New rules for TCO have come into force in Russia

The Government of the Russian Federation has approved Resolution No. 1476 regulating the energy transmission markets in the regions. The document stipulates that from January 1, 2026, territorial network companies (TCO) must own at least 80% of the network assets under their management.

"These changes are aimed at eliminating gaps in legislation, preventing abuse and stimulating industry consolidation," reads a message posted on the VKontakte page of the Ministry of Tariff Regulation of the Voronezh Region.

The changes, among other things, affected the criteria for classification as a TCO. The requirements for ownership of electric grid facilities have been tightened: Now the owners must have ownership of transformer substations connected to power lines and used for regulated activities. Thus, the use of leased facilities becomes illegal.

In order to confirm ownership, the TCO needs to conduct an inventory of assets by the end of 2025. This process concerns accounting not only for transformers and switchgear in cities, but also for power transmission poles in rural and hard-to-reach areas. The accounting procedure for network assets is also being clarified. In the past, one of the mandatory criteria for TCO was the ownership or lease of power transmission lines with a length of at least 300 km and substations with a total rated capacity of at least 150 MVA.

"The new version is aimed at eliminating "formal" ownership schemes that allowed small and medium—sized enterprises to receive "boiler" revenue without leading to real consolidation and consolidation," the official page of the Ministry of Tariff Regulation of the Voronezh Region says.

However, the changes may affect some regional network companies, which will lose their status and be forced to leave the market. We are mainly talking about small players. For example, as follows from the message of the Committee on Prices and Tariffs of the Moscow Region, Elmont Energy LLC has already been recognized as non-compliant with the criteria of the new resolution.

"It should be noted that the information about the electric grid equipment of Elmont Energy LLC, indicated in the Universal Tariff Calculation Template, does not correspond to the information provided in the materials confirming ownership of electric grid equipment (purchase and sale agreements, agreements on the transfer of movable and immovable property to the authorized capital)," the Committee's explanation follows..

According to the interviewed industry experts, the new regulation will have the greatest impact on small enterprises. At the same time, as an example of a large company at risk of falling under regulation, they also name enterprises like Oblkommunenergo, owned by the Irkutsk region.

According to experts, the upcoming reform is aimed at improving the reliability and stability of energy supply to the population and equivalent categories of consumers, as well as preventing a sharp increase in tariffs. In fact, the changes will lead to the displacement of small players from the market who do not have sufficient resources to maintain the network infrastructure in a regulatory state.

"The main purpose of the changes is to increase control over the efficiency of the electric grid infrastructure, stimulate its consolidation and consolidation, as well as prevent possible abuses by participants in the energy sector. The focus is shifting to the real owners of the facilities, excluding schemes with temporary ownership or "formal" corporate ties, which previously allowed circumventing the established criteria," the Ministry of Tariff Regulation of the Voronezh Region notes.