NEURC grants the right to the Guaranteed Buyer to reduce the level of settlements with RES producers
On 3 April 2024, the National Energy and Utilities Regulatory Commission (NEURC/Regulator) adopted a resolution extending the right of the Guaranteed Buyer to reduce payments to renewable energy producers (RES producers). This is NEURC Resolution No. 652 of 3 April 2024 "On Amendments to NEURC Resolution No. 332 of 25 February 2022".
In particular, subparagraph 13 of paragraph 1 of Resolution No. 332, which provides for the right of the Guaranteed Buyer to reduce the amount of settlements with RES producers by the unpaid share of the compensation for the costs of imbalance, has been supplemented by the right of the Guaranteed Buyer to reduce the amount of settlements by the costs of deviation. The right of the Guaranteed Buyer to reduce the level of settlements with RES producers by the unpaid imbalance was established with the start of full-scale invasion in order to:
- ensure that the RES producer can maintain its participation in the Guaranteed Buyer's balancing group if it fails to make such payment on its own
- ensure the smooth functioning of the market under critical conditions
In April of this year, the Guaranteed buyer was granted the right to reduce the amount of payments by the unpaid imbalance and the cost of the unpaid deviation.
It should be noted that the Law of Ukraine "On the Electricity Market", NEURC Resolution No. 641 "On Approval of Regulatory Acts Regulating the Activities of the Guaranteed Buyer and the Purchase of Electricity at the "green" tariff, the Purchase of Services under the Market Premium Mechanism", and the Agreement on Participation in the Balancing Group stipulate that producers are obliged to:
- reimburse a share of the costs of balancing the electricity of the Guaranteed Buyer
- reimburse the cost of the deviation
A Deviation, as defined by the Law and Regulations, is the difference between a Participant's actual electricity input/output volumes and its forecast hourly schedules. The procedure for calculating the deviation is set out in Annex 3 to the Model Agreement on Participation in the Balancing Group of the Guaranteed Buyer.
This means that even before NEURC adopted the amendments of 3 April, RES producers were obliged to reimburse the cost of the deviation to the Guaranteed buyer (if any). These amendments enshrined the right of the Guaranteed buyer to reduce the settlement with the producers by the amount of such deviations if the producer did not reimburse them on its own.
However, given that the issue of settlements between the Guaranteed Buyer and RES producers and the offsets of debts is currently acute, such amendments could have caused a wave of negative reactions among RES producers. Instead of solving the urgent problem of settling debts with RES producers, NEURC has added the right of the Guaranteed Buyer to reduce the level of settlements with producers by one more indicator. In this regard, it is hoped that the Regulator and the market participants will be able to reach an agreement on the settlement of payments in the market in order to ensure its functioning.
For more information, please contact Asters' Partner Yaroslav Petrov and Associate Kateryna Andarak.
