Transcript of the beginning of the meeting:

Vladimir Putin: Go ahead, Mr Sechin. We have agreed that the Energy Ministry and the energy companies will think about the way to make the country’s electricity and gas markets more transparent. This is the first point.

The second issue is how to free consumers, particularly small and medium electricity and gas consumers, from burdensome and baseless fines. You had to develop the form of property declaration and business participation for the country’s major state-run power companies, first and foremost grid companies. First, how is the work going? And, on a related point, how we can apply these rules to private companies?

Igor Sechin: According to the instruction you issued at the government meeting, a resolution was signed to introduce changes in the rules under which the electricity market operates. In the last two weeks, the ministry has prepared proposals jointly with the companies operating in the market, and the Market Council (the Market Council for the Organisation of an Efficient System of Wholesale and Retail Electricity and Capacity Sales). Given that these issues are very sensitive for the socioeconomic sphere, we offer the following decision. According to the existing Russian law, grid companies (Federal Grid Company, Interregional Distribution Grid Company) have no right to distribute electricity to end consumers.

Vladimir Putin: I’m aware of this. Could you tell me about the declaration form? What do you suggest in this area? And we will continue to discuss distribution.

Igor Sechin: Mr Putin, we propose that the ban on combining power transmission and distribution at the level of individual managers also involve…

Vladimir Putin: I see, Mr Sechin. We will discuss this in a moment. I’m asking about declaring.

Igor Sechin: In this regard, we propose that executives at federal grid companies should be obligated to file income declarations specifying their property obligations, stocks held, and affiliation with [private] companies as beneficiaries involved in distribution. We also suggest developing a mechanism for them to transfer their assets under interim management for the period during which they remain at the helm of federal grid companies. As for the top managers of privately owned groups, we propose they submit such declarations on a voluntary basis.

Vladimir Putin: Let this be voluntary for private companies. As for the public sector, those chief executives who violate current law by building a whole network of private businesses around their state-owned enterprises, often using offshore schemes, should be made to change jobs rather than have their assets transferred under interim management.

Igor Sechin: I see.

Vladimir Putin: In some of Russia’s regions, the heads of regional grid companies and other market players are known to have set up dozens of private businesses. The law bans (state-owned grid) companies from getting involved in private sales activities. By extension, this ban should apply to the top management of such companies, I think.

So, executives in breach should just change jobs. If they want to trade, just let them go and work on the market full-time. And let the vacated positions be offered to people who would not divide their time between their main job and private dealings. Okay?

Igor Sechin: Okay.

Vladimir Putin: Please draw a form for such declarations as soon as possible and get it published so that everyone has an idea of what it looks like.

Igor Sechin: I will.

Vladimir Putin: Secondly, we’ve agreed to solve the problem of penalties for small consumers on the gas and electricity markets. During a recent meeting with rural professionals, this issue was brought up once again. One of the participants remarked that the decision had already been made for the electricity market, but not yet for the gas market. I’ve asked you, Mr Sechin, to work on this with Gazprom. Do you have any proposals to make in this regard?

Igor Sechin: We’ve discussed this with Gazprom and agreed that customers whose annual gas consumption is under 10 million cubic metres should be fully exempted from underuse penalties.

Vladimir Putin: That’s a total of around 80 billion consumers, right?

Igor Sechin: Last year’s commercial consumption was at 417 billion cubic metres. So, as you say, we have about 88 billion consumers (to be exempted).

Vladimir Putin: Of the 417 billion consumed last year, electric power plants accounted for 60%.

Igor Sechin: These were mostly large consumers, yes.

Vladimir Putin: I agree with Gazprom that large electricity companies consuming a lot of natural gas can and should plan their consumption, especially during autumn/winter consumption peaks. Otherwise we’ll seriously undermine discipline in this sector. As for small companies, they make up…

Igor Sechin: …almost half of the consumers.

Vladimir Putin: Yes, 88 billion, or nearly a half. So let’s begin here. Ten million cubic metres per year is the consumption level of a small town of about 250-300 households, I reckon.

Igor Sechin: Yes, 250-300 houses. Quite large houses, though.

Vladimir Putin: We’re talking about a dozen hectares of greenhouses and small substations. OK, let’s begin here. And then we’ll see how it all works.

Igor Sechin: Okay. We’ll prepare appropriate directives for the Gazprom Board. It won’t take us long to see the matter through.

Vladimir Putin: When will you be done, do you think?

Igor Sechin: Within a week.

Vladimir Putin: Okay, go ahead.