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  • AT THE END OF 2019, UKRENERGO MAY ENCOUNTER A SHORTAGE OF FUNDS TO FINANCE THE “GREEN” TARIFF

    At the end of 2019, Ukrenergo may encounter a shortage of funds to compensate SE Guaranteed Buyer and universal service providers for the “green” tariff expenses. According to company estimates, it will amount to 1.58 billion UAH (9% of all expenses). On October 18, this issue was discussed at an open meeting at NPC Ukrenergo.

    The shortage is caused primarily by payment delays and incompleteness in the second half of 2019. For July-September, the debt is 1.09 billion UAH or 11%. The optimistic forecast for the second half of 2019 is 91% (debt – 9%).

    Another reason for the shortage is that five companies obtained a court injunction on the new transmission tariffs for July and August 2019. They were charged at the previous tariff of 57.4 UAH/MWh. It was assumed, however, that they would pay at the higher rates in force at that time: 347.14 UAH/MWh in July and 116.54 UAH/MWh in August. As a result, the total underfunding in July-August due to the court injunction is 321.4 million UAH. These funds may be credited only after the relevant court decision.

    As a result, in the second half of the year, Ukrenergo’s total expenditures carried out at the expense of the transmission tariff should exceed 1,583 billion UAH in revenues. These are the funds to compensate Guaranteed Buyer and universal service providers for the “green” tariff. However, of that amount, Ukrenergo can only compensate 503 million UAH that the company had accrued to its account balances as of July 1, 2019. In this case, Guaranteed Buyer will be underpaid 1.079 billion UAH.

    Another problem is that, while invoicing its “green” tariff expenses, SE Guaranteed Buyer does not take into account the provision of Decree of the Cabinet of Ministers of Ukraine No. 483 dated 05.06.2019 (PSO mechanism), which establishes that these costs should be partially covered at the expense of its own profit. As a result, the amounts invoiced to Ukrenergo are significantly higher than the amounts charged in the transmission tariff.

    Accordingly, in September, the transmission tariff provided 1.04 billion UAH to compensate SE Guaranteed Buyer, while the enterprise invoiced 1.9 billion UAH.

    But today, even if Guaranteed Buyer takes into account the PSO, its revenue may still be lower than planned due to the profit shortfall from the sale of NPP-generated electricity. The reason for this is that from August 14 to December 20, 2019, power unit №1 of Khmelnytska NPP is undergoing emergency repair. According to Ukrenergo’s estimates, the electricity sold from nuclear generation could amount to almost 1.9 billion UAH.

    “NPC Ukrenergo believes that a number of measures will help tackle these problems. Namely, there is a need for legislative regulation of the PSO mechanism in order for Guaranteed Buyer to have no doubts about the possibility of using its income to pay the “green” tariff. We also need a mechanism for adjusting the transmission tariff if there is a risk that Guaranteed Buyer is unable to make sufficient profit to pay the “green” tariff. A discussion is currently underway to introduce liability for imbalances of RES producers. This is an energy policy issue, which may positively influence these problems. Another potential tool for improving payment discipline is to increase penalties for late payment for electricity transmission services. Finally, we hope that NEURC will win the court cases, in which the July-August 2019 tariffs for transmission services are appealed,” said First Deputy Chairman of the Management Board of NPC Ukrenergo, Volodymyr Kudrytskyi.

    “We would like to thank Ukrenergo for the meeting, at which we can discuss the problem and outline the steps to address it. Regarding the reduction of the amount of service that we invoice Ukrenergo (to compensate for the costs of the “green” tariff – Ed.), the legislation does not clearly state how much we can reduce it. It states that it makes the difference between the income and costs of the PSO activities. In this regard, proposals for amendments to the legislation have been prepared and recently supported by the Profile Committee of the Parliament,” said Deputy Director for Economy of SE Guaranteed Buyer, Stanislav Sova.

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