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The business calls for finding a mechanism for the development of the issue of debts in the electricity market before the start of the heating season

25/ 10/ 2023
  The total debt of electricity market participants to NPC Ukrenergo exceeds UAH 60 billion. Accordingly, NPC Ukrenergo cannot fully fulfill its obligations to other electricity market participants. This leads to the formation and accumulation of a chain of debts from all to all. NPC Ukrenergo receives one of the main sources of funds for its activities, in particular, from tariffs for electricity transmission and dispatching of the power system. However, according to NPC Ukrenergo, the tariffs set by the National Energy and Utilities Regulatory Commission (NEURC) do not currently allow it to receive sufficient funds to avoid accumulating debts and operate at a loss. Tariffs for the services of the transmission system operator should break even, and market participants should pay for the service in full. After all, revenues for services for NPC Ukrenergo are a source for paying special obligations imposed on the company by the state and for settlements with other energy companies. The country is currently entering the heating season. There is a possibility of shelling of energy infrastructure. Therefore, energy companies also need significant funds to build up a stock of equipment in case of new shelling. Thus, cooperation with international partners to raise funds has already begun and about $1 billion has been raised. However, in order to ensure the normal attraction of credit resources by the system operator, it is important for the NEURC to make appropriate decisions that will help optimize the operation of NPC Ukrenergo and allow servicing and repayment of previously attracted credit resources. In addition, according to the EBA Energy Committee member companies, the formation of debts in the energy sector is influenced by a certain overregulation of the electricity market. In particular, the maximum permissible price levels set by the National Energy and Utilities Regulatory Commission make it impossible to import electricity during shortage hours, as the cost of electricity cannot rise above the current limit during shortage hours. In addition, according to experts of the EBA Committee, price caps also do not facilitate electricity imports during peak hours, as electricity in the EU is more expensive than in Ukraine at this time. To address this problem, the NEURC proposed a mechanism to impose special obligations on electricity importers to compensate them for the difference in electricity prices. At the same time, if the difference in the cost of electricity is to be compensated by NPC Ukrenergo, the business believes that this decision is not justified. In addition, this mechanism may lead to the accumulation of new debts by energy market participants, rather than to the settlement of the situation. Therefore, the European Business Association appeals to the Prime Minister of Ukraine Denys Shmyhal to facilitate the resolution of these issues as soon as possible. In particular, to cancel the maximum permissible price levels (price caps) established by the NEURC in the electricity market; to establish a deficit-free electricity transmission tariff for NPC Ukrenergo, etc. If necessary, the community is ready to provide expert support in developing the necessary solutions and hopes that the voice of business will be heard!

The total debt of electricity market participants to NPC Ukrenergo exceeds UAH 60 billion. Accordingly, NPC Ukrenergo cannot fully fulfill its obligations to other electricity market participants. This leads to the formation and accumulation of a chain of debts “from all to all”. NPC Ukrenergo receives one of the main sources of funds for its activities, in particular, from tariffs for electricity transmission and dispatching of the power system. However, according to NPC Ukrenergo, the tariffs set by the National Energy and Utilities Regulatory Commission (NEURC) do not currently allow it to receive sufficient funds to avoid accumulating debts and operate at a loss.

Tariffs for the services of the transmission system operator should break even, and market participants should pay for the service in full. After all, revenues for services for NPC Ukrenergo are a source for paying special obligations imposed on the company by the state and for settlements with other energy companies.

The country is currently entering the heating season. There is a possibility of shelling of energy infrastructure. Therefore, energy companies also need significant funds to build up a stock of equipment in case of new shelling.

Thus, cooperation with international partners to raise funds has already begun and about $1 billion has been raised. However, in order to ensure the normal attraction of credit resources by the system operator, it is important for the NEURC to make appropriate decisions that will help optimize the operation of NPC Ukrenergo and allow servicing and repayment of previously attracted credit resources.

In addition, according to the EBA Energy Committee member companies, the formation of debts in the energy sector is influenced by a certain overregulation of the electricity market. In particular, the maximum permissible price levels set by the National Energy and Utilities Regulatory Commission make it impossible to import electricity during shortage hours, as the cost of electricity cannot rise above the current limit during shortage hours. In addition, according to experts of the EBA Committee, price caps also do not facilitate electricity imports during peak hours, as electricity in the EU is more expensive than in Ukraine at this time.

To address this problem, the NEURC proposed a mechanism to impose special obligations on electricity importers to compensate them for the difference in electricity prices. At the same time, if the difference in the cost of electricity is to be compensated by NPC Ukrenergo, the business believes that this decision is not justified. In addition, this mechanism may lead to the accumulation of new debts by energy market participants, rather than to the settlement of the situation.

Therefore, the European Business Association appeals to the Prime Minister of Ukraine Denys Shmyhal to facilitate the resolution of these issues as soon as possible. In particular, to cancel the maximum permissible price levels (price caps) established by the NEURC in the electricity market; to establish a deficit-free electricity transmission tariff for NPC Ukrenergo, etc. If necessary, the community is ready to provide expert support in developing the necessary solutions and hopes that the voice of business will be heard!

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