This paper explores interactions between regulatory and political institutions during the reform process of the three major natural monopolies’ sectors in Russia: electricity, natural gas and railroads. An empirical analysis of institutional and political factors that proved to determine natural monopolies’ responses to the regulatory environment is provided. We find that regulatory institutions are week that allows for multiple regulators with often confronting goals. The prevailing de jure regulatory rule is the cost-based regulation. However, current economic situation, political and institutional configurations force the government to set caps on natural monopolies’ tariffs taking into account short-term inflation targets. This practice breaks the cost-based logic of utilities regulation in Russia bearing resemblance to sliding-scale regulatory scheme. What makes this scheme ‘implicit’ is the vagueness of power distribution between regulatory agencies and the lack of explicit profit sharing rule. That hampers the progress of reforms and favours lobbying rather than restructuring.