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Draft laws on the natural gas market were returned for revision

11/ 02/ 2022
  In January, the European Business Association sent a letter to the Speaker of the Verkhovna Rada and the Speaker of the Verkhovna Rada Committee on Energy, Housing and Utilities regarding natural gas market draft laws № 6426, 6426-1 and called for their return for revision. Both draft laws are aimed at changing the principles of the natural gas market and the introduction of state regulation of natural gas prices, which could completely change the rules of the natural gas sector, curtail market reforms and negatively affect investment in the industry. Draft Law № 6426 proposed to fundamentally change the functioning of the natural gas market. Moreover, it was proposed to introduce state regulation of natural gas prices by setting the marginal price at which natural gas is supplied to consumers in the domestic market, the marginal level of trade margin at all stages from production to final consumer, and establishing the level of profitability in the supply of natural gas. Besides, the provisions on mandatory participation of the Energy Community Secretariat in law-making and law enforcement activities on the natural gas market in Ukraine were excluded, which means Ukraine’s waiver of some of its international obligations. Also, export transactions in the gas market would be effectively banned, despite the contracted volumes under international agreements. In addition, the draft law provided for the possibility of providing indirect state aid to individual entities at the expense of natural gas market participants, while not determining the source of compensation for losses incurred by them. This procedure contradicts the requirements of Articles 4 and 5 of the Law On State Aid to Business Entities regarding possible forms and criteria of eligibility of state aid. Alternative draft law №6426-1, similarly to Draft Law № 6426, established norms that allow the expropriation of private property – the sale of natural gas of own production at prices set by the state. A novelty of the Draft Law was the consolidation at the legal level of the status of the Crisis Committee as a temporary advisory body under the Ministry of Energy, which would be responsible for crisis management at any level. Given the powers of the Crisis Committee, the uncertainty in the text of the law of its composition, and the procedure for electing members - there were significant risks of appointing non-professionals who will not be responsible for decisions affecting all consumer groups and energy security in general. Business welcomes the decision of the VRU Committee on Energy, Housing and Utilities of February 8 to return draft Laws on the Natural Gas Market № 6426, 6426-1 for revision. We thank the Committee and its Chairman, Andriy Gerus, for listening to the voice of business.

In January, the European Business Association sent a letter to the Speaker of the Verkhovna Rada and the Speaker of the Verkhovna Rada Committee on Energy, Housing and Utilities regarding natural gas market draft laws № 6426, 6426-1 and called for their return for revision.
Both draft laws are aimed at changing the principles of the natural gas market and the introduction of state regulation of natural gas prices, which could completely change the rules of the natural gas sector, curtail market reforms and negatively affect investment in the industry.

Draft Law № 6426 proposed to fundamentally change the functioning of the natural gas market. Moreover, it was proposed to introduce state regulation of natural gas prices by setting the marginal price at which natural gas is supplied to consumers in the domestic market, the marginal level of trade margin at all stages from production to final consumer, and establishing the level of profitability in the supply of natural gas. Besides, the provisions on mandatory participation of the Energy Community Secretariat in law-making and law enforcement activities on the natural gas market in Ukraine were excluded, which means Ukraine’s waiver of some of its international obligations. Also, export transactions in the gas market would be effectively banned, despite the contracted volumes under international agreements.

In addition, the draft law provided for the possibility of providing indirect state aid to individual entities at the expense of natural gas market participants, while not determining the source of compensation for losses incurred by them. This procedure contradicts the requirements of Articles 4 and 5 of the Law “On State Aid to Business Entities” regarding possible forms and criteria of eligibility of state aid.

Alternative draft law №6426-1, similarly to Draft Law № 6426, established norms that allow the expropriation of private property – the sale of natural gas of own production at prices set by the state. A novelty of the Draft Law was the consolidation at the legal level of the status of the Crisis Committee as a temporary advisory body under the Ministry of Energy, which would be responsible for crisis management at any level. Given the powers of the Crisis Committee, the uncertainty in the text of the law of its composition, and the procedure for electing members – there were significant risks of appointing non-professionals who will not be responsible for decisions affecting all consumer groups and energy security in general.

Business welcomes the decision of the VRU Committee on Energy, Housing and Utilities of February 8 to return draft Laws on the Natural Gas Market № 6426, 6426-1 for revision. We thank the Committee and its Chairman, Andriy Gerus, for listening to the voice of business.

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