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10:30 AM Tuesday, July 17, 2018
Energy
Electricity Law Moves Ukraine Closer to EU
Law ends control of market by single industry operator
image/svg+xml Kyiv Lutsk Rivne Zhytomyr Lviv Ternopil Khmelnytskyi Uzhgorod Chernivtsi Vinnytsia Chernigiv Sumy Kharkiv Poltava Cherkasy Kirovohrad Lugansk Dnipropetrovsk Donetsk Zaporizhzhia Mykolaiv Odesa Kherson Simferopol Sevastopol Ivano- Frankivsk

KYIV - Ukraine has taken a big step toward aligning with European Union standards - and disbursement of a loan tranche - with parliamentary approval of long delayed legislation reforming the electricity market.

Analysts applauded the Rada's adoption of the law on April 13, saying it met a key commitment to the EU. Some dissenting parliamentarians suggested the chamber had moved too hastily.

"The adoption of this law is a breakthrough for Ukraine, whose parliament has tried unsuccessfully to introduce a liberalized electricity market for more than a decade," Alexander Paraschiy, head of research at Concorde Capital, told the UBJ.

Reform of the electricity market was a key commitment to the EU in conjunction with the the bloc's Third Energy Package - a set of laws establishing an internal gas and electricity market.

The law eliminates the single state-controlled operator that purchases all produced electricity from power generation companies.

Instead, power companies will be allowed to sign direct contracts with consumers or traders at prices free from regulation.

For 25 years, Ukraine has largely coasted on power infrastructure inherited from the Soviet Union. Ideally, a new law will encourage private and public investment.

More Investment, Fair Competition

Parliamentarians backing the reforms say the legislation will bring in investments in the energy sector and support fair competition.

Natalia Boyko, Deputy Minister of Energy and the Coal Industry for European Integration, praised the outcome, but she said reforms would need time to take hold.

"But this is a strong start, which will help to generate appropriate market relations in the electricity sector,” she said in a statement.

Doing Away with Speculation

Maxim Tmchenko, CEO of DTEK, said every Ukrainian would benefit from the introduction of the electricity market.

“A consumer will be able to choose a supplier, get a fair price as well as a new quality of service," he told the website reform.energy. In his view, transparent European rules will eliminate any speculation in prices of coal, connection fees or roles of the regulator.

Mikhail Bno-Ayriyan, Ukrenergo spokesman, called the bill one of the most important decisions in the energy sector over the past few years, along with the law on the gas market.

Implementing Rules Needed

The legislation had been discussed for two years.

The difficulty lies in the fact that the law only sets down basic principles of the new electricity market. Now it needs to be supplemented by other regulatory documents to make the market fully operational.

And there is always a risk that such regulations will distort the law's intent.


For comments and story tips, please email UBJ Kyiv Correspondent Vitalii Dubenskyi at: vitalii.dubenskyi@theubj.com.

Photo: A woman anxiously checks her apartment electricity meter in Kyiv. Ideally, the new law will encourage competition and lower prices. (UNIAN/Vladimir Gontar

Posted April 21, 2017

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