Exclusive How to reduce the burden of high electricity prices on industry

Basic sectors of the economy need not subsidies, but a systemic policy that takes into account the interests of both energy producers and consumers

State energy policy

The critical situation of the industry

Today, the Ukrainian industry, not only the mining and metals sector, is on the verge of survival. We see the situation with ArcelorMittal Kryvyi Rih and other large enterprises. Ferroalloy producers, chemists and others are not doing any better. One of the components of this, along with other factors, is very high electricity tariffs.

If the Ministry of Economy and other ministries do the math, they will come to the conclusion that something needs to be done now to reduce the burden on industry. The only source of these resources is our foreign partners. From the state’s point of view, we need to show them the situation we are in and prove that if the necessary measures are not taken, the industry will start to collapse and the state budget deficit, which is being covered by our partners, will start to grow.

How to reduce the burden on industry

We believe that the following measures will reduce the existing financial burden on industrial enterprises:

1. Find a mechanism by which Energoatom could sell a certain amount of its electricity under direct long-term contracts to industrial companies. If the Ministry of Economy calculates this, the multiplier effect will be very high, and the state will only benefit from it.
2. The state should support Energoatom in terms of PSO. UAH 160 billion is a huge amount. A certain amount of funds should be provided in the budget for the next year. In this matter, we need to talk to our partners – they must first understand the need for this and support it.
3. Long-term access to the crossing – then our industrial enterprises will be able to take advantage of the opportunity to import, working not at spot prices, but under normal long-term contracts. The state should also invest in the development of crossing capacities.

About the regulated tariff and the role of the NEURC

The regulated tariff is the cost price plus a certain percentage of the profit margin, compensation for renewable energy, etc. However, the NEURC meetings are mostly held to «blow off steam». Active involvement of the Ministry of Economy could encourage Ukrenergo and regional power distribution companies to improve their efficiency and reduce their costs. Now, due to the NEURC’s decision to increase tariffs, electricity transmission companies are passing on their inefficiency through tariffs to industry.

The state can also compensate for part of the costs of introducing renewable energy sources, as they account for about half of the cost of electricity transportation. I consider it appropriate to include at least 20% of the costs of supporting renewable energy sources in the 2026 budget, as already provided for in Law No. 810-IX. Another option to reduce Ukrenergo’s costs would be for the state to help restructure the company’s debts with a deferral of principal repayment until the end of martial law.

Ways to solve the problem

The only option is to raise the discussion of tariffs from the level of the Ministry of Energy and the National Commission for State Regulation of Energy and Utilities to the level of the Cabinet of Ministers and the President’s Office. We also need to involve our partners, primarily the European Union, in discussing this issue.

I believe that our international partners, who will see the facts and potential consequences, will understand the real risk that our basic industries will collapse, followed by logistics and other areas of the economy and society. Our partners can meet us halfway and agree to additional allocation of funds to the state budget and change the rules of the game for Energoatom and consumers. This will improve the situation in the Ukrainian economy, and in the long run, both power engineers and consumers will benefit.