Certain media are sharing prejudiced reports claiming that one of the main reasons for the increase in the final price for electricity in the new market is the increase in tariffs of NPC Ukrenergo for electricity transmission and dispatch control. The authors of such publications are not asking for any direct comment from Ukrenergo, while also ignoring explanations about the new tariff structure, which we have posted on our site several times.
We would like to ask the journalists to treat their job of presenting the facts responsibly and to give an objective coverage to the issue of increased price of electricity, with due regard to the stance of all market participants.
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.
The tariff for dispatch control now also includes the costs of Ukrenergo’s fulfilling its obligations in the new electricity market: payments to the Settlement Administrator and the Commercial Metering Administrator, as well as the purchase of ancillary services to balance the grid.
All new components of Ukrenergo were previously paid for by the market participants as part of electricity wholesale market price (WMP) to SE “Energorynok” . At the same time, the components of the tariff that finances Ukrenergo’s activities, have undergone little change.
Therefore, after July 1, the main contributing factor of the increase in electricity prices for industry is its increased cost as a commodity in the new market, rather than an increase in Ukrenergo’s tariffs.
The increase in the cost of electricity for industry was largely due to the fact that today SE NNGC Energoatom, the largest producer, has a restricted possibility to sell cheap electricity in the cheapest segment of the new market – the bilateral contracts market. This is due to the Cabinet of Ministers placing special obligations on this company to sell 75% of the electricity to SE Guaranteed Buyer for the needs of the population, and another 15% – to Ukrenergo and DSOs (former oblenergos) to cover grid losses.
Thus, only Energoatom sells only 10% of its generation in the free market, which it sells in the day-ahead market, where the prices are higher than in the bilateral contracts market. As a result, the industry cannot buy cheap nuclear electricity under direct contracts. Instead, companies are forced to buy it from the most expensive producers, i.e. thermal generation.
Another factor for the increase in the price of electricity as a commodity is that thermal generation (TPPs) is currently trying to sell as much electricity as possible in the most expensive segment today – the balancing market. This is due to the price limits (price caps) set in the night time in the day-ahead market and the intraday market being too low (959.12 UAH/1 MWh) and not profitable for thermal generation. Therefore, TPPs are not motivated to sell electricity in these segments (especially at night), and are trying to maximise their sales in the balancing market, which is much more expensive (price caps 00:00 to 8:00 and 23:00 to 24:00 are 815.25-1102.99 UAH per 1 MWh; and 8:00 to 23:00 – 1740.99-2355.46 UAH per 1 MWh).