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Based on the results of monitoring the electricity market, it was established that more than 100 business entities (major consumers) connected to the transmission system operator's networks have networks used for the distribution of electricity to other consumers (users).

In accordance with part two of Article 49 of the Law, the relations between the major consumer and the users powered from its networks, and the distribution system operator and/or the transmission system operator are regulated by the distribution system code, the transmission system code, the retail market rules, and agreements concluded on their basis.

In accordance with part six of Article 49 of the Law, major consumers provide non-discriminatory access of third parties to their electrical networks, safety, and reliability of their functioning in accordance with the distribution system code, retail market rules, and other regulatory legal acts.

At the same time, according to the results of the preliminary analysis, the networks of such major consumers have signs of small distribution systems.

Thus, in accordance with part four of Article 49 of the Law, NEURC may classify electrical networks that distribute electricity in a limited area of the facility as a small distribution system if at least one of the following conditions is met:

1) the production processes of users of such a system are interconnected for technological reasons or safety considerations;

2) distribution through such networks is carried out mainly for the network owner or for legal entities related to it by economic relations and/or control relations;

3) the distribution of electricity through such networks is carried out to fewer than the threshold number of household consumers who are related to the owners of such a system by contractual relations or on other legal grounds, and/or this system is in the joint ownership of such household consumers.

Classification and criteria for determining small distribution systems are defined by the distribution system code based, in particular, on the number and category of small distribution system users, the volumes of electricity distribution by the small distribution system, and the capacity of connection to the transmission system.

According to the Distribution System Code, approved by NEURC Resolution No. 310 dated 14.03.2018, a small distribution system (SDS) is an electrical network connected to the transmission system networks, through which electricity is distributed to a certain number of Users and which is the property/co-ownership of a business entity/entities and built to meet the needs of these Users.

Electrical networks can be defined as an SDS if it is:

a distribution system created in a single development project (development phase), owned by legal entity consumers and located in a limited area of a residential complex;

a distribution system created on the basis of joint ownership in a limited land area and used by co-owners to meet the needs (garden societies, garage cooperatives, cottage communities, etc.) defined by the relevant charter of organizations and/or associations of citizens;

a distribution system through whose networks electricity is distributed primarily for the network owner or for legal entities related to it by economic relations and/or control relations;

electrical networks distributing electricity to Users in a limited area of a commercial establishment (office centers, shopping and entertainment complexes, etc.) related to each other by economic relations and/or control relations;

electrical networks distributing electricity in a limited area to Users whose production processes are interconnected for technological reasons or safety considerations;

electrical networks distributing electricity in a limited area to Users of a public service establishment (sports and health complexes, sanatorium-resort complexes, etc.).

An electrical network is classified as an SDS if it simultaneously meets the following numerical criteria:

the number of connected points (Users - legal entities or individuals) to the SDS is more than 2;

the connected capacity of SDS Users is more than 50 kW;

the average monthly volume of SDS electricity distribution is more than 5 thousand kWh;

electricity distribution is carried out to fewer than 10,000 household consumers who are related to the owners of the SDS by contractual relations or on other legal grounds, and/or this system is in the joint ownership of such household consumers.

The SDS must be equipped with commercial metering devices for the total flow of electricity and for each User of this system separately in accordance with the Commercial Metering Code.

To obtain SDS status, the owner of an electrical network that meets the SDS classification criteria must register it with the NEURC, providing the following documents:

an application from the owner of the electrical network meeting the criteria for definition as an SDS to the NEURC for registration of such an SDS;

documents confirming the right of ownership to the electrical network;

a copy of the agreement on the provision of electricity transmission services concluded between the owner and the TSO;

confirmation from the TSO regarding the connected capacity and the volume of average monthly consumption (kWh);

documents confirming the compliance of this electrical network with the definition of an SDS (confirmation regarding the number of connection points, connection capacity, and volume of electricity distribution of the SDS).

Based on the above, in order to ensure non-discriminatory access of third parties to electrical networks, the safety and reliability of their functioning, and the protection of the rights of sub-consumers (users) of such networks, major consumers (network owners) connected to the networks of the transmission system operator must, as soon as possible but no later than January 20, 2019, provide the NEURC with the necessary documents for registration of the relevant networks as small distribution systems.

The NEURC, within 3 months from the date the owner provides the documents, enters the network into the SDS register published on its website, or sends the owner a reasoned refusal to enter it into the register.

Owners of electrical networks who have acquired SDS status (legal entities created by owners/co-owners), or legal entities performing these functions on a contractual basis, become Small Distribution System Operators.

Small Distribution System Operators perform the functions, have the rights and obligations of a distribution system operator regarding small distribution system users, taking into account the specifics defined by the distribution system code and the retail market rules, without the relevant licenses.

At the same time, taking into account:

the need for uninterrupted power supply to sub-consumers (users) powered by the networks of the main consumer, who are connected exclusively to the networks of the transmission system operator;

the need to carry out certain organizational measures and provide time to acquire SDS and SDSO status;

the start of the operation of the new retail electricity market from January 01, 2019,

we believe that temporarily, for a period until April 01, 2019, the issue should be resolved in the following way:

1. Main consumers whose electrical networks are connected to the transmission system networks conclude agreements on the provision of electricity transmission services with the TSO, effective from January 1, 2019.

2. DSOs that, prior to the implementation of unbundling measures in accordance with paragraph 13 of the transitional provisions of the Law, had concluded agreements with main consumers connected to the TSO networks as suppliers at a regulated tariff in the assigned territory, shall, by January 1, 2019:

conclude term (until 01.04.2019) additional agreements to existing agreements on the joint use of technological electrical networks with main consumers connected to TSO networks, using the provision of the Final and Transitional Provisions of the Law, according to which the distribution system operator is the legal successor regarding rights and obligations under the concluded agreements for the joint use of technological electrical networks;

conclude term (until 01.04.2019) consumer agreements for the provision of electricity distribution services with sub-consumers connected to the electrical networks of the main consumer, who is connected to the TSO networks;

ensure commercial metering of electricity for the aforementioned sub-consumers;

conclude electricity supplier agreements for the provision of electricity distribution services with electricity suppliers who provide and/or will provide electricity supply to sub-consumers during the period until 01.04.2019, according to the standard form defined by the Retail Electricity Market Rules.

3. Main consumer connected to the TSO networks:

concludes an electricity supply agreement with the chosen electricity supplier, unless such a main consumer provides electricity supply for themselves independently based on the relevant license;

concludes term (until 01.04.2019) additional agreements to existing agreements on the joint use of technological electrical networks with the relevant DSO and ensures unhindered access for the DSO to its own commercial metering devices and the commercial metering devices of sub-consumers with whom term (until 01.04.2019) electricity distribution agreements have been concluded.