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Gas price swings in Ukraine: What to expect?

Author : Olena Holubeva

Source : 112 Ukraine

The gas price of the operator of last resort, whose functions are performed by Naftogaz, increased to 0,28 USD per cubic meter for the population and 0,58 USD for budgetary organizations up to 1,64 per cubic meter as of December 3
23:21, 7 December 2021

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On November 30, the grace period, which was established by a government decree for two months, ended, and the PIP price is again calculated using the formula. It will change daily. Considering that the formula is tied to import parity, in the near future it will be below 1 USD per cubic meter, the price of PPN will definitely not decrease, but if gas in Europe continues to rise in price, it may even exceed 2 USD per cubic meter. Since December 1, such a high price is paid by 453.500 households that have lost a supplier, have not signed a contract with a new one and still remain PIP clients. And also 2539 budget organizations with which Naftogaz of Ukraine did not manage to conclude contracts before November 30.

Related: Price of imported gas grows to $730 per 1,000 cubic meters

Who and why gets to the operator of "last resort"

The supplier of "last resort" appeared in Ukraine after the launch of the gas market. It performs the function of providing gas to consumers who were left without a single supplier. According to the provisions of the Law "On Natural Gas", people who have lost their supplier because it was liquidated, declared bankrupt or lost a license get to the PIP. Contrary to popular belief, debtors do not fall into this category. If the amount of debt for gas exceeds the patience limit of the current supplier, then upon his request, the GDS operator simply cuts off the consumer from gas and he needs to either look for a new energy carrier or pay off the debt and restore gas supply. In Ukraine, Naftogaz, which won this right at a tender, is playing the role of POP.

Related: Memorandum with IMF provides for population support during period of world gas prices increase

According to the NAC, 453.500 household consumers from different regions of Ukraine remain at the PIP. Also, the clients of PPN are 2359 budgetary organizations - one-fifth of their total number. These are sad times for them.

The norm that before November 30, the PNP must supply gas to the population at 0,28 USD, and to budgetary organizations at 0,58 USD per cubic meter, was provided for by government decree No. 1102, which the government adopted for two months due to the fact that the price of gas according to the formula began to rise rapidly.

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In the initial version, the formula was tied to the price of the German hub NCG and the exchange rate of the hryvnia plus a supplier's margin. But Decree No. 1102 changed the formula: the price of spot gas quotations in Slovakia plus the payment for exiting the gas transportation system of Slovakia, the payment for entering the GTS, and the exchange rate became the base for it. According to the new formula, Naftogaz, through a supplier of last resort, sells gas at a price as if it were imported from Slovakia, plus 20% of its supplier's margin and VAT. Considering that gas in Europe is cheaper than $ 1,000 per 1,000 cubic meters. m no, it came out in the range of 1,4-1,5 USD. There is no reason to expect that the price will decrease by the end of the heating season. It can grow up to 2 USD / cubic meter.

What to do if your tariff rises up to 1,8 USD? Note that a household may not even know that it is a POP client. In the event of the liquidation of an existing supplier, his clients are transferred to the POP automatically. How to find out that you are not a client of the PPN before receiving the payment and do not consume gas at 1,8 / cubic meter?

Related: Launch of Nord Stream 2 could lead to loss of gas supply in five Ukrainian cities

What should those who find themselves among the PPN clients do? Urgently look for a supplier with a fixed price for a year and go to him.

What will happen next with such consumers

In addition, on December 9, NEURC plans to consider a decree according to which residential customers of the PIP, who for some reason cannot choose a supplier themselves and continue to pay a high price, will be automatically transferred to the fixed annual tariff of Naftogaz with the price 0,28 USD / cubic meter. At the same time, there is no complete understanding, from December 1 at the checkpoint until the day of automatic transfer they will count gas at 1,8 USD or at a lower price? After all, this will be a solid increase in payments.

Related: Russia could start negotiations on gas transit with Ukraine after selling fuel in Europe

To be honest, it is not clear why the commission did not consider this issue in advance - before December 1. The NEURCU documents say that the letter from the gas supply company No. 119 / 07-15384-2021 with a request to approve the automatic transfer of the PPN clients to the basic annual offer was received by the NEURCU only on November 30. Why didn't Naftogaz turn to the regulator earlier? Indeed, even on October 25, on the day of the adoption of Resolution No. 1102, both the NAK and NKREKU understood that at a price of 0,28 USD / cubic meter will the PPN be able to sell gas to residential consumers only until November 30? Who needed to delay the resolution of this issue and why?

Schools and hospitals will be shut down?

2,539 budgetary organizations were stuck at the PIP, since Naftogaz simply did not have enough hands and resources to process the required number of contracts in two months.

In October, when gas prices reached 1,300 USD / 1 thousand cubic meters. m, private suppliers who entered into contracts with budgetary institutions at a lower price were unable to service them. Most of them faced a choice: either to deliver at a loss, or to break off the concluded contracts, due to a significant change in circumstances, as provided for in Article 652 of the Civil Code of Ukraine. Then, in particular, suppliers belonging to the Association of Energy Suppliers asked President Zelensky to provide them with gas at a preferential price to fulfill contracts with state employees by analogy with the mechanisms by which Naftogaz-suppliers receive gas for household customers, in within the balancing group or conclude commission agreements. The letter said that the suppliers have more than 6.500 signed contracts with budgetary organizations.

Related: Ukraine may face gas shortage: Who is about to get shut off?

The gas, which the suppliers asked for, was not given to them - the authorities adopted Resolution No. 1102, according to which budgetary organizations were sent to the PPN and by November 30 they were given a price of 0,58 USD. for 1 cubic meter m. with VAT. After that, the process of concluding contracts with the gas supply company Naftogaz Trading began in manual mode, which undertook to conclude contracts valid until December 31 and for the whole of 2022 at a price of 400 USD per 1,000 cubic meters. m (excluding VAT and transportation tariff). The CEO of Naftogaz assured that by the end of November NJSC will complete the work on concluding contracts for the supply of gas with budgetary organizations that are heated by autonomous boiler houses.

And it turns out that Naftogaz did not cope with this task. In response to a request from 112ua.tv, the company officially acknowledged that 2539 organizations and institutions still remain on the POP. This is one-fifth of the state employees.

On November 30, the Gas Market Association warned of the threat of a shutdown of these subscribers due to the expectation of an increase in the price of PIP. The AGRU noted that among the state employees who remained at the PPN are schools and hospitals. 526 of them are located in the Lviv region, 163 - in the Dnipropetrovsk region, 251 - in the Mykolaiv region, 85 - in the Kherson region, 48 - in the Odesa region, and more than 230 - in the Poltava region.

Related: Three people injured due to gas explosion in residential building in Nova Odesa

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