Unification of electricity distribution tariffs will have a negative impact on the operations of mining and metals companies – Ukrmetalurgprom

Unification of tariffs for electricity distribution services will lead to discrimination against large domestic consumers. This is stated in a letter from Ukrmetalurgprom addressed to Valeriy Tarasyuk, Chairman of the National Energy and Utilities Regulatory Commission (NEURC).

This step will also contradict the EU’s practice of tariff setting for these services and will have serious negative consequences for the competitiveness of the mining and metals industry, reducing tax payments to the budget and foreign exchange earnings.

According to the association, the media reported that the regulator may abolish the division into consumer classes. Such a decision could have serious negative consequences for mining and metals companies and the domestic economy as a whole.

Mining and metals companies use high-voltage electricity, which requires significantly lower distribution costs for distribution system operators, and have their own infrastructure, including transformers, substations and high-voltage lines.

«The abolition of distribution into classes will lead to double payment – for their own and common infrastructure. This will not only increase their operating costs, but also negatively affect the competitiveness of Ukrainian steel products on the international market,» the letter says.

The abolition of consumer classification will lead to a significant increase in costs in the industry and make mining and metals production unprofitable, Ukrmetallurgprom said. The association estimates additional costs for the sector at over UAH 3 billion per year.

«This will lead to a decline in production, job losses, reduced export potential, a drop in budget revenues and the inability to provide further assistance to Ukraine’s defense forces. The additional financial burden on the industry risks reducing investment, negatively impacting GDP and reducing budget revenues, as mining and metals companies are major taxpayers. This will complicate Ukraine’s post-war recovery and may lead to the loss of entire sectors of the economy,» the letter says.

At the same time, it is a common practice in the EU to differentiate tariffs for electricity distribution services. The number of such classes usually exceeds three. In Ukraine, there are only two: Class 1 – those using electricity with a voltage of 27.5 kV (large industry), Class 2 – all others. In the context of European integration processes, Ukrmetallurgprom believes that the country should improve its consumer classification system rather than unify it.

The association reminded that the mining and metals industry together contributes about 5.7% to the country’s GDP. Last year, the industry generated over $4 billion in foreign exchange earnings and paid over UAH 25 billion in direct taxes. In addition, the sector creates more than 350 thousand jobs and accounts for 35% of cargo transportation by Ukrainian Railways and Ukrainian seaports. The iron and steel industry is also a leading sector in supporting Ukraine’s defense forces.

As a reminder, representatives of major mining and metals companies have called on the government to reconsider the decision to increase the share of electricity imports to 80% to ensure stable energy supply for enterprises. The business considers it a compromise to set this rate at only 50%. Otherwise, the high cost of imported electricity will lead to a reduction in production.