"UES and oil companies should form an alliance to use flare gas to resolve the problem of power shortages in Russia," Sergei Oganesyan, head of the Federal Energy Agency, said.
Oganesyan said that around 25 billion cubic meters of associated gas is burnt in gas flaring annually.
He said a program to build such enterprises, involving the assets of UES and oil companies, would contribute to the development of both the power and oil sector, as well as to an effective solution to the associated gas utilization problem.
"We will propose soon that oil companies draft such a program," he said.
Prime Minister Mikhail Fradkov earlier said the power industry is hampering Russia's economic development, and that the government should step up its efforts to resolve the sector's problems.
"The power industry is hampering the country's economic development," he said. "We cannot continue to keep silent over this. The government must help [UES CEO] Chubais resolve [the sector's] problems."
Anatoly Chubais said last month the company will consider reducing the volume of electricity exports during the coming winter, to cover the domestic energy shortfall.
A cold spell that hit Russia last winter put a serious strain on the country's power grid, and rising energy consumption this year created a generating capacity shortfall.
"An extremely difficult situation is currently developing in Russia with the shortfall in power capacity," Chubais said. "Given this situation, we are forced to take measures to make maximum use of existing capacity during the autumn-winter [consumption] peak."
Ukraine's energy ministry proposed in late September helping Russia cover its electric power deficit with the spare capacity of its power plants, particularly in the Krasnodar Territory in southern Russia that borders on Ukraine, in exchange for Russian natural gas.
Russia's power sector has undergone radical changes in recent years aimed at increasing the efficiency of power plants and developing the industry by attracting investment. During the restructuring process, specialized structures were created in place of the old vertically integrated companies.
