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  • CLARIFICATIONS REGARDING THE SETTLEMENTS FOR UKRENERGO SERVICES IN JULY 2019

    Due to the court decision to suspend the effect of NEURC resolutions of June 7, 2019, No. 954 and 955 setting tariffs for SE NPC Ukrenergo for the II half of 2019, in July 2019 Ukrenergo will be billing its contracted services based on the tariff that was in force before July 1, as stipulated by the NEURC resolution of December 12, 2018 No.1905 that set a uniform tariff for the company for the III quarter 2019 at 57.40 UAH/MWh. 

    The bills will also contain a new line “Recommended amount payable”, which will be billed according to the new tariffs for the II half of 2019 approved by the NEURC resolutions No. 954 and 955 of June 7, 2019. SE NPC Ukrenergo recommends to pay for its services based on the tariffs in the line “Recommended amount payable”. This will allow Ukrenergo to function properly in the new electricity market and, consequently, maintain the grid’s operational security. Ukrenergo will also be able to fully discharge its special obligations, which include, among other, compensating the Guaranteed buyer the difference between the market price of renewable electricity and the green tariff, and purchase of electricity to compensate for grid losses.

    Ukrenergo is currently appealing the suspension of the NEURC resolutions of June 7, 2019, No. 954 and 955 in the Court of Appeal. After Ukrenergo’s petition of appeal is satisfied, the counterparties that made payments based on the uniform tariff set by the NEURC resolution of December 12, 2018 No. 1905, will receive recalculated invoices for the Company’s services in July 2019 according to resolutions 954 and 955.

    A draft resolution setting the new tariff for Ukrenergo services for electricity transmission after August 1, 2019, is currently under consideration at the NEURC. The suggested tariff is 312.12 UAH/MWh, i.e. the transmission tariff will be 10% smaller compared to the one set by the NEURC resolution No.954 (347.43 UAH/MWh), due to decreased costs for the purchase of electricity to compensate for the grid losses, whose cost includes the electricity price of SE Energoatom at e-auctions (80%) and the average price of electricity at the day-ahead market (20%). Ukrenergo also sent a submission to the regulator arguing that the tariff for dispatch (operational and management) control should be reviewed and enacted in August 2019 to allow proper execution of services for dispatch control and proper functioning of the balancing market and the ancillary services market.

    The tariff at 57.40 UAH/MWh established by the NEURC resolution No.1905 of December 12, 2018, does not provide for Ukrenergo’s functioning in the new electricity market. It does not account for the functions placed on the transmission system operator in the new electricity market.

    According to the underlying calculations, receipt of funds by Ukrenergo in III quarter 2019 should amount to approx. 1.46 bln UAH, including in July – almost 492 mln UAH. Ukrenergo’s operational expenses for the quarter, including the costs of loan repayment and the services of the Settlements Administrator and the Commercial Metering Administrator will amount to 1.43 bln UAH, in July – 481.5 mln UAH, i.e. almost everything that the Company will earn.

    The Company will put the remaining funds to the following use:

    1. To purchase grid losses from SE NNPC Energoatom at the margin price with full 5-day pre-payment. If the pre-payment is not possible, the losses will be purchased in the in the balancing market at a considerably larger price, which profits no one. (the quarterly deficit will amount to approx. 496 mln UAH, in July 167.1 mln UAH);
    2. Procurement of ancillary and balancing services from TPPs, CHPs, HPPs and PSPPs (the deficit is 214.4 mln UAH, in July – 72.2 mln UAH);
    3. To compensate the difference between the market price of the RES-generated electricity and the “green” tariff (the deficit is 6.2 bln UAH, in July –2.1 bln UAH).

    Should Ukrenergo’s proceeds be insufficient, it won’t be able to compensate to the Guaranteed buyer its expenses for paying to RES-generating companies for the electricity at the green tariff.

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