Federal Law No.261-FZ “On energy conservation, increasing energy efficiency and introducing amendments to certain legislative acts of the Russian Federation” (hereinafter the “Law”).

1. Increasing energy efficiency and mandatory energy inspection.

This Law has been adopted as part of the government policy concerning creation of a legal, economic and organizational framework for stimulating energy conservation and increasing energy efficiency.

Pursuant to the Law, energy efficiency is comprised of useful effect indices resulting from using energy resources. In order to increase energy efficiency, the Law establishes special requirements for the procedure of metering, supplying and using energy resources.

The Law provides for an opportunity and in certain cases an obligation to conduct energy inspection of the use of energy resources. Pursuant to Article 2 of the Law, energy inspection means the collection and processing of data on the use of energy resources in order to reveal more efficient ways of using them.

The main targets of energy inspection are as follows:

• obtaining objective data with respect to the volume of energy resources being used;

• determining energy efficiency indices;

• determining potential for energy conservation and increasing energy efficiency;

• developing a list of measures on energy conservation, increasing energy efficiency and conducting their valuation.

The inspection is conducted on a voluntary basis. Nevertheless, Article 16 of the Law establishes a mandatory procedure for conducting energy inspection with respect to the following entities:

• Government authorities, local self-governing authorities authorized to act as legal entities;

• Organizations with participation of the government or of municipalities;

• Organizations conducting regulated types of activities;

• Organizations carrying out production and/or transportation of energy resources;

• Organizations whose total costs of energy resource consumption exceed 10,000,000 rubles (approximately 250,000 euro) within a calendar year;

• Organizations arranging measures on energy conservation and increasing energy efficiency, which are fully or partially financed from the Russian state budget.

It should be noted that the activities on conducting energy inspection may only be carried out by entities that are members of self-regulatory organizations.

On completing the energy inspection, the entity that performed such work draws up an energy performance certificate and hands it over to the entity that ordered such inspection. The timeframes for conducting an energy inspection vary from 1.5 to 12 months, depending on the object of study.

Pursuant to Article 16 of the Law, the first energy inspection must be conducted by December 31, 2012; subsequent energy inspections must be carried out no less than once in every five years.

The Law also provides for administrative liability for violating regulations of the legislation with respect to conducting mandatory energy inspection. Failure to comply with the timeframes for conducting an energy inspection entails an administrative penalty on officials in the amount from 10,000 to 15,000 rubles (approx. 250 – 375 euro); on legal entities – from 50,000 to 250,000 rubles (approx. 1,250 – 6,250 euro).

2. Energy performance contract.

Liberalization of the electric power market, as well as adoption of regulatory acts on energy conservation stimulate the increase of energy efficiency in enterprises.

The main way to increase energy efficiency is to enter into an energy performance contract.

Based on the energy inspection data, the enterprise may receive services aimed at energy conservation and increasing its energy efficiency.
The Law stipulates mandatory requirements as to the content of an energy performance contract.

Provisions of Article 19 of the Law determine the conditions which the parties must include into an energy performance contract:

• Provision on the scope of energy resource conservation (including in terms of cost), which must be ensured by the contractor as a result of the energy performance contract;
• Provision on the term of the energy performance contract, which may not be less than the timeframe necessary to achieve the value of energy resource conservation established by the energy performance contract;
• Other mandatory provisions of energy performance contracts, as established by legislation of the Russian Federation.

The Law also determines provisions that may be included into an energy performance contract at the discretion of the parties involved:

• Provision on the contractor’s obligation to ensure the regimes and conditions with respect to using energy resources approved by the parties (temperature regime, lighting level), in the course of fulfilling the energy performance contract;
• Provision on the contractor’s obligation to install and commission into operation the metering devices with respect to the energy resources being used;
• Provision on determining the price in the energy performance contract based on the indices achieved or to be achieved as a result of implementing the energy performance contract, including based on the cost of conserved energy resources.

The provisions of the energy performance contract may also be included into a sale and purchase agreement, supply agreement, or an agreement on transfer of energy resources.

Additional notes

Should any questions arise in connection with the above or if you need any additional materials, please contact Dmitry Churin, St. Petersburg Office of Capital Legal Services.

This Information letter keeps the clients of the Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this Information letter shall not be deemed as legal opinions.