RUSSIA - May 19 - Reform Plan For Electricity Adopted.

The government approves a programme to restructure the electricity sector, which would gradually create a market for electric power. The sector will be divided into generation, distribution and sales units. The government will sell stakes in them, but would retain full control over the grid itself, and thousands of kilometres of power lines. (Critics, including Pres. Putin's economic adviser Andrei Illarionov strongly oppose the plan, saying it does not provide adequate safeguards for the current owners of the electricity companies. The reform has been the object of debate since Anatoli Chubais - the former government reformer best known for his state-asset sales programme in the mid-1990s - proposed a radical version in 2000. The proposal offered by Chubais, who runs Unified Energy System (UES), incurred the wrath of foreign investors, who feared that the plan would ruin their holdings. Putin ordered a compromise. Though UES is the world's largest electric grid, its value is not one-tenth the value of utilities in Western countries. The industry needs outside investment to modernise. UES, which is 52% owned by the government, has many minority owners, including foreign investors who hold about a third of it. The debate centres on how property should be redistributed within the new system. Investors who own parts of the regional companies oppose the proposal to remove chunks of property from those companies through share swaps or buyouts. UES itself would be liquidated, and investors say they are not confident they will get a fair payment).