News report on the common market for electric energy

Word count: 456

News report

On January 31, the consultative committee under the Collegium of Eurasian Economic Commission approved the proposal of the Agreement on the common market for electric energy of the Eurasian Economic Union. The meeting was chaired by Adamkul Zhunusov, the Minister of energy and infrastructure of EEC. It is planned to come into force on January 1, 2019, therefore, by the end of 2018 it should be signed by the heads of states of Eurasian Economic Union. The document consists of 19 articles and is based on the previously approved Conception and Program on formation of EEC common energy market. The document is planned to regulate the market of natural monopolies by creating common rules on the tariffs, access and energy transportation procedures. It also has a provision on the possible division of the vertically integrated electric energy producers and distributors (Eurasian Economic Commission 2018).

This Agreement can be analyzed in the framework of “spillover effect”, when already existing integration gives impetus for further integration (Ian Bache 2011). In 1998, the governments of CIS signed the Agreement for parallel operation of the power systems of the CIS members-states, which regulated already integrated electric energy system inherited from USSR (KEGOC 2018). The governments agreed to stick to common standards and keep the existing compatibility of the grid system. The agreement also forbids any import tariffs on the electric energy originating within CIS (CIS Web portal 1998). Therefore, it could be stated that the new Agreement furthers the existing integration. Kazakhstan, Belarus and Russia already have integrated electric grid systems which allow them to sell and buy electricity from each other (KEGOC 2018). However, Armenia does not share a land border with any EAEU countries and its energy grid system does not have a direct connection to any other EAEU countries’ systems. Kyrgyzstan is also somewhat isolated and has direct connections only with Kazakhstan’s southern regions.

The proposal of the Agreement not only does not require any state to privatize its natural monopolies, but it solidifies the position of state-owned natural monopolies in the Article 7, which states that only state-owned companies can trade on the future common electricity market (Eurasian Economic Commission 2018). It also does not have any provisions regarding subsidized prices for electricity in EAEU member-states: Kyrgyz Republic directly subsidizes its electric energy tariffs (U.S. Department of Commerce 2017), while Kazakhstan indirectly subsidizes its electric energy producers (OECD 2013).

In conclusion, it could be stated that the future Agreement will be a logical step forward in terms of integration of key sectors of EAEU member-states economies. However, the gaps in infrastructure connections, lack of provisions regarding existing subsidies and proposed exclusive access of government-owned natural monopolies to the common market will prove a challenge for fruitful integration.

References

CIS Web portal. 1998. ДОГОВОР. Accessed February 1, 2018. http://www.e-cis.info/page.php?id=21484.

Eurasian Economic Commission. 2018.

Консультативный комитет ЕЭК одобрил Соглашение об общем электроэнергетическом рынке Союза. Accessed February 1, 2018. http://www.eurasiancommission.org/ru/nae/news/Pages/31-01-2018-1.aspx.

—. 2018. СОГЛАШЕНИЕ об общем электроэнергетическом рынке Евразийскогоэкономического союза. Accessed 1 February. https://docs.eaeunion.org/pd/ru-ru/0112578/pd_29012018_att.pdf.

Ian Bache, Stephen George and Simon Bulmer. 2011. "Theories of European Integration." In Politics in the European Union. Oxford University Press.

KEGOC. 2018. International Cooperation. Accessed February 1, 2018. http://www.kegoc.kz/en/power-industry/international-cooperation.

—. 2018. Kazakhstan Electric Power Industry Key Factors. Accessed February 1, 2018. http://www.kegoc.kz/en/power-industry/kazakhstan-electric-power-industry-key-factors.

OECD. 2013. ENERGY SUBSIDIES AND CLIMATE CHANGE IN KAZAKHSTAN:. Accessed February 1, 2018. http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ENV/EPOC/EAP(2013)7&docLanguage=En.

U.S. Department of Commerce . 2017. Kyrgyz Republic - Energy. Accessed February 1, 2018. https://www.export.gov/article?id=Kyrgyz-Republic-Energy.