A Guide to Transformation: the Progress of Electricity Sector Reforms in Ukraine

The Mind launches a series of publications devoted to the success of Ukrainian energy market reforms and obstacles on their way.

The upcoming changes in the Ukrainian electricity sector are envisioned in the package of reforms called Ukraine-2020 and outlined in the Energy Strategy of Ukraine until 2035. The reforms are also a part of the implementation by Ukraine of European energy legislation in line with the country’s commitments to the Energy Community and the EU-Ukraine Association Agreement.

The key reformation document for the industry is the Electricity Market Law meant to become a basis for 201 normative acts to be developed and adopted later. In order to implement  the law, the Coordination Center was established under the supervision of the Cabinet of Ministers. Headed by the Vice-Prime Minister Volodymyr Kistion, the Center is in charge of the new market development.

Implementation

What has already been done?

• NEURC established the market rules and retail electricity market rules, as well as Day-Ahead market and Intra-Day market regulations.
• In June 2017, Ukraine and the EU signed an agreement for the ENTSO-E interconnection.
• The Codes of the transmission network, distribution systems, and fiscal power metering were approved.
• Software and equipment for the balancing market, i.e. software for the Power Metering Administrator were purchased. Software for Day-Ahead market and Intra-Day market is to be acquired soon.

What still has to be done?

• State-owned Energorynok and Ukrenergo enterprises restructuring.
• Transmission network operator certification.
• Oblenergos unbundling. That is, the transmission system operators are to be separated from the electricity production, transmission and/or supply. New entities are to be established and licensed for the related activities.
• RAB regulation method implementation.
• Electricity market debt restructuring.
• RES construction auctions implementation.
• Residential tariffs escalation in order to decrease the volume of cross-subsidization on the market.
• Determining the suppliers of universal services and “last resort suppliers”.
• Testing the electricity purchase and sale in the new electricity market segments.
• Establishing a state-owned Guaranteed Buyer and Market Operator based on Enrgorynok state-owned enterprise.
• Launching the transitional phase of the competitive electricity market on July 1, 2019.
• Holding contests to select the suppliers of universal services and “last resort suppliers” till July 1, 2020.
• Taking a series of measures to connect to the ENTSO-E electricity system.
• Setting up and enforcing energy supply quality requirements, including continuity (reliability) requirements.
• Drafting a Smart Grid Implementation Concept until 2035 and a mid-term action plan to introduce smart grids in Ukraine.

Legislation

Key laws adopted as a part the reform:

• Electricity Market Law
• National Energy and Utilities Regulatory Commission Law
• Energy Strategy of Ukraine
• Alternative Energy Sources Law
• Law on lands for energy industry and the legal status of special areas for energy facilities
• The National plan on waste reduction from large combustion plants
• Decree by the Cabinet of Ministers of Ukraine on the Provisions for the State Inspection of Ukraine for Energy Supervision
• Decree by the Cabinet of Ministers of Ukraine establishing the procedures of temporary support to producers engaged in the combined production of electric and thermal energy at co-generation plants

Legal acts to be adopted:

• Law on the special procedures of electricity debt repayment in the wholesale electricity market
• Law on amendments to the Tax Code of Ukraine to ensure the operation of new electricity market
• Electricity Ombudsman Law
• Decree by the Cabinet of Ministers of Ukraine on establishing a Commission to make a conclusion about the necessity of temporary support to co-generation plants
• Decree by the Ministry of Energy and Mining on the electricity supply safety rules