23-11-06 Russia could face a breakdown in its electricity sector unless domestic gas prices are raised, according to a senior bureaucrat.
Anatoli Chubais, chief executive of the state-owned electricity monopoly UES, said: “We are facing a worsening gas deficit. The reason for the domestic shortage is clear -- gas is too cheap domestically. The Government should raise the price to reduce domestic demand.”

Russia’s domestic gas market is probably the cheapest and least efficient in the world. Gas costs $ 45 per 1,000 cm, a quarter of the international market price.
Mr Chubais said: “With such a low price, we are always going to face domestic shortages.”
The cost for retail consumers is even less, so household gas is more or less free. Central heating in homes is also controlled by the Government, leading to a situation in which Russians in Siberia may leave windows open in temperatures of minus 15 degrees Celsius because their homes are too hot. Many households do not even have control over their radiators -- a central authority decides whether the thermostat will be on or off.

Gazprom makes a loss on its domestic gas business, which encourages it to send more of its gas abroad, particularly to Western Europe, the source of most of its profits. Gazprom’s apparent domestic gas deficit is likely to mean that independent gas producers, such as TNK-BP or the London-listed Novatek, will increase sales to Russian companies and to Gazprom itself.
However, independent producers will not be able to sell to foreign companies despite the lobbying efforts of the European Union, which is concerned that Gazprom will be unable to meet its growing commitments.