Verkhovna Rada’s Economic Committee has requested a justification for distribution tariffs unification

The Verkhovna Rada Committee on Economic Development has asked the Ministry of Energy and the National Energy and Utilities Regulatory Commission (NEURC) to provide calculations to assess the market impact and expected economic effect of unifying distribution tariffs for the 1st and 2nd classes of industrial electricity consumers.

This decision was made on July 16 at a meeting of the Verkhovna Rada Committee on Economic Development dedicated to the unification of electricity distribution tariffs.

According to Valeriy Tarasyuk, Chairman of the National Commission, this decision is aimed at helping small and medium-sized businesses, which, if adopted, will pay for electricity by 0.40 UAH/kWh less (according to preliminary calculations), and will also help avoid abuses when connecting to the grid.

However, during the discussion, representatives of government agencies were unable to justify to MPs the need to unify tariffs, nor how this proposal appeared on the agenda of the Supreme Commander-in-Chief’s Staff. As a result, MPs requested detailed calculations and the overall effect on the economy and industry.

«In order to make certain decisions, we need to see the calculations – what benefits one sector will receive and what the other will lose. Therefore, it will be right if you prepare the figures, and we will understand who gains and loses what, who is the main beneficiary of this story. And then we will have a normal balanced discussion. Right now, these intentions are really unclear to us as to why they have arisen,» said Ihor Marchuk, Chairman of the Subcommittee on State-Business Interaction and Investment of the Verkhovna Rada Committee on Economic Development.

In his turn, a representative of the Ministry of Energy confirmed the availability of preliminary calculations and general readiness to provide them.

«At the moment, we are not talking about the abolition of the 1st or 2nd classes, but about the theoretical definition of a single class. This is the beginning of the discussion. Calculations are provided when the tariff is set. We will publish them if we come to that point. We are ready to provide theoretical calculations in a working order,» said Yuriy Vlasenko, First Deputy Minister of Energy of Ukraine.

On July 17, the NEURC planned to consider the draft resolution «On Approval of Amendments to the Procedure for Setting (Formation) of Tariffs for Electricity Distribution Services» (amendments to the NEURC Resolution No. 1175 of 05.10.2018). Due to criticism from business, consideration of this decision was postponed for a week.

GMK Center estimates that the unification of tariffs will lead to duplication of costs for industrial companies. The total increase in costs for iron and steel companies will be about UAH 10 billion per year, and about UAH 26 billion for the entire economy.

The unification of tariffs for electricity distribution services will lead to discrimination against large domestic consumers, Ukrmetalurgprom, a business association, said in a letter to the head of the National Energy and Utilities Regulatory Commission. This step will also contradict the practice of tariff setting for these services in the EU. According to experts, this contradiction to European Directive 2019/944 and Regulation 2019/943 (to be implemented under the Ukraine Facility) will lead to non-transparency and discrimination in tariffs.