Ukraine’s National Energy and Utilities Regulatory Commission paralyzed

Author : Olena Holubeva

Source : 112 Ukraine

The commission assures it will resume its work in three months. Experts are convinced that, this will happen after June 2018
23:21, 28 November 2017

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November 23, National Energy and Utilities Regulatory Commission (UNEURC) could not hold a regular meeting. The previous meeting of the commission was also canceled. Since November 13, the commission's meetings have not been held because of the absence of a quorum. UNEURC press office explained: "The commission has lost the opportunity to hold meetings and make decisions."

Borys Tsyganenko, one of two members of the commission, went to a hospital. He must be dismissed no later than November 26. Also, by this date, another commission member, Viktoria Morozova, has to be dismissed. "According to the decree of the President of Ukraine of March 23, 2017 №78 "On approval of the rotation plan for the head and members of the UNEURC," Tsyganenko and Morozova must be dismissed no later than 12 months after the law of "On UNEURC" entered into force," the department of information and communication explained.

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Thus, after November 26, UNEURC will also not be able to hold meetings and make decisions. "In accordance with Article 14 of the Law of Ukraine "On UNEURC," the commission's meetings are legitimate if there is a majority of the general staff (7 people). Quorum of the UNEURC meeting is at least four members of the commission. In late May, as a result of the first wave three members were dismissed, and no new ones were appointed. After November 26, when two more members leave, only two people will remain in the commission," UNEURC informed.

Prime Minister Vladimir Groysman has already expressed his concern. He said he would appeal to President Poroshenko in connection with the need to stabilize the work of the UNEURC. The head of government also said that he could offer the parliament to support changes to the legislation that would allow him to influence the work of the UNEURC.

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UNEURC assured that the tender commission, which should appoint new members of the commission, is already "fully formed and started its work." "The situation with the appointment of new members of the UNEURC will be resolved approximately three months after the completion of the work of the competitive commission or in case of amending the legislation," UNEURC informed.

Experts say that three months are something not realistic. If all the norms are met, then the work of the commission, at best, will resume in April 2018, said the director of special projects of the SEC "Psycheya" Hennady Ryabtsev.

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"The tender commission for the selection of candidates for UNEURC vacated posts was approved on November 17. Its first meeting was scheduled for November 24. Let us suppose that during the next two weeks the commission will be able to choose a chairman, develop and adopt a work schedule, promulgate an appropriate protocol, approve and publish the procedure and conditions for conducting an open competition for UNEURC positions. Then starts it will have 45 calendar days for receiving applications. Deadline would be January 23. The meeting of the commission would take place January 25. Then 30 days would be needed for examination of applications and verification of candidates. February 26, the meeting would be announced. Then promulgation of the protocol and provision for consideration by the president of the bidders who received the highest rating and passed the statutory review would take place. Another 30 days would be needed for the decision of the head of state, and 10 more days for a meeting of the new composition of the UNEURC and the election of the chairman. Thus, ideally, the regulator's work will not be restored on April 9. But this is not real. The practice of holding competitions for category "A" jobs testifies that the time limits established by the rules are usually not maintained," Ryabtsev believes.

The expert stressed that the current situation was due to the fact that the formation of the competitive commission was dragged on extremely. "After all, if it had worked on time, there would be no gap in the functioning of the UNEURC," said Ryabtsev.

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The situation was delayed due to the lack of candidacies for the positions of the members of the competitive commission (which should appoint new UNEURC members) from the Presidential Administration. November 17, president of Ukraine Petro Poroshenko signed the decree on appointing two members of the commission - the president of the All-Ukrainian public organization "Energy Association of Ukraine" Vasyl Kotko and the president of the All-Ukrainian public organization "Association Ukrgidroenergo" Semen Potashnyk.

According to the experts, the situation with the UNEURC is more than serious. It is threatening the stability of the energy markets. According to them, the commission is an arbiter for all energy markets, none of which is able to independently form such prices and tariffs that suit not only the suppliers of goods and services, but all consumers. UNEURC also establishes the rules of the game for all participants of the energy market.

According to the provisions of the law "On UNEURC," the Commission regulates the tariffs. No other body can approve them, said Viktor Merkushov, member of the Presidium of the Energy Association of Ukraine.

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"Not a single tariff could be changed before the resumption of work of the UNEURC. They will be "frozen" at the current level. And this is a real problem for projects on "green energy," for nuclear power plants, and for "gas workers" who cannot raise tariffs," the expert says.

UNEURC was supposed to settle the issue with a change in tariffs for end users of the categories "budget organizations" and "other consumers" in Kyiv, which is especially problematic for Kyivenergo. The company claims that due to the difference between the prices for gas purchases from Naftogaz Ukraine and the price set in the tariff for the category of "budget organizations" (approved by UNEURC), losses have already been received of about 2 million USD. Due to this problem with the company, the first persons of the Kyiv City Administration settled the issue of heating Kyiv budget institutions.

According to Merkushov, as the work of the commission is paralyzed, it will not be able to issue licenses. As you know, several large international and domestic companies are waiting for the decision of UNEURC to issue licenses for wholesale trade in natural gas.

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In addition, according to Ryabtsev, "for the full launch of natural gas and electricity markets it is necessary to develop and adopt hundreds of regulations that will launch the mechanisms envisaged in the laws adopted in 2015-2017." And, for example, most of the rules and regulations concerning the wholesale natural gas market have already been adopted (and the market is actively being formed), the retail gas market (for household consumers) does not exist even on paper.

Also, without the documents prepared by the commission (or with its participation), the implementation of the law "On the Electricity Market" is impossible, Ryabtsev notes. According to him, today the transition period in this segment will be protracted for some five months.

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The current situation is beneficial only for the oligarchs, who control the largest energy assets in the country and are not interested in changing the rules of the game and especially in increasing competition, experts believe.

Co-founder of the Energy Strategies Fund Yuriy Korolchuk suggested that the situation with the absence of a quorum in the UNEURC is a confirmation of the political conflict between businessman Kostyantyn Hryhoryshyn and the current authorities. He also writes that the commission cannot hold meetings since November 13 because Borys Tsyganenko. Before being appointed a member of the Commission, Tsyganenko headed Kostyantyn Hryhoryshyn’s company "Energy Consulting". "Especially if you look at Hryhoryshyn’s conflict relations with the president, and recall the debts of Luhansk energy association (owned by Hryhoryshyn) to an energy market (worth more than 200 million USD), then even more questions arise. The conclusion is that the work of the NKREC is actually artificially blocked or even sabotaged," Korolchuk wrote.

However, previously the UNEURC was not particularly successful in the destruction of the oligarchic monopolies, and now the situation is being preserved.

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"The current state of affairs quite suits both the energy monopolists and their "watchers" located on the Pechersky Hills. Both courtiers and disgraced oligarchs. No one of them does not need competition in the energy markets, because it forces them to take into account the needs of consumers," Ryabtsev concluded.

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