The Sixth Administrative Court of Appeal of Kyiv adjourned the hearing of the appeal of PrJSC “NPC “Ukrenergo” on suspending the NEURC resolutions, which set the company’s tariffs for services of electricity transmission and dispatch (operational and technological) control for the second half of 2019. The next hearing is scheduled for 1:00 pm on August 21.
In the mean time, today, on July 31, representatives of a number of industrial enterprises of the Dnipropetrovska oblast – Nikopol Ferroalloy Plant, Dniprospetsstal, Pokrovsky Mining Combine and others, – had a rally in front of the company’s HQ this morning.
They demanded that the Ukrenergo management revise the company’s tariff structure and repeal the NEURC regulations approving Ukrenergo’s new tariffs for II half 2019, and take steps to prevent further increase in electricity prices for industry, to protect the interests of domestic producers.
The management met the initiative group of protesters and provided clarification on the questions of industry representatives:
- Ukrenergo is not authorised to cancel tariffs, as it is the Regulator that approves them with its regulations
- The company’s tariffs increased, because now their structure includes costs previously covered by SE Energorynok. The company’s operating expenses in the second half of the year remained largely unchanged, with the projected net profit for the year decreasing from UAH 2.2 billion to UAH 2.17 billion.
Ukrenergo’s tariff for transmission for II half 2019 increased at the expense of inclusion of costs for the purchase of grid losses.
Moreover, Ukrenergo now also bears a special obligation to offset the costs of the SE Guaranteed Buyer to pay for renewable electricity at the green tariff.
For Ukrenergo to be able to fulfill its obligations in the new electricity market, the expenses for the activity as the Settlements Administrator and the Commercial Metering Administrator were included in the company’s tariff for dispatch control for II half of 2019.
Therefore, the main factor behind the increase in the price of electricity for the industry was the increase in its cost as a commodity in the new market, rather than Ukrenergo tariffs. For the most part, the cost of electricity increased because today the largest and the cheapest electricity producer – SE NNEGC Energoatom is not able to operate in the new market’s cheapest segment, i.e. the bilateral contracts market. This is due to the fact that the Cabinet of Ministers has assigned special obligations to this company to sell 75% to the SE Guaranteed Buyer for the needs of the population, and another 15% – to Ukrenergo and DSOs (former oblenergos) to cover their grid losses.
As a result, Energoatom has only 10% of its generation up for sale on the free market, which it sells on the day ahead market, where prices are higher than in the bilateral contracts market. Because of this, the industry in Ukraine cannot buy the cheapest electricity under direct contracts. Instead, they have to buy it from the most expensive producers – thermal generation.
Therefore, Ukrenergo invited industry representatives that came to the rally in front of the company’s head office to carry out a detailed analysis of electricity prices for industry, taking into account their consumption schedules, and to come up with joint proposals that will help to improve the situation. These proposals may further be submitted for public discussion.