The use of the government approved compensation for the difference between the price of electricity for households and its market price in the new market will lead to higher prices for non-domestic consumers by 40-50%, in order to avoid collapse of the market order needs to be changed.

As have informed Agency “Interfax-Ukraine” a source in the government, a letter of warning and suggestions sent to the Cabinet of Ministers and the Ministry of energy and coal industry, the Chairman of the national Commission, carrying out state regulation in spheres of power and utilities (NKREKU), Oksana Krivenko on Monday.

Read the news also on the website “Energoinform”

The controller recalled that the government at the meeting on may 22 has approved developed by the Ministry the procedure for assigning public spacebattles (PSO, Public Service Obligation) for the supply of electricity for the needs of the population until December 31, 2020 (the text of the document is still not officially published – if). The document envisages the laying of PSO at NNEGC “Energoatom”, JSC “Ukrhydroenergo” (by their obligation to sell electricity according to certain rules) and NPC “Ukrenergo” (by the inclusion of compensation in the tariff for dispatching).

According to the national Commission, adopted by the government draft contains critical flaws, and one of the probable effects of the launch of the new market with the same mechanism of PSO will increase prices for non-domestic consumers by 40-50%.

It will happen, in particular, with the increase in profits of “Energoatom” in the amount of UAH 53 billion to 75 billion a year, and also due to the rising costs of “Ukrenergo” in the amount of 35 billion to 44 billion UAH, said the national Commission.

Besides, the turnover of “Ukrenergo” in 14 billion per year and the estimated amount assigned to it PSO 35-44 billion and 19 billion a year spacebattles payment of the cost of “green” electricity (which also temporarily plan to assign to “Ukrenergo”), the financial stability of the transmission system operator will be extremely unstable. Any fluctuations in cash flow (related to not paying for electricity consumers) will lead to a lack of funds for the implementation of PSO, the providers of universal services (CCP) will not be able to purchase electricity for the population and there will be a market collapse, predicts NKREKU.

In addition, the Cabinet adopted a mechanism for imposing PSO in the electricity sector difficult to implement, I believe in NKREKU. This requires an accurate prediction of several indicators, such as sales of “Energoatom” for sales “Ukrhydroenergo” at a special price and the remaining amount of electric energy necessary for supplying the population, at the market price (compensation on it will be included in the tariff “Ukrenergo”).

To implement would require two auction platforms for the conclusion of bilateral agreements, state power generation companies. For one they will sign a contract with PUU (who will then deliver the purchased Spezzano e/e population) and with other market participants (suppliers and large consumers).

One more complication: the Order of formation of tariffs for dispatching “Ukrenergo” is intended to include such costs as PSO (to make changes in the Order will take two months). In addition, the national Commission is not fixed by law authority to calculate the volumes of PSO resembles the controller.

To resolve the situation, the Commission proposes to require “Energoatom” to sell at auction at least 80%, and “Ukrhydroenergo” – at least 50% of the produced electricity at fixed prices. This will prevent the uncontrolled growth of prices on electricity, nuclear power plants, says the regulator. The price at auction will be the same for all buyers that will exclude the possibility of manipulation on the purchase and sale (i.e., PUU will not be able to purchase electricity at a price to the public and resell it to small non-domestic consumers two to three times more expensive).

To PUU the regulator proposes to set a certain percentage of procurement auctions. They also will be purchased electricity for technological needs.

To pay the remaining amount of compensation cost electricity for the population, at the suggestion of the national Commission, will be required to “Energoatom”, by concluding relevant agreements with PUU.

The national Commission reported that the outstanding issue of compensation for the cost of electricity for the population does not give her the opportunity to calculate the limit value prices for new segments to be implemented from 1 July of the energy market, then the price limits need to prevent a possible sharp jump in the cost of electricity for non-domestic consumers.

Currently the population of Ukraine pays about 30% of the cost of electricity. According to the Agency “Interfax-Ukraine”, the national Commission in the beginning of 2019 has developed a phased schedule of tariff increases for citizens within two years, however, the authorities subsequently refused the promotion. In this regard the need arose to introduce a new mechanism of subsidies to the population, since entering the new market of e/e from July 1, ceases to exist a wholesale customer (SE “Energorynok”), and the current mechanism of subsidy certificates (the inclusion of certain amounts in the wholesale-market price e/e) can no longer be used.

The law “On the electricity” suggests that the launch of the new model of the wholesale market of electric energy occurs with the reduction of prices on electricity for the population to economic levels.