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The EBA does not support increasing tariffs for the Gas TSO of Ukraine for natural gas transportation

27/ 12/ 2024
  The European Business Association experts have thoroughly analysed the draft resolution by the National Energy and Utilities Regulatory Commission (NEURC) “On Setting Tariffs for Gas Transmission System Operator of Ukraine (GTSOU) for Natural Gas Transportation Services at Entry and Exit Points for the Regulatory Period 2025–2029,” adopted on 13 November 2024. According to the EBA, the proposal entails a sharp tariff increase in hryvnias—356% for entry points and 305% for exit points. Member companies of the EBA Energy Committee highlight that the tariff-setting process lacks transparency, as discussions on NEURC’s draft decisions are not conducted, despite the calculation data for GTSOU tariffs not being classified as restricted information. Should gas transit cease in 2025, the number of compressor stations used for gas transportation could decrease from 73 to 20–25, according to Energy Committee member companies. Thus, unused compressor stations should be excluded from the tariffs since they will no longer contribute to the gas transportation process. Additionally, it is recommended to conduct an inventory of GTSOU assets and an audit to assess their impact on tariff formulation. Since 2022, GTSOU has participated in exchange trading on the Ukrainian Energy Exchange. According to Committee experts, Ukrainian gas is 20% cheaper than imported gas, which allows for cost reductions for GTSOU. Therefore, it seems reasonable to consider the forecasted natural gas price on the Ukrainian market when calculating tariffs. Such a significant tariff increase would have a clear negative impact on the industry. Higher financial pressure on gas production companies would reduce investments in the development of new fields and wells, leading to a decrease in gas production volumes and potentially increasing reliance on imports. In light of this, the European Business Association does not support the proposed tariff increase and calls for maintaining the current rate. Business community members have addressed the Chair of NEURC, urging greater transparency in the tariff-setting process by publishing or providing market participants with these calculations. They also recommend involving business representatives in developing and agreeing upon a methodology for determining tariff levels based on transit and production volumes.

The European Business Association experts have thoroughly analysed the draft resolution by the National Energy and Utilities Regulatory Commission (NEURC) “On Setting Tariffs for Gas Transmission System Operator of Ukraine (GTSOU) for Natural Gas Transportation Services at Entry and Exit Points for the Regulatory Period 2025–2029,” adopted on 13 November 2024. According to the EBA, the proposal entails a sharp tariff increase in hryvnias—356% for entry points and 305% for exit points.

Member companies of the EBA Energy Committee highlight that the tariff-setting process lacks transparency, as discussions on NEURC’s draft decisions are not conducted, despite the calculation data for GTSOU tariffs not being classified as restricted information.

Should gas transit cease in 2025, the number of compressor stations used for gas transportation could decrease from 73 to 20–25, according to Energy Committee member companies. Thus, unused compressor stations should be excluded from the tariffs since they will no longer contribute to the gas transportation process. Additionally, it is recommended to conduct an inventory of GTSOU assets and an audit to assess their impact on tariff formulation.

Since 2022, GTSOU has participated in exchange trading on the Ukrainian Energy Exchange. According to Committee experts, Ukrainian gas is 20% cheaper than imported gas, which allows for cost reductions for GTSOU. Therefore, it seems reasonable to consider the forecasted natural gas price on the Ukrainian market when calculating tariffs.

Such a significant tariff increase would have a clear negative impact on the industry. Higher financial pressure on gas production companies would reduce investments in the development of new fields and wells, leading to a decrease in gas production volumes and potentially increasing reliance on imports.

In light of this, the European Business Association does not support the proposed tariff increase and calls for maintaining the current rate. Business community members have addressed the Chair of NEURC, urging greater transparency in the tariff-setting process by publishing or providing market participants with these calculations. They also recommend involving business representatives in developing and agreeing upon a methodology for determining tariff levels based on transit and production volumes.

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