Heat Supply Connection in Russia: Non-Discriminatory Access and Antimonopoly Rules

 

March 26, 2025

BRACE Law Firm ©

 

The markets for heat supply services, including connection (technological connection) to heat supply systems and services for the transmission of heat energy and heat carriers, are markets with undeveloped competition. Entry into these markets is hindered by the need for significant investment in the construction and operation of heat grids, as well as technical constraints regarding connection to existing infrastructure. As the Federal Antimonopoly Service points out, the operating conditions and relationships between market participants in the heat supply market lack transparency, which allows economic entities to abuse their dominant position in the market. [1] This includes major types of violations committed by heat supply organizations.

This situation required state regulation and antimonopoly control to ensure non-discriminatory access to services in the heat supply sector.

This article examines:

• the legal regulatory measures applied to prevent the restriction of competition in the provision of services for connection to heat grids and the transmission of heat energy;
• the methods for protecting rights against abuses by economic entities holding a dominant position in the heat supply sector.

General Principles of Regulation and Antimonopoly Control in the Heat Supply Sector

The basic law regulating the production, transmission, and consumption of heat energy and heat carriers, as well as the relations between consumers of heat energy, heat supply organizations, and heat grid organizations, is Federal Law No. 190-FZ dated July 27, 2010, On Heat Supply (the "Heat Supply Law", the "Federal Law No. 190-FZ").

Antimonopoly regulation and control in the heat supply sector are carried out in accordance with the antimonopoly legislation of the Russian Federation, taking into account the specifics established by the Heat Supply Law.

In accordance with Part 2 of Article 4.2 of the Heat Supply Law, the purpose of antimonopoly control in the heat supply sector is the timely prevention, detection, restriction, and (or) suppression of actions (omissions) aimed at restricting competition and (or) actions (omissions) of a person occupying a dominant position that lead or may lead to the infringement of the interests of heat supply organizations, heat grid organizations, and consumers, including those committed through:

• unreasonable refusal to enter into heat supply contracts, contracts for the supply of heat energy (capacity) and (or) heat carriers, contracts for the provision of services for the transmission of heat energy and heat carriers, and contracts for connection (technological connection) to a heat supply system;
• creating discriminatory or more favorable conditions for the activities of individual heat supply organizations or heat grid organizations;
• creating obstacles to access to services in the heat supply sector.

To prevent the infringement of the interests of heat energy consumers, the Government of Russia has the right to approve rules for non-discriminatory access to services in the heat supply sector. The currently effective Rules for Connection (Technological Connection) to Heat Supply Systems, including the rules for non-discriminatory access to services for connection (technological connection) to heat supply systems and the rules for non-discriminatory access to services for the transmission of heat energy and heat carriers, were approved by Decree of the Government of Russia No. 2115 dated November 30, 2021 (the "Rules for Non-Discriminatory Access", the "Decree No. 2115"). We will examine them in detail below.

Rules for Non-Discriminatory Access to Services for Connection (Technological Connection) to Heat Supply Systems

Connection (technological connection) is defined as a set of organizational and technical actions that enable an object, after connection to a heat supply system, to consume heat energy from that heat supply system, ensure the transmission of heat energy through adjacent heat grids, or deliver heat energy produced at a heat energy source into the heat supply system (Clause 2 of the Rules for Non-Discriminatory Access).

Non-discriminatory access to services for technological connection to heat supply systems provides for ensuring equal conditions for the provision of the specified services to their consumers.

Technological connection includes the following stages:

• submitting an application to the performer to enter into a connection contract;
• entering into the connection contract;
• the parties to the contract performing the connection measures;
• drawing up a certificate of readiness;
• obtaining a permit from the state energy supervision authority to conduct tests and commissioning works for the connected heat supply facilities and heat-consuming installations;
• drawing up a connection certificate.

To ensure non-discriminatory access, each stage is regulated in detail in the Rules for Non-Discriminatory Access and is replete with technical details. We do not intend to analyze the procedure for each stage in detail within this article. As shown by an analysis of judicial practice, the greatest number of disputes in the process of technological connection are caused not by the actual connection actions, but by the contractual formalization of the technological connection.

The Contract for Technological Connection

In accordance with Part 2 of Article 14 of the Heat Supply Law, a contract for technological connection is a public contract for the heat supply organization. This means that a heat supply organization may not refuse to enter into such a contract. The only exceptions are the lack of technical connection capability and the lack of free capacity. The rules for choosing the organization to which interested persons should apply, and which may not refuse them the service for such connection, are also regulated by Decree No. 2115.

To enter into a contract, the interested party submits an application to the heat supply organization. The application is submitted in hard copy or as an electronic document using the Gosuslugi portal, with the attachment of the title documents listed in Decree No. 2115.

If the information and documents are submitted in full, the heat supply organization, within 20 working days from the date of receipt of the application, sends the applicant a signed draft connection contract in two copies. In the event of unreasonable evasion from entering into a public contract, the other party may apply to a court with a demand to compel the entry into the contract (Part 4 of Article 445 of the Civil Code). We will illustrate this with an example from judicial practice.

Thus, in Case No. A41-88456/2023 [2], a Company applied to an arbitration court with a statement of claim against a Heat Supply Organization to compel it to enter into a contract for the technological connection of a constructed facility: a block-modular boiler house belonging to the plaintiff. As established during the court proceedings, the plaintiff sent the defendant an application and a package of documents to enter into a contract for technological connection. However, no response was received from the Heat Supply Organization, which served as the grounds for the court application. In court, the defendant referred to the lack of capacity of the heat grids to connect the requested load. The court pointed out that these arguments were not supported by evidence and ordered the Heat Supply Organization to send the Company a draft contract for the connection of the boiler house within five days.

A heat supply contract must contain the essential conditions specified in Part 8 of Article 15 of the Heat Supply Law. However, as analysis of practice shows, the parties cannot always reach an agreement on the content of these conditions. If the applicant disagrees with the submitted draft contract, it shall, within 10 working days from the date of its receipt, send the heat supply organization a corresponding notice and a protocol of disagreements, to which a response must be given within 10 working days. In the event that the protocol of disagreements is rejected or no notice of the results of its consideration is received within the specified period, the applicant may submit the disagreements arising during the entry into the connection contract for consideration by a court.

Thus, in Case No. A40-62058/2023 [3], disagreements arose between the parties during the entry into a contract regarding the determination of the connection point, the boundary of operational responsibility, the performance of measures for the construction of heat grids, and the amount of the connection fee. The court's decision settled the disagreements.

Other disputes related to the entry into and performance of connection contracts are also submitted for court consideration:

• on making amendments to a connection contract; [4]
• on declaring a unilateral refusal to perform a contract for connection to a heat supply system invalid. [5]

In the event of non-performance of obligations under a contract, either party may apply to a court with a demand for the termination of the contract and the recovery of damages, which heat supply organizations frequently abuse.

Thus, in Case No. 5-KG24-39-K2 [6], a heat supply organization applied to a court with a lawsuit against a citizen for the termination of a technological connection contract and the recovery of damages in the amount of 4,984,772 rubles. During the consideration of the case, the courts established that a contract had been entered into between the parties for the connection of a capital construction facility belonging to the citizen to the heat supply system. The defendant committed a breach of the essential conditions of the contract, specifically, failing to prepare the on-site and in-house grids, which precluded the possibility of further performance of the contract. In turn, the plaintiff incurred expenses for design and survey work and the purchase of materials and equipment to perform its obligations under the technological connection contract in the amount of the sum claimed for recovery. The courts of the first, appellate, and cassation instances recognized the claims of the Heat Supply Organization as lawful. The Supreme Court of the Russian Federation pointed out that the plaintiff's expenses cannot be qualified as damages, as they exceed the contract fee by almost 10,000 times and are essentially aimed at developing the heat grids belonging to the Heat Supply Organization. The plaintiff provided no evidence of the impossibility of using the heat grids for other purposes, rather than under the contract with the defendant. The case was remanded for a new trial.

Non-Discriminatory Access to Heat Energy Transmission Services

A heat supply organization cannot always perform the full cycle of heat supply, from production to sale. For example, if the heat grids do not belong to the heat supply organization, the transmission of heat energy and the heat carrier is carried out through the grids of other persons.

Transmission of heat energy and heat carrier is a set of organizationally and technologically related actions ensuring the maintenance of heat grids in a state that meets the requirements established by technical regulations, the rules for the technical operation of heat supply facilities and heat-consuming installations, and the receipt, conversion, and delivery of heat energy and the heat carrier (Part 12 of Article 2 of the Heat Supply Law).

In such a situation, ensuring reliable heat supply and access largely depends on the heat grid organization. Non-discriminatory access to heat energy and heat carrier transmission services involves ensuring equal conditions for the provision of these services to heat supply organizations and consumers.

To ensure non-discriminatory access, Decree No. 2115 imposes prohibitions and restrictions on the owners and other legal possessors of heat grids. Thus, according to Clauses 3 – 5 of the Rules for Non-Discriminatory Access, owners and other possessors of heat grids:

• may not obstruct the transmission of heat energy through their heat grids to consumers whose heat-consuming installations are connected to such heat grids in accordance with the established procedure;
• may not condition access to heat energy transmission services on the receipt of other paid services or access to heat energy and heat carrier transmission services using other heat grids;
• are obliged to provide information on the conditions of access to heat energy and heat carrier transmission services in accordance with the information approved by the Decree of the Government of the Russian Federation. [7]

In the event of a violation of these rules, the person whose rights have been violated may apply to a court with a demand to compel the performance of actions or to prohibit actions (omissions) leading to the termination and (or) restriction of heat energy transmission.

Thus, in Case No. A50-26178/2022 [8], a Heat Supply Organization applied to an arbitration court with a lawsuit to declare the actions of a Company in obstructing the heat supply of apartment buildings illegal and to prohibit actions leading to the termination of heat energy transmission. As established by the court, the Company holds buildings of central heating points under a lease right. After the start of the heating season, the supply of heat energy to several houses was not carried out. The Heat Supply Organization conducted an inspection and established that heat supply was absent due to the Company turning off the circulation pumps at the heating points. The defendant argued that it had lost its status as a heat grid organization and had signed an agreement to terminate the contract for the provision of heat energy transmission services. The court decided that owners of heat grids may not obstruct the transmission of heat energy through their grids to consumers, even despite the loss of status as a heat grid organization. It also pointed out that the defendant is not precluded from involving specialists from the relevant industry to operate the heating points and further transmit heat energy to consumers. The claims were satisfied in full.

The transmission of heat energy is carried out on the basis of a contract entered into between a heat grid organization and a heat supply organization. A contract for the provision of heat energy transmission services is mandatory for heat grid organizations (Part 3 of Article 17 of the Federal Law No. 190-FZ).

Furthermore, the parties may not impose on each other contract terms that are disadvantageous for the other party or not related to the subject of the contract, are economically or technologically unjustified, or are not expressly provided for by normative legal acts or judicial acts, demands for the transfer of financial resources or other property, or the inclusion in the contract of provisions regarding a product in which the counterparty is not interested (Clause 15 of Decree No. 2115).

As shown by an analysis of law enforcement practice, when pre-contractual and contractual disputes arise, the parties use similar methods for protecting their rights as they do when entering into a technological connection contract.

Prices (tariffs) for heat energy transmission services are subject to state regulation. At the same time, owners and other legal possessors of heat grids may not demand compensation from consumers or heat supply organizations for the costs of operating heat grids until a tariff for heat energy transmission services is established. We will illustrate this with an example from judicial practice.

Thus, in Case No. A50-13032/2023 [9], a Company applied to an arbitration court with a lawsuit against a Heat Supply Organization to recover 3,122,897 rubles of unjust enrichment. To support its claims, the plaintiff stated that the defendant was using its heat grids to transmit heat energy to the end consumer — an Educational Organization. Thus, in the plaintiff's opinion, the defendant was using the heat grids without contractual relations, while refusing to enter into a lease agreement. The courts pointed out that owners of heat grids may not obstruct the transmission of heat energy through their heat grids to consumers whose installations are connected to such heat grids. Before commencing activities for the transmission of heat energy, the plaintiff should have taken measures to establish a tariff for heat energy transmission services, but did not apply for the establishment of a tariff. The court dismissed the lawsuit.

Administrative Liability for Violation of Non-Discriminatory Access Rules

For a violation of the rules for non-discriminatory access, entities can be held administratively liable under Article 9.21 of the CAO RF. The fine for officials ranges from 10,000 to 40,000 rubles, and for legal entities — from 100,000 to 500,000 rubles. For a repeated violation, the amount of liability increases: a fine for officials from 40,000 to 50,000 rubles or disqualification for up to three years, and for legal entities—from 600,000 to 1,000,000 rubles.

The objective side of the administrative offense consists of a violation of the rules for non-discriminatory access or the established procedure for connection (technological connection) to heat grids.

We should separately note the relationship between Article 9.21 of the CAO RF and the norms of Article 14.31 of the CAO RF, Abuse of a Dominant Position in a Commodity Market, and Article 14.6 of the CAO RF, Violation of the Pricing Procedure.

As explained by FAS Russia [10], the disposition of Article 9.21 of the CAO RF is special in nature relative to the norms of Article 14.31. Thus, if the actions of a person occupying a dominant position in a commodity market violate the Rules for Non-Discriminatory Access, the administrative offense case should be initiated and considered under Article 9.21 of the CAO RF.

Furthermore, the determination of the connection fee amount by a natural monopoly entity is an integral part of the connection (technological connection) procedure. In view of the above, a violation of the pricing procedure established by normative legal acts, specifically, overstating or understating the fee amount, in the opinion of FAS Russia, constitutes the objective side of the offense for which liability is provided for by Article 9.21 of the CAO RF.

The subjects of the administrative offense are natural monopoly entities. The disposition of the article does not specify the owner or other possessor of a heat grid facility as a subject of the offense. However, in letter No. VK/17438/21 dated March 10, 2021, FAS Russia expressed the position that the actions of economic entities that are owners or other possessors of heat grids may also be considered for the commission of this offense. In such cases, in the opinion of the control authority, it should be established whether such an owner or other legal possessor of heat grids is a natural monopoly entity.

This position was applied by a court in Case No. A50-33098/2022 [11]. In this case, a Company was found guilty of committing an administrative offense provided for by Part 1 of Article 9.21 of the CAO RF for obstructing the transmission of heat energy to residential consumers. The Company challenged the antimonopoly authority's decision in court, referring to its lack of status as a heat grid organization. The court pointed out that the Company, by possessing heat grid property, met the criteria of a natural monopoly and was a proper subject of the offense. The request to cancel the decision to hold the Company liable was denied.

The subjective side of the administrative offense consists of the presence of fault.

According to the position established in Decree of the Plenum of the Supreme Arbitration Court of the Russian Federation No. 10 dated June 2, 2004 [12], when the possibility of being held administratively liable depends on the form of fault, it is only necessary to establish in respect of legal entities that the corresponding person had the opportunity to comply with the rules and norms for the violation of which administrative liability is provided. In respect of an individual entrepreneur as a natural person, the antimonopoly authority must establish the form of fault (intent or negligence).

We will illustrate this with an example from judicial practice.

In Case No. A54-4877/2019 [13], a citizen applied to a Heat Supply Organization with an application for the issuance of technical conditions for connection to a heat supply system. The Company sent a response stating that connecting an additional heat load could lead to a decrease in the reliability of the heat supply of other end consumers. Regarding this as a refusal, the citizen applied to the antimonopoly authority. The antimonopoly authority established that the response was sent outside the established period. Furthermore, the citizen's application did not contain all the necessary information and documents; therefore, the refusal should have been justified by a reference to the lack of necessary documents and information. The Heat Supply Organization was found guilty of committing the offense provided for by Part 1 of Article 9.21 of the CAO RF, with a fine of 100,000 rubles imposed. Subsequently, the fine was reduced to 50,000 rubles. It was not possible to challenge the punishment in court on the grounds of insignificance.

In Clarification No. 7 [14], FAS Russia also drew attention to the following specifics of being held administratively liable under Article 9.21 of the CAO RF:

• the initiation of a case for the violation of antimonopoly legislation in accordance with the procedure provided for by Chapter 9 of the Law on Protection of Competition, as well as the issuance of a warning, is not provided for.

This means that if the antimonopoly authority receives reports or applications regarding a violation of the Rules for Non-Discriminatory Access or independently detects an offense, the antimonopoly authority is obliged to draw up a protocol or make a decision to initiate an administrative offense case.

• the impossibility of changing the qualification from Article 14.31 of the CAO RF to Article 9.21 of the CAO RF after a decision to initiate an administrative offense case has been issued.

According to Clause 20 of the Decree of the Plenum of the Supreme Court of the Russian Federation No. 5 dated March 24, 2005, On Certain Issues Arising for Courts When Applying the Code of the Russian Federation on Administrative Offenses, the reclassification of the actions (omissions) of a person being held administratively liable is possible under another article of the CAO RF that has a common generic object of encroachment with the original one. Articles 14.31 and 9.21 are located in different chapters of the CAO RF and have different objects of encroachment. If an administrative offense case was originally initiated for abuse of a dominant position, it is subject to termination. At the same time, if the statute of limitations has not expired, it is possible to initiate an administrative offense case provided for by Article 9.21 of the CAO RF.

For a violation of information disclosure standards regarding services in the heat supply sector, entities are held administratively liable under Article 19.8.1 of the CAO RF; the fine for officials ranges from 5,000 to 20,000 rubles, and for legal entities — from 100,000 to 500,000 rubles. For a repeated violation, an official may be disqualified for a period of one to three years.

Thus, in Case No. A84-4584/2021 [15], an Institution was held administratively liable under Part 1 of Article 19.8.1 of the CAO RF for non-disclosure of information on the availability of technical connection capability to a heat supply system, as well as on the progress of connection applications, and was fined 100,000 rubles. The Institution applied to a court with a demand to declare the decision to hold it liable illegal. The court pointed out that the Institution had the opportunity to comply with the requirements, but failed to take all measures depending on it. Taking into account the financial situation, the fine was reduced to 50,000 rubles.

In conclusion, we note that the establishment of rules for non-discriminatory access to connection and heat energy transmission services is of great importance for preventing abuses by economic entities holding a dominant position in the heat supply sector. However, the significant number of disputes confirms that the developed regulatory mechanisms do not fully ensure the protection of the interests of heat energy consumers.

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References

1. FAS Russia website: https://fas.gov.ru/documents/575240.
2. Resolution of the Arbitration Court of the Moscow District dated October 02, 2024, No. F05-15672/2024.
3. Resolution of the Arbitration Court of the Moscow District dated June 07, 2024, No. F05-10209/2024 in Case No. A40-62058/2023.
4. Resolution of the Thirteenth Arbitration Court of Appeal dated November 27, 2024, No. 13AP-28481/2024 in Case No. A56-47607/2024.
5. Resolution of the Arbitration Court of the West Siberian District dated November 08, 2023, No. F04-5528/2023 in Case No. A45-12976/2022.
6. Ruling of the Judicial Collegium for Civil Cases of the Supreme Court of the Russian Federation dated May 28, 2024, No. 5-KG24-39-K2.
7. Decree of the Government of the Russian Federation No. 570 dated July 05, 2013, On Information Disclosure Standards for Heat Supply Organizations, Heat Grid Organizations, and Regulatory Authorities.
8. Ruling of the Supreme Court of the Russian Federation No. 309-ES24-12401 dated August 13, 2024, in Case No. A50-26178/2022.
9. Ruling of the Supreme Court of the Russian Federation No. 309-ES24-12139 dated August 12, 2024, in Case No. A50-13032/2023.
10. Clarification of the Presidium of FAS Russia No. 10 dated August 29, 2017, On the Application of Antimonopoly Legislation by Antimonopoly Authorities for the Purpose of Detecting and Suppressing Violations of the Pricing Procedure.
11. Ruling of the Supreme Court of the Russian Federation No. 309-ES23-28293 dated February 05, 2024, in Case No. A50-33098/2022.
12. Clause 16.1 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation No. 10 dated June 02, 2004, On Certain Issues Arising in Judicial Practice When Considering Administrative Offense Cases.
13. Ruling of the Supreme Court of the Russian Federation No. 310-ES20-54 dated March 16, 2020, in Case No. A54-4877/2019.
14. Clarification No. 7 of the Presidium of FAS Russia, "The Procedure for Applying the Law on Protection of Competition with Regard to the Rules of Technological Connection, the Rules of Non-Discriminatory Access, the Connection Rules, and the Legislation on Heat Supply", approved by the protocol of the Presidium of FAS Russia No. 15 dated November 30, 2016.
15. Resolution of the Arbitration Court of the Central District dated June 26, 2023, No. F10-1641/2023 in Case No. A84-4584/2021.