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  • REGULATOR PLANS TO REDUCE UKRENERGO’S TRANSMISSION TARIFF BY HALF

    The NEURC approved for public discussions the new draft tariff for electricity transmission services of NPC Ukrenergo, which proposes to reduce it by 49%.  It is envisaged that the new tariff will apply from October 1, 2019, and amount to 159.3 UAH/MWh. Since August 1, the transmission tariff is 312.14 UAH/MWh (NEURC Resolution of 12.07.2019 No. 1411).

    Public discussions on the new draft tariff will take place 10 days after its publication on the Regulator’s website.

    The main factor for reducing the transmission tariff was the recalculation of the projected volume of electricity transmission. The Regulator has increased this volume by almost 24% to 71.2 million MWh, adjusting it based on the producers’ forecast sale volumes. Increased volumes of transmission allow Ukrenergo to significantly reduce the proportion of network maintenance costs in the cost of transmission per MWh.

    The second factor for the reduction of the transmission tariff is the reduction of 78.5 million UAH in the amount of funds intended to offset the costs of the SE Guaranteed Buyer to compensate for the green tariff to large RES producers. This became possible after the NEURC adjusted and approved the Guaranteed Buyer’s cost estimate. However, it should be noted that the amount of funds to offset the green tariff costs for private households remained unchanged.

    At the public meeting with the Regulator Ukrenergo’s COO Volodymyr Kudrytskyi stated that the company fully supported this proposal. “These changes will reflect in the tariff a more accurate amount of Ukrenergo’s electricity transmission services provided. However, after the Cabinet of Ministers has approved changes to the Regulation on the placement of special obligations (PSO) in the electricity market, further analysis is required. Because the change of PSO can lead to a change in the amount of Ukrenergo’s expenses for compensation of grid losses. We propose to finalise the calculation of tariffs in the course of public discussions with the NEURC, allowing for the changes approved by the government,” Volodymyr Kudritsky said.

    It should be noted that, according to the new PSO mechanism, the amount of electricity that Ukrenergo has to buy to cover its technological losses in the networks at a regulated price in the state-owned enterprise of NNEGC Energoatom, is reduced. Now, this volume will go from 80% down to 50%. In addition, Energoatom itself will be obliged to sell not 10% but 15% of the generated electricity to compensate for losses. This means that the TSO may need to increase the share of electricity it buys to offset losses at market prices.

    Ukrenergo’s tariffs have increased since July 1 due to the added costs previously born by SE Energorynok. In particular, according to NEURC (the Regulator)’s plan, the transmission tariff now includes the costs for the purchase of grid losses, as well as the costs for reimbursement to SE Guaranteed Buyer for RES electricity purchased at the green tariff. Please note that compensation for the purchase of electricity from renewable energy sources is an obligation placed on Ukrenergo as the TSO by the Law of Ukraine No. 2712-VIII of 25.04.2019.

    On July 12, the Regulator reduced Ukrenergo’s transmission tariff by 10% (from 347.43 UAH/MWh to 312.14 UAH/MWh). This is due to the reduction of electricity purchase costs to compensate for technological losses.

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