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  • NEURC to approve new 2020 Ukrenergo tariffs

    In the course of open public discussions, NEURC proposed to approve NPC Ukrenergo 2020  electricity transmission tariff at 135.78 UAH/MWh, and dispatch (operational and technological) control tariff at 10.23 UAH/MWh

    Thus, Ukrenergo’s electricity transmission tariff will drop by 22.18% compared to the average tariff since the launch of the new electricity market in the second half of 2019 (165.89 UAH/MWh), and dispatch tariff will soar by 21.41% (average tariff in the second half of the year – 8.04 UAH/MWh) due to additional expenses for ancillary services and operation support of the Settlement Administrator and Commercial Metering Administrator.

    At the same time, NPC Ukrenergo has proposed to amend and set the draft electricity transmission tariff for 2020 at 215.17 UAH/MWh, and the draft dispatch tariff at 15.13 UAH/MWh. The proposed amendments were considered only partially by NEURC.

    NEURC tariffs do not take into account a number of factors. First of all, the costs of purchasing ancillary services for frequency and power regulation and maintaining the reliability of the power grid are set in the dispatch tariff at 1.3 billion UAH. This is 1.5 times less than required according to Ukrenergo estimates (2.04 billion UAH).

    Also, the costs of fulfilling the “green” compensation obligations in the transmission tariff are considered at 10.2 billion UAH that is significantly less than Ukrenergo’s offer (19.38 billion UAH). It should be noted that, for today, Ukrenergo has paid to SE Guaranteed Buyer 6.9 billion UAH within the scope of its special obligations. The balance by the end of the year will be over 1 billion UAH.

    In addition, Ukrenergo’s expenses for dividend payment and income tax in the amount of 2.8 billion UAH for 2019 and 2020 on both tariffs are not taken into account. Of these, dividends amount to 1.4 billion UAH, and income tax – 1.4 billion UAH. This calculation is based on the estimated rate of dividend payments to the state budget for Ukrenergo at 50% regarding the loss of privileges for the investment component and repayment of loans through the corporatisation of the company.

    In the draft tariffs, the depreciation costs are 22% less than Ukrenergo’s estimates (723.596 million UAH  versus 927.505 million UAH). For the projected 2020 depreciation, NEURC has not included the facilities, which have been and will be commissioned by the end of 2019 and in 2020 in the amount of 4.8 billion UAH and 5.9 billion UAH, respectively. These funds (203.9 million UAH) should be provided in Ukrenergo tariffs to ensure the construction of facilities, which are strategically important for Ukraine, and the implementation of the Company’s Investment Program.

    The tariffs adopted do not fully satisfy the Company’s needs, pose risks for financial stability of the transmission system operator, the ability to fulfill Ukrenergo’s special obligations and market development in general. Therefore, in the future, after approval of the discussed draft tariffs, we will contact the Regulator on adjusting the tariffs of the company in order to ensure the reliable and safe operation of the power grid and the efficient functioning of the electricity market.

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