Single electric power system of the Republic of Kazakhstan (SEPS) – the set of electric power plants, power transmission lines and electric substations ensuring reliable and qualitative power delivery to consumers in Kazakhstan.

The electric power industry of the Republic of Kazakhstan includes the following sectors:

• electricity production;
• transmission of electrical energy;
• supply of electrical energy;
• consumption of electrical energy;
• other activities in the electric power industry.

Electricity generation sector

Electricity production in Kazakhstan is carried out by 158 power plants of various forms of ownership. The annual maximum load in the Unified Electric Power System of Kazakhstan for the past AWP was recorded on November 26, 2019 and amounted to 15,182 MW. As of January 1, 2020 the total installed capacity of power plants in Kazakhstan amounted to 22,936.6 MW, available capacity - 19,329.7 MW.

Power plants are divided into national power plants, industrial power plants and regional power plants.

In 2019, the volume of electricity generation amounted to 106.0 billion kWh or 99.3% by 2018 (106.8 billion kWh). Electricity consumption amounted to 105.1 billion kWh or 102% by 2018 (103.2 billion kWh), which indicates the full coverage of the country's economy's need for electricity.

For 6 months of 2020, the volume of electricity generation amounted to 53.5 billion kWh or 103% compared to 6 months of 2019 (51.9 billion kWh). Electricity consumption amounted to 53.1 billion kWh or 102.1% by 6 months of 2019 (52 billion kWh).

By the Order of the Minister of Energy of the Republic of Kazakhstan dated 15.01.2020 No. 15, the Forecast balance of electric energy and capacity for 2020-2026 was approved.

According to which, the volume of production and consumption of electric energy should be:

billion kWh

Electric energy transmission sector

Electric networks of the Republic of Kazakhstan are a set of substations, switchgears and connecting power transmission lines with a voltage of 0.4-1150 kV, intended for the transmission and (or) distribution of electric energy.

The role of the backbone network in the SEPS of Kazakhstan is played by the national power grid (NPG), which provides electrical connections between the regions of the republic and power systems of neighboring countries (the Russian Federation, the Kyrgyz Republic and Uzbekistan), as well as the delivery of electrical energy by power plants and its transfer to wholesale consumers. Substations, switchgears, interregional and (or) interstate power transmission lines and power transmission lines providing electric power of electric stations with a voltage of 220 kV and higher, which are part of the NPG, are on the balance sheet of JSC "KEGOS".

Regional-level power grids provide electrical connections within the regions, as well as the transmission of electricity to retail consumers. Electric grids of the regional level are on the balance sheet and operation of 19 the regional electric grid companies (REC), including the transmission of electric energy is carried out by smaller energy transmission organizations in the amount of 130 units.

Power-transmitting organizations (PTO) carry out on the basis of contracts the transfer of electrical energy through their own or used (rent, leasing, trust management and other types of use) electrical networks to consumers of the wholesale and retail market or power supply organizations.

Electricity supply sector

The electricity supply sector of the electricity market of the Republic of Kazakhstan consists of energy supply organizations (ESOs) that purchase electricity from energy-producing organizations or at centralized auctions and then sell it to end retail consumers.

Energy in the Republic of Kazakhstan shall be delivered under conditions of functioning of electric and heat energy markets. Electric and heat energy are the market product.

The electrical energy market consists of two levels: wholesale and retail electrical energy markets. The heat energy market consists of one level: retail market.

The wholesale electrical energy market shall consist of:

market for decentralized buy-and-sell of electrical energy, functioning on the basis of buy-and-sell agreements concluded by the market participants at the prices and subject to delivery conditions determined by agreement between the parties;

centralized electrical energy trade market constituting an organized trading platform for buying and selling electrical energy on a short term (spot biddings), medium term (week, month) and long term (quarter, year) basis;

balancing market in real-time mode, functioning for the purpose of physical and subsequent financial settlement of hourly unbalance arising during operating days between actual and contractual values of electrical energy production-consumption in the single electric power system of the Republic of Kazakhstan, confirmed by the system operator in a daily electrical energy production-consumption schedule;

market of system and ancillary services, functioning on the basis of acquisition from the wholesale electrical energy market entities and of provision of the relevant services by the system operator for the wholesale electrical energy market entities, for ensuring the standards of work of the single electric power system of the Republic of Kazakhstan and the quality of electrical energy as determined by the national standards.

market of electric capacity.

Entities of the wholesale electric energy market are:

• energy - producing;
• energy-transmitting;
• energy-supplying organizations;
• electric energy consumers;
• a system operator;
• an operator of the centralized trading market;
• a single purchaser.

State participation 

The Ministry of Energy of the Republic of Kazakhstan is the State authorized Body that implements the state policy in the field of electric power industry.

The Ministry is responsible for approving the marginal tariffs for the production of electric energy by energy-producing organizations.

At the same time, in accordance with the Law of the Republic of Kazakhstan "On electric power industry", the energy-producing organization shall set the selling price for electrical energy independently, which may not be higher than the marginal tariff. At the same time, the purchase and sale of electric energy in the wholesale market of electric energy is carried out on the basis of contracts concluded in accordance with the Civil Code of the Republic of Kazakhstan and other regulatory legal acts of the Republic of Kazakhstan. Thus, energy producers independently conclude contracts with consumers of electric energy, including energy supply organizations, which in turn sell electric energy to the population.

In accordance with the article 12-1 of the Law of the Republic of Kazakhstan "On Electric Power Industry "(hereinafter - the Law) the marginal tariff for electrical energy and the marginal tariff for balancing electricity shall be approved by groups of energy-producing organizations selling electrical energy for a seven-year period, with a breakdown by years.

By order of the Minister of Energy of the Republic of Kazakhstan
of December 14, 2018 No. 514 "On approval of marginal tariffs for electricity", the marginal tariffs for electric energy of energy producing organizations for a seven-year period were approved.

Groups of energy producing organizations were formed by the order of the Minister of Energy of the Republic of Kazakhstan dated December 5, 2018 No. 476, where each energy producing organization is assigned to a separate group.

At the same time, in accordance with article 8 of the Law of the Republic of Kazakhstan "On electric power industry", neither the central executive bodies nor then local representative and executive bodies have the right to interfere in the production and technological activities of organizations connected with production and transfer of electrical and heat energy or with technological management of these processes, with the exception of cases provided for by laws of the Republic of Kazakhstan.

A marginal tariff for electric energy 

tenge/kWh

In accordance with the paragraph 3 of article 12 of the Law energy-producing organizations are obliged to present a report on costs of production and sales of electrical energy, showing volumes of production and sales of electrical energy for the previous calendar year, to the authorised organisation, annually. 

In the event of an actual increase in the costs of electricity production that are independent of energy-producing organizations, the Ministry adjusts the marginal tariffs for electricity production at the request of energy-producing organizations.

In turn, the authorized body in the field of natural monopolies, which include activities for the transmission and supply of electrical energy, is the Committee for the Regulation of Natural Monopolies of the Ministry of National Economy of the Republic of Kazakhstan (hereinafter - CRNM MNE RK). The functions of the CRNM MNE RK include the determination of the method of tariff regulation of the natural monopoly sphere, regulation of prices and tariffs for goods, works and regulated services.

Thus, the tariffs for the transmission of electricity by KEGOC JSC and power transmission organizations, as well as the supply surcharge of power supply organizations are regulated in accordance with the current legislation of the CRNM MNE RK.

The final price for electricity for consumers is set by the KRNM MNE RK.

The participation of the Ministry of Energy of the Republic of Kazakhstan in the activities of natural monopoly entities is carried out by considering the investment programs of natural monopoly entities for technological feasibility and satisfaction of consumer demand for regulated services in order to improve the quality and reliability of provided regulated services. Also, reports on the implementation of these investment programs are accepted together with the authorized body in the field of natural monopoly.

Regarding the budget as part of the development of the electric and heat power system

The Department for the Development of the Electric Power Industry of the Ministry of Energy is the administrator of budget programs 041 "Development of heat and power" of subprogram 101 "Targeted transfers for the development of regional budgets, budgets of cities of republican significance, the capital for the development of the heat energy system" and 042 "Lending to regional budgets, budgets of cities of republican significance, the capital for the reconstruction and construction of heat supply systems ”.

Within the framework of the budget program 041/101 "Targeted transfers for the development of regional budgets, budgets of cities of republican significance, the capital for the development of the heat and power system" from the republican budget finances the costs of construction, reconstruction, expansion and modernization of combined heat and power plants and boiler houses with a capacity of 100 Gcal/hour and above, also substations and power lines with voltage above 35/10/0.4 kV.

The purpose of the budget program is to meet the growing demand of the country's economy for heat and electricity.

Under this budget program, the budget for 2020 is 36 336 707 thousand tenge, for the implementation of 22 projects, including:

Nur-Sultan – 17 011 327 thousand tenge (7 projects);

Almaty – 4 000 000 thousand tenge (2 projects);

Shymkent – 3 772 375 thousand tenge (3 projects);

West-Kazakhstan region – 871 493 thousand tenge (1 project);

Karaganda region – 769 029 thousand tenge (1 project);

Kostanay region – 3 655 144 thousand tenge (2 projects);

Kyzylorda Region – 892 218 thousand tenge (1 project);

Mangistau region – 3 030 664 thousand tenge (2 projects);

Pavlodar region – 376 475 thousand tenge (1 project);

Turkestan region– 1 957 982 thousand tenge (2 projects).

Under the budget program 042 "Lending to regional budgets, budgets of cities of republican significance, the capital for the reconstruction and construction of heat supply systems", projects are being implemented for the reconstruction, modernization and construction of heat supply systems.

The program is aimed at providing reliable and uninterrupted heat supply to consumers.

For 2020, funds were allocated in the amount of 1 178 965 thousand tenge for the implementation of 2 projects of akimats of Kostanay and West Kazakhstan regions, including:

- "Construction of gas boiler houses with the reconstruction of heating networks in the Oktyabrsky village, Lisakovsk, Kostanay region" - 662 547 thousand tenge.

- "Reconstruction of the boiler house of the ATP "Vodostroy" in the village of Zachagansk of Uralsk city of West Kazakhstan region" - 516 418 thousand tenge.

Implementing the Plan of the Nation 100 Concrete Steps

Within the Step 50, a Single Purchaser was created in the electric power market. As a single purchaser the company LLP "Settlement and Financial Center for Support of Renewable Sources" (established in 2014 for the development of Renewable Energy Sources) (a subsidiary of KEGOC JSC) was determined (Order of the Minister of Energy No. 367 dated 07.09.2018).

In pursuance of Step 52, on November 12, 2015, the Law of the Republic of Kazakhstan "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Electric Power Issues" was adopted.

According to the Law dated January 1, 2019, along with the electric power market, the electric power market began to function, aimed at ensuring the attraction of the necessary volume of investments in the industry both for the construction of new power plants and for maintaining existing capacities, also contributes to the development of competition among existing power plants and provision of return on investment costs of energy producing organizations.

To ensure reliable and uninterrupted power supply, the Single Purchaser represented by "the Settlement and Financial Center for the Support of Renewable Energy Sources" LLP implements the purchased service for maintaining capacity to wholesale consumers, energy transmission, power supply organizations at a single average price.

Within the electricity market, the existing electricity tariff is divided into two parts:

1) electricity tariff - a variable part that provides recoupment of the cost for electricity production;

2) the capacity tariff is a constant part that ensures the return on investment in the construction of new and renewal, modernization, reconstruction, expansion of existing electric capacities.

In the electricity market, direct bilateral contracts for the purchase and sale of electricity are concluded under free bilateral contracts, and there is also the possibility of buying and selling electricity at centralized auctions.

The model of the electricity market with a Single Buyer allows to achieve the effect of maximum mitigation of the influence of the inflow of new investments into the industry on electricity prices for end consumers, i.e. the regional change in electricity prices from the implementation of investment energy projects of the country is minimized as much as possible.

In 2019, the Single Buyer concluded 51 contracts with 34 energy producing organizations on the purchase of services for maintaining the readiness of electrical capacity for a total capacity of 8 125 MW, including:

- with energy producing organizations under investment agreements for a total capacity of 311 MW 2 contracts (SevKazEnergo JSC - 221 MW at the marginal tariff of 1.376 million tenge/MW per month; Karaganda Energocenter LLP - 90.1 MW at the marginal tariff of 5.223 million tenge/MW per month);

- with energy producing organizations, which include CHPPs for 2 455 MW 19 contracts (at the marginal tariff of 590 thousand tenge/MW per month);

- with energy producing organizations following the results of centralized trading for 5 359 MW 30 contracts (maximum tariff - 590 thousand tenge/MW per month; minimum tariff - 383 thousand tenge/MW per month).

Thus, in 2019, attracting investments in the electricity generation sector amounted to more than 58 billion tenge.

For 2020, the Single Buyer signed 50 contracts with 32 energy producing organizations for a total capacity of 9 191.96 MW in the amount of 82.5 billion tenge.

In order to implement Step 51, on July 11, 2017, the Law of the Republic of Kazakhstan "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Electricity Issues" was adopted, which establishes requirements with their phased introduction, aimed at enlargement of energy transmission organizations (hereinafter – ETO).

1) availability of dispatch technological control - no later than January 1, 2018 (entered into force);

2) the availability of services that operate and maintain electrical networks, equipment - no later than January 1, 2020 (entered into force);

3) availability of contracts with system operator to render system services - no later than January 1, 2020 (entered into force);

4) the availability of automated commercial accounting systems, telecommunications systems, ensuring their unification with the systems installed by the system operator and the regional power grid company - no later than January 1, 2022.

The mechanism for enlargement of ETO is defined:

- the state body for Energy Supervision and Control checks the ETO for compliance with the established requirements. On ETO that does not meet the requirements of the Law, sends information to the Committee for the Regulation of Natural Monopolies of the Ministry of National Economy of the Republic of Kazakhstan (hereinafter referred to as CRNM); 

- CRNM is revising EPO's tariffs with the exclusion of investment costs (profit, depreciation charges, capital costs leading to an increase of fixed assets value). 

These measures should encourage ETOs that do not meet the requirements to consolidate by combining with each other or with regional grid companies, as well as to stop the activities of transfer electric energy.

The main task is to solve two main problems at the regional level:

1) a large number of energy transmission organizations (162 in total) and, as a result, the existence of different levels of tariffs for their services;

2) the presence of ownerless electrical networks, which negatively affects the reliability of power supply to consumers.

The purpose of the consolidation is to reduce the number of energy transmission organizations that are "in the same chain" on the same electrical network. Consolidation of several energy transmission organizations into one company will eliminate the obligation of the end user to pay for the service of transmitting electric energy to several companies at different tariff levels.

Also, transfer of ownerless electric networks to the management of an energy transmission organization that has qualified specialists and appropriate material and technical equipment will increase the reliability of electricity supply to consumers.

The main expected result from the process of consolidation of regional power grid companies is a reduction of number of energy transmission organizations to 110 organizations by 2023 and a reduction of tariffs for the transmission of electric energy.

With the adoption of the Law, there is already a tendency to reduce the number of ETOs from 162 in 2017 to 150 in 2019.

In 2017, the number of utility companies engaged in the transmission of electric energy was 22 enterprises.

As of today, 5 municipal enterprises of 22 organizations have ceased their activities.

116 energy transmission organizations are subject to verification for compliance with the requirement for the presence of dispatching technological control.

-  conducted inspections of 116 ETOs by energy supervision for compliance with the requirement for the presence of dispatching technological control, of which: 32 ETOs correspond, 75 ETO do not correspond, 9 ETOs are excluded from the Register.

- 1 ETO is excluded from the Register by the decision of the owner.

- CRNM from 75 ETO to 66 ETO reduced the tariff for the transmission of electric energy, for 9 ETO the tariff was not reduced due to the lack of investment costs.

In 2017, akimats of the regions approved Road Maps for the consolidation of ETOs, including the transfer of electric networks owned by the municipal authorities, with deadlines for execution.

According to the results of the work carried out within the framework of the Roadmaps, the length of ownerless electrical networks as of January 2020 was 225 km and 98 TP (in 2017, the length of such networks was 2 350 km and 630 TP). Reduced by 2 125 km of power lines and 532 transformer substations. In general, the identified ownerless electrical networks should be transferred to the ETOs balance in 2020.

At the same time, as part of the work carried out by local executive bodies, new ownerless objects are identified.

Thus, in 2019, as part of the ongoing work 540.7 km of ownerless networks and 257 KTP (ZTP) were identified, namely by akimats:

- Nur-Sultan - 286.26 km of networks and 98 KTP;

- Almaty - 254.415 km of networks and 159 KTP;

- Almaty region -16 KTP.

Work in this direction continues.

International cooperation

Integration within the framework of the Eurasian Economic Union

Within the framework of the Treaty on the Eurasian Economic Union signed in May 2014, the member states are gradually forming the common electricity market of the Union (hereinafter referred to as CEM). It is planned to form a common electric power market based on the provisions approved by the Concept and Program for the formation of a common electric power market of the Union.

The concept defines the goals and objectives of the common electric power market of the EAEU, its target model, management structures, mechanisms of interaction of market entities, forms and methods of regulation, and also contains the stages of market formation.

The program includes a set of organizational, legislative and technological measures, including the development of an electronic trading system on the CEM for fixed-term contracts and for the day ahead, an information exchange system, and also provides for the preparation of a system of acts regulating the CEM.

In general, it is planned to gradually form a common electricity market by integrating the national electricity markets of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia on the basis of parallel electricity systems. At the same time, the provision of electricity to domestic consumers will remain a priority.

Thus, conditions will be created for cooperation on the basis of equality, mutual benefit and without causing economic damage to any of the member States.

May 29, 2019 in celebration of the fifth anniversary of signing the Treaty by the High Council signed a Treaty on the formation of the common electric power market of the Union in the form of a Protocol on amendments to the Treaty on the Eurasian economic Union of may 29, 2014 (in the part of the formation of the common electric power market of the Eurasian economic Union).

The Protocol defines the legal basis and principles for the formation, functioning and development of the CEM, establishes the areas that will be regulated by the rules of operation of the CEM, and also empowers the Intergovernmental Council and the Council of the Commission to approve acts regulating the CEM.

CEM will also expand the export potential of the electric power industry of the EAEU member States, since the total energy capacity utilization rate is only 52%, and the capacity of interstate lines is currently used by only 20%.

Subordinate organizations

The Department of Electric Power Industry Development of the Ministry of Energy of the Republic of Kazakhstan coordinates the activities of the subordinate organizations "NPP Shulbinskaya HPP" LLP, "NPP Ust-Kamenogorsk HPP" LLP and "MAEK-Kazatomprom" LLP.

Unofficial translation