On February 3, the Minister of Energy and Environment Protection Oleksiy Orzhel stated that NPC Ukrenergo allegedly “has not worked out the decision and has not signed the relevant netting agreements”, which “allow to balance and cover the costs between transmission system operators” for the export of electricity transmission.
According to the Minister, it is not obvious what he meant, but we would like to inform that there are no netting agreements in the regulatory field of EU countries to net the costs for the export of electricity transmission.
We would like to emphasize that operational agreements are concluded between the TSOs of neighboring countries. These operational agreements set the rules and requirements as for the interaction between operators during parallel operation of power systems. For these purposes, emergency assistance contracts are also concluded. However, these documents have nothing to do with export operations. Ukrenergo has such agreements with all adjacent transmission system operators.
In this regard, we would like to inform that there is ITC (Inter-Transmission System Operator Compensation) mechanism currently in force in ENTSO-E. This mechanism allows transmission system operators to compensate for infrastructure and technological power losses when performing trans-border operations, and therefore, reduce the financial burden on exporters.
The ITC compensation mechanism is provided for by European legislation, in particular: Comission Regulations (EU) 714/2010 and (EU) 838/2010 (EU third energy package). According to these documents, an ITC compensation fund is created, which is filled at the expense of annual contributions from electricity producers at special rates.
To join the ITC mechanism, the countries have to implement in the national legislation rules and regulations of the EU third energy package in full. NPC Ukrenergo applied to ENTSO-E to join it in May 2018. Due to the fact that the Ukrainian electricity market model at that time did not meet the requirements of European legislation, the issue of joining the ITC mechanism was postponed.
One of the important conditions for the implementation of the EU third energy package is the certification of Ukrenergo as an independent transmission system operator. Ukrenergo submitted to NEURC all necessary documents in August 2019, and received a preliminary positive decision of the Regulator enshrined in the resolution №2094 dated 07.10.2019. However, this decision provides that in order to be certified as an independent TSO, a number of conditions are required to be met, and these conditions require amendments to the legislation. In particular, according to the recommendation of the Energy Community Secretariat, the Law of Ukraine “On Electricity Market” has to provide for the possibility of TSO certification as an Independent System Operator (ISO model).
NPC Ukrenergo has already proposed a relevant draft law to the Ministry of Energy and the Profile Committee of the Verkhovna Rada. However, this document is yet to be registered in the parliament despite the recommendations of the Director of the Energy Community Secretariat Janez Kopač.
Given the above, Ukrenergo addresses the Minister of Energy Oleksiy Orzhel and the Profile Committee of the Verkhovna Rada to expedite the resolution of the specified set of issues, which will not only allow joining the ITC mechanism and resolve the problem of paying the exporters for the electricity transmission costs, but it is essential for the efficient operation of the electricity market as a whole.