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  • To balance financial settlements in the electricity market, the PSO mechanism needs to be changed – Volodymyr Kudrytskyi

    To balance financial settlements in the electricity market, it is necessary to change the existing placement of special obligations (PSO) model in the electricity market, as well as to revisit NPC Ukrenergo electricity transmission tariff. It was mentioned by Acting CEO of NPC Ukrenergo Volodymyr Kudrytskyi during a web-conference of the European Business Association “Energy security of Ukraine in the event of emergency and the further way out of the crisis”.

    “Today, the market has to cover with its financial resources two types of PSO: providing preferential electricity tariff for population and feed-in tariff offset. Their total volume this year could reach up to 80 billion UAH. This is actually one third of the market volume. Under decreasing demand and imperfect PSO mechanism, this creates financial imbalances that lead to chain delinquency. Ukrenergo has a debt to Guaranteed Buyer, and Guaranteed Buyer – to RES producers and Energoatom, and so on. This will actually affect all market participants”, said  Volodymyr Kudrytskyi.

    He emphasized that to get out of crisis, it is necessary to update the forecast electricity balance, as the current one had been developed before the quarantine was implemented, and hence it did not take into account a sharp reduction of electricity consumption. After that, it is necessary to consider the scenarios, under which the electricity market is financially balanced. One of the tools for such balancing is changing electricity transmission tariff, which is used by Ukrenergo to finance all offsets within PSO. In the tariff structure, the amount of funds provided to offset the costs of Guaranteed Buyer for the feed-in tariff is less than needed today. That is why it is necessary to determine the amount of electricity transmission tariff in order to fully balance financial settlements in the market.

    At the same time, the current situation is further complicated by the low level of payments in the electricity market.

    “Today, the level of settlements of the market participants for Ukrenergo’s services is approximately 60%, and it is going down. I think that during the quarantine it is not just Ukrenergo, but all other power companies, are getting significantly less funds from the market that they invoice. It means that today we exist in the mode of covering the most urgent expenses, such as taxes, salaries, etc. Alongside, the debts accumulated for the last two-three months are impossible to cover quickly under current conditions”, emphasised Volodymyr Kudrytskyi.

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