11 December 2013
Alert

Ukraine Liberalizes Its Electricity Market

As a member of the European Energy Community Ukraine has undertaken to liberalize its electricity market. To fulfill this commitment, on 24 October 2013 the Ukrainian Parliament adopted and on 3 December 2013 the President signed the Law "On Operating Principles of Electricity Market of Ukraine" (the "Law"). The Law will come into effect on the first day of the month following the month of its expected official publication.

Under the existing electricity trading module, electricity should be traded in the most of the cases through the Whole Sale Market of Ukraine, and under strictly regulated prices. Purporting to create a more competitive electricity trading regime, the Law foresees liquidation of the Whole Sale Market of Ukraine and provides for establishment from 1 July 2017 of four trading platforms, or "markets", in particular the (a) market of bilateral agreements; (b) day-ahead market; (c) balancing market; and (d) retail electricity market. Under this new module electricity producers will be able to trade electricity through any of the markets, save for certain regulatory limitations. Moreover, certain groups of customers will be allowed to choose their supplier of electricity. Such flexibility and competitive electricity prices will result in a much more liberalized electricity market.

A separate regime will apply to electricity produced from alternative energy sources which may be traded at the (a) market of bilateral agreements; (b) day-ahead market; and (c) balancing market. However, electricity traded at the feed-in ("green") tariff must be purchased under bilateral agreements by a mandatory governmental buyer (a successor of the State Company "Energorynok"), which should then re-sell it at the day-ahead market in accordance with the electricity production hourly schedules provided by generation companies. Expenses incurred by the mandatory buyer must be compensated by the Cost Imbalance Allocation Fund.

 


For further information, please contact senior partner Armen Khachaturyan
or associate Yaroslav Petrov.

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