013 are given according to the annual accounting statements for 2014 including retrospective data.2013 2014 2014 / 2013, %
Controllable costs 5,502 6,329 6,560 3.7
Raw materials and supplies 464 497 517 3.8
Works and services of production character 1,121 1,367 1,283 — 6.2
Payroll 2,596 2,939 3,153 7.3
Other costs 1,321 1,525 1,608 5.5
Non-controllable costs 26,842 29,575 32,196 8.9
Purchased power to compensate for losses 4,754 5,415 5,829 7.6
Services in electric power transmission by networks of third-party regional grid companies 8,029 7,774 9,166 17.9
FGC UES fee 6,119 6,715 6,566 — 2.2
Depreciation of fixed assets and intangible assets 6,270 8,254 8,967 8.6
Lease payments 803 123 76 — 38.5
Other costs 867 1,294 1,592 23.1
Total costs 32,344 35,903 38,756 7.9

Dynamics of controllable and non-controllable costs on electricity transmission, RUB mln

Dynamics of controllable and non-controllable costs on electricity transmission

Compared to 2013 the changes are as follows:

Controllable costs were up by RUB 231 mln, or 3.7% y-o-y, primarily driven by the growth of payroll by RUB 214 mln, or 7.3% y-o-y due to the indexation of salaries in connection with execution of obligations of the employer under the Branch tariff agreement, activities for motivation of the employees of key positions and professions, and changes in legislation regarding payment of remuneration of the staff involved in work with harmful working conditions.

Non-controllable costs were up by RUB 2,622 mln, or 8.9% y-o-y, for the following reasons:

  • purchased power to compensate for losses increased by RUB 414 mln, or 7.6% y-o-y driven by increased losses by 73 mln kWh, or 2.1% (growth of costs by RUB 122 mln), and increased non-regulated tariff for purchase of losses by 5.4% due to the growth of the actual price of ATS (growth of costs by RUB 292 mln);
  • depreciation of fixed assets and intangible assets increased by RUB 713 mln, or 8.6% y-o-y due to the growth of balance sheet total resulting from execution of the investment program on commissioning of fixed assets;
  • other costs increased by RUB 299 mln, or 23.1% y-o-y driven by the growth of property tax due to the increase in 2014 of tax rates on the grid equipment subject to taxation since 1 January 2013, and increase in the tax base as a result of commissioning of fixed assets owing under the investment program of Lenenergo;
  • cost of electricity transmission services by networks of third-party grid companies by RUB increased by 1,392 mln, or 17.9% y-o-y due to the indexation of individual tariffs from 2H 2014;
  • FGC UES fee decreased by RUB 149 mln, or 2.2% y-o-y that was primarily caused by lower volumes of customer contract demand by 363 MW, or 9.3% y-o-y as a result of leaving of some consumers under the so-called “last mile” agreements and the growth of cost of loading losses by RUB 50 mln, or 6.1% y-o-y at a simultaneous growth of tariffs for UNEG networks maintenance and payment for losses in UNEG networks;
  • lease payments dropped by RUB 48 mln, or 38.5% y-o-y that was linked to the expiration of lease contracts.

Financial result from electricity transmission activities

Results of financial and business activities on electricity transmission, RUB mln
Indicator Indicators for 2012 and 2013 are given according to the annual accounting statements for 2014 including retrospective data2012 Indicators for 2012 and 2013 are given according to the annual accounting statements for 2014 including retrospective data2013 2014 2014 / 2013, %
Revenue from electricity transmission on networks 28,816 33,207 36,261 9.2
Cost of electricity transmission on networks 32,344 35,903 38,756 7.9
Gross profit from electricity transmission on networks — 3,529 — 2,696 — 2,495 7.5
Interest payable 1,788 2,217 2,766 24.8
Other expenses 830 887 4,464 403.4
Profit (loss) before tax from electricity transmission on networks — 6,146 — 5,800 — 9,725 67.7
Profit tax attributable to transmission activities 427 646 884 36.9
Net profit (loss) from electricity transmission on networks — 6,573 — 6,446 — 10,609 — 64.6

Reasons for generation of losses from electricity transmission in 2014.

Since 2011, the Company has completed the transition to RAB-regulation. The loss from electricity transmission in 2012 amounted to RUB 6,573 mln, in 2013 — RUB 6,446 mln, and in 2014 — RUB 10,609 mln.

The occurrence of losses from electricity transmission activities was influenced by the following factors:

  • overestimate by the Committee on tariffs of St. Petersburg of the customer contract demand in relation to the actually consumed capacity;
  • excess of the accrued amortization in accounting (useful life — 21years) over the value of return on invested capital (useful life — 35 years);
  • application of smoothing under RAB-regulation.

In 2014, losses from electricity transmission increased by RUB 4,163 mln compared to 2013. The increase of losses was primarily caused by the growth of other costs attributable to transmission activities at the expense of reflection of provisions for disagreements with third-party grid organizations, write-offs of losses on the lost cases on disagreements with third-party grid organizations, increase in the amount of interest payable and profit tax.

Net profit (loss) from electricity transmission
Indicator Indicators for 2012 and 2013 are given according to the annual accounting statements for 2014 including retrospective data2012 Indicators for 2012 and 2013 are given according to the annual accounting statements for 2014 including retrospective data2013 2014 2014/2013, %
Net profit (loss) from electricity transmission — 6,573 — 6,446 — 10,609 64.6

Dynamic of gross profit? profit before tax and net profit from electricity transmission, RUB mln

Dynamic of gross profit? profit before tax and net profit from electricity transmission

2 Indicators for 2012 and 2013 are given according to the annual accounting statements for 2014 including retrospective data

Financial result on the solution of regulators
Indicator St. Petersburg Leningrad region Lenenergo, total
Equity funds for investments and expenses from profit 6,800 367 9,867
Expenses from profit (interest on loans, social payments, dividends, other expenses) 2,821 1,558 4,379
Depreciation 6,091 3,191 9,282
Equity funds for investments (item 1 — item 2 — item 3) — 2,112 — 1,682 — 3,794
Smoothing — 1,102 — 919 — 2,021
Lost income 2,284 — 235 2,049
Total loss on electricity transmission approved by regulators — 930 — 2,836 — 3,766

In accordance with the approved tariffs for 2014, the Company forms losses from electricity transmission activities in the amount of RUB 3,767 mln. In 2014, the actual loss from electricity transmission activities totaled RUB 10,609 mln, which is RUB 6,843 mln, or 181.7% y-o-y above its value put at regulation.

Variation of actual indicators from the indicators considered at regulation, RUB mln
Indicator St. Petersburg Leningrad region Lenenergo, total
Revenue — 5,111 — 252 — 5,363
Controllable costs — 49 462 413
Non-controllable costs — 1,465 — 887 — 2,352
Profit tax 505 380 884
Expenses from profit 2,418 433 2,850
Depreciation — 525 210 — 315
Total growth of loss — 5,994 — 848 — 6,843

Reasons for variation of actual indicators from the indicators approved at regulation:

The decrease in sales revenue from the revenue considered by regulators amounted to RUB 5,363 mln. Key driver were as follows: application by the Committee on tariffs of St. Petersburg in calculations of tariff rates of the overestimated customer contract demand, variation of the actual structure of consumers by groups and voltage levels from the structure considered by the committees at formation of the balance of electric power and capacity, change of the actual productive electricity supply relative to that considered by the committees and its redistribution by half-year periods of 2014.

The growth of controllable costs in comparison with the costs considered by regulators amounted to RUB 413 mln. The greatest influence was rendered by increased repair expenses on the additional activities held to ensure reliable power supply of consumers (in preliminary coordination with regulators), rising labor costs due to the activities undertaken to motivate employees of key positions and professions, and changes in the legislation on payment of remuneration to the staff engaged in work with harmful working conditions.

The drop of non-controllable costs was RUB 2,352 mln. The main influence was rendered by:

  • decrease in the amount of electricity transmission services by networks of third-party grid organizations that is linked to the differences that are primarily due to the lack of agreed essential terms of contracts stipulated by the applicable Russian legislation, in particular the reaffirmation of the ownership right of facilities, the lack of documents on technological connection and metering devices, and relate to the application in the calculations of the actual or contract demand;
  • decrease in the expenses on purchased energy to compensate for losses due to the formation of the non-regulated tariff for purchase of losses at a level below the forecast of regulators.

The growth of profit tax amounted to RUB 884 mln. Variation for the profit tax was linked to different methods of calculating profit tax. The regulator does not consider the features of tax accounting.

The growth of expenses from profit amounted to RUB 2,850 mln. The greatest influence was rendered by creation of provisions for disagreements with third-party grid organizations, and write-off of losses on the lost cases on disagreements with third-party grid organizations.

Depreciation in 2014 was RUB 315 mln below the depreciation considered by the regulator, which is due to the reduction in the average rate of depreciation as a result of changes in the structure by groups of fixed assets.