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  • A STEP TOWARDS RENEWAL OF THE UKRENERGO’S LICENSE FOR ELECTRICITY TRANSMISSION

    NPC Ukrenergo welcomes the Verkhovna Rada passing Bill #2233, prolonging the company’s license for electricity transmission until its certification as an independent transmission system operator (TSO). MPs also voted to shorten the drafting period for thesecond reading.

    Final adoption of this bill will resolve the issue of the licence’s impending expiration by end of January 2020. Conducting activities without a license would carry the following risks:

    • potential crisis of non-payments by market participants as Ukrenergo would have no rights to provide services as a TSO;
    • halted development of the electricity market and suspension of the integration of the IPS of Ukraine into ENTSO-E;
    • risk of early repayment of loans from international financial institutions (IFIs) funding most Ukrenergo’s projects for rehabilitation and development of the backbone networks;
    • a fine imposed on Ukrenergo by the Regulator.

    All of the above may result in Ukrenergo’s bankruptcy and, as a consequence, threaten the operational security of the grid.

    Bill 2233, however, does not address the issues related to Ukrenergo’s certification as a TSO, as provided for by the Law of Ukraine “On the Electricity Market”. It is required for proper operation of the new market model and the integration of the UkrainianIPS into ENTSO-E Continental Europe. Moreover, Ukrenergo’s certification is one of the conditions for the EU to provide EUR 500 million of macro-financial assistance to Ukraine in support of economic stabilisation and structural reform programmes.

    On October 7, the NEURC’s Resolution 2094, adopted a preliminary decision on Ukrenergo’s certification as a TSO. The Regulator confirmed an overall compliance with the requirements for unbundling and independence of the transmission system operator. However, for the final certification, the following requirements of the Energy Community Regulator and Secretariat must be met:

    • exclusion of certain types of activities from NPC Ukrenergo’s Charter
    • amending part 3 of Art. 32 of the Law of Ukraine “On the Electricity Market”, stipulating that none other than the transmission system operator may be the owner of the transmission system. At the moment, NPC Ukrenergo owns assets of the transmission system on the right of economic management, which does not meet the above requirements.
    • exclude from Art. 5 of the Law of Ukraine “On the Electricity Market” the powers of the Ministry of Energy and Environmental Protection to approve investment programmes of the transmission system operator and distribution system operators.
    • settle the issue of collateral for the TSO assets or, alternatively, in the Law of Ukraine “On the Electricity Market” allow for the TSO to be certified according to the ISO model.

    On October 21, the Ministry of Finance of Ukraine, the sole shareholder of PrJSC NPC Ukrenergo, issued Order No. 437 approving the new version of the Company’s Charter, thus fulfilling the first requirement of the Regulator.

    Other conditions require amendments to the legislation, which can only be initiated by a subject of the legislative initiative. NPC Ukrenergo has already requested the relevant authorities to come forward with the appropriate legislative initiative.

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