The business welcomes the NEURC’s decision to retain the existing division of electricity consumers into distribution classes by voltage level

08/ 08/ 2024

In July, the National Commission that regulates the energy and utilities sectors proposed a draft resolution On Approval of Amendments to the Procedure for Establishing (Forming) Tariffs for Electricity Distribution Services. This draft aimed to change the procedure for setting electricity distribution tariffs and eliminate the division of consumers into distribution classes based on voltage level. As a result of the consideration, the NEURC did not support this draft resolution. Experts from the Energy Committee of the European Business Association noted that changing the tariff-setting approaches and eliminating the division of consumers by voltage classes could lead to serious financial consequences for a number of Ukrainian enterprises. According to Appendix 31 of the Procedure for Establishing (Forming) Tariffs for Electricity Distribution Services, consumers and operators of electrical energy storage facilities are divided into 1st and 2nd voltage classes depending on the nominal voltage of the received electricity. According to the information of the EBAs member companies, in accordance with the formulas for calculating tariffs for electricity distribution services, which are defined in the Procedure, consumers of high-voltage electricity (27.5 kV and above) of the 1st voltage class pay less for distribution than consumers of low-voltage electricity of the 2nd class. Ukraine has two voltage classes applicable to electricity distribution systems. The first class is large industry, which consumes a lot of energy, and the second class is all others. In different European countries, the number of voltage classes is larger and each of them has its own distribution tariffs. For example, in Moldova, there are three such voltage classes with corresponding distribution tariffs. Moreover, in the event of the abolition of the division of consumers into distribution classes by voltage level, consumers of high-voltage electricity would be forced to bear the costs associated with servicing low-voltage consumers, in fact, subsidizing the costs of 2nd class consumers. Such additional costs for industrial enterprises of the 1st voltage class could amount to approximately 26.1 billion hryvnia per year. This would not only increase the operating costs of companies but also significantly worsen the competitiveness of Ukrainian industry. Moreover, foreign investors who connected to high-voltage power grids developed their business plans taking into account the tariff for electricity distribution services for the 1st class. At the same time, the abolition of the division into classes is also not fully consistent with Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU, which provides for 3 voltage classes - high, medium, and low, which, according to the EBAs Committee experts, allows to avoid subsidizing some consumers by others and supports the principle of the consumer pays for what they consume. Therefore, taking into account the negotiations on Ukraines accession to the European Union, businesses consider it necessary to improve the system of classifying consumers by voltage classes, rather than abolishing it. Accordingly, the European Business Association community is grateful to the NEURC for its decision not to support the abolition of the aforementioned classes, and at the same time, we would appreciate further joint work on improving the classification system!

In July, the National Commission that regulates the energy and utilities sectors proposed a draft resolution “On Approval of Amendments to the Procedure for Establishing (Forming) Tariffs for Electricity Distribution Services”. This draft aimed to change the procedure for setting electricity distribution tariffs and eliminate the division of consumers into distribution classes based on voltage level. As a result of the consideration, the NEURC did not support this draft resolution.

Experts from the Energy Committee of the European Business Association noted that changing the tariff-setting approaches and eliminating the division of consumers by voltage classes could lead to serious financial consequences for a number of Ukrainian enterprises.

According to Appendix 31 of the Procedure for Establishing (Forming) Tariffs for Electricity Distribution Services, consumers and operators of electrical energy storage facilities are divided into 1st and 2nd voltage classes depending on the nominal voltage of the received electricity. According to the information of the EBA’s member companies, in accordance with the formulas for calculating tariffs for electricity distribution services, which are defined in the Procedure, consumers of high-voltage electricity (27.5 kV and above) of the 1st voltage class pay less for distribution than consumers of low-voltage electricity of the 2nd class.

Ukraine has two voltage classes applicable to electricity distribution systems. The first class is large industry, which consumes a lot of energy, and the second class is all others. In different European countries, the number of voltage classes is larger and each of them has its own distribution tariffs. For example, in Moldova, there are three such voltage classes with corresponding distribution tariffs.

Moreover, in the event of the abolition of the division of consumers into distribution classes by voltage level, consumers of high-voltage electricity would be forced to bear the costs associated with servicing low-voltage consumers, in fact, subsidizing the costs of 2nd class consumers. Such additional costs for industrial enterprises of the 1st voltage class could amount to approximately 26.1 billion hryvnia per year. This would not only increase the operating costs of companies but also significantly worsen the competitiveness of Ukrainian industry. Moreover, foreign investors who connected to high-voltage power grids developed their business plans taking into account the tariff for electricity distribution services for the 1st class.

At the same time, the abolition of the division into classes is also not fully consistent with Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU, which provides for 3 voltage classes – high, medium, and low, which, according to the EBA’s Committee experts, allows to avoid subsidizing some consumers by others and supports the principle of “the consumer pays for what they consume”.

Therefore, taking into account the negotiations on Ukraine’s accession to the European Union, businesses consider it necessary to improve the system of classifying consumers by voltage classes, rather than abolishing it.

Accordingly, the European Business Association community is grateful to the NEURC for its decision not to support the abolition of the aforementioned classes, and at the same time, we would appreciate further joint work on improving the classification system!