As of 1 March, the debt owed by the Education Department of the Svobodensky District Administration for the electricity supplied by OAO "Amurenergo" totalled RUB2.74 million. Over the month, the debt grew to RUB4.5 million, which is equivalent to a 2 months' consumption of the entire district. Although OAO "Amurenergo" repeatedly requested the authorities to pay the debt and offered to restructure the debt, the municipal authorities refused to promptly resolve the issue of payment for the current supply of electricity. In full accordance with the applicable laws, OAO "Amurenergo" warned the Svobodensky District Administration that it was planning to limit electricity supply if the authorities fail to settle the debt, but the municipal authorities did not respond. All they do is keep saying that they do not have the necessary funds, refusing even to discuss the problem. However, it is the municipal authorities' duty to make the relevant allocations in their budgets. This means that the lack of funds is a mere excuse, which is intended to conceal their incompetence, bad management, and indifference to the needs of the people living in Svobodensky district. However, they do have the money to pay for the electricity supplied to the offices of the district officials and to pay salaries to them.

In such a situation, OAO "Amurenergo" is forced to limit electricity supply to 13 educational institutions in the district. The restrictions concern only the electricity supply, and are in effect only in the daytime, so they do not affect the teaching process. The school canteens are fully supplied with electricity, which makes it possible to cook food for the pupils.

Another matter of serious concern is non-payment for the electricity consumed by the Education Department of the Mazanovsky District Administration in Amurskaya Region. As of 1 April, the local authorities owed over RUB2 million to the energy company.

The growing consumer indebtedness makes it difficult for OAO "Amurenergo" to pay for the fuel and materials it buys, which hinders stable operation of the energy company. As of 1 April 2004, the consumer indebtedness to OAO "Amurenergo" for the electricity supplies totalled RUB600 million, including over RUB400 million owed by the wholesale resellers managed by the local authorities.

RAO "UES of Russia" supports the efforts taken by its subsidiaries aimed at preventing unpaid electricity supply, as required by the Russian Government. This is the principled position of the energy company aimed at ensuring reliable and uninterrupted energy supply to good faith consumers of energy produced by the Holding.