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Last week, the National Commission for State Regulation of Energy and Public Utilities adopted and approved a methodology of incentive-based tariff regulation for distribution system operators (RAB regulation). The methodology implies a rate of return of 16.74% on the “new” asset base and a rate of return of 3% on the “old” asset base. Also, 50% of the return from the old asset base must be reinvested in the modernization of distribution system operators’ networks.<\/p>\n
At the same time, it should be noted that the National Regulator did not listen to experts and representatives of the business community, which insisted on the use of best European practices in the implementation of incentive regulation.<\/p>\n
The European Business Association emphasizes that the adoption of incentive tariffs is an important step for the development of grid infrastructure, improving the quality of electricity services, increasing the investment attractiveness of Ukrainian businesses with cheaper grid connection costs.<\/p>\n
According to market experts, the adopted parameters of RAB-regulation will attract $ 470 per 1 km of power grids while the average demand is estimated at $ 1,200 \/ km. In our opinion, the lack of investment jeopardizes the full and proper implementation of the tariff reforms: investing in the development and renewal of grid infrastructure, compliance with the requirements of the Regulator to reduce SAIDI and grid losses, improving electricity connection which is an important criterion for Doing Business ranking. Therefore, the European Business Association appreciates the step made towards incentive-based tariff regulation, at the same time, we hope that the adopted parameters will be expanded.<\/p>\n
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