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Ukraine Approves Secondary Legislation Required for Launch of the New Electricity Market

On 14 March 2018, the National Energy and Utilities Regulatory Commission of Ukraine (the "Regulator") adopted several regulations necessary for efficient operation of Ukraine's new electricity market starting 1 July 2019. 

This marks another significant milestone in implementing Electricity Market Law No. 2019-VIII dated 13 April 2017, and includes enaction of the following secondary acts: 

  • Market Rules (Resolution No. 307);
  • Day-ahead and Intraday Market Rules (Resolution. No. 308);
  • Transmission System Code (Resolution No. 309);
  • Distribution System Code (Resolution No. 310);
  • Commercial Metering Code (Resolution No. 311);
  • Retail Market Rules (Resolution No. 312). 

Importantly, a number of regulations, including Resolutions No.309-312, have entered into force on 19 April 2018, while the remaining Resolutions No.307-308 are pending official publication. All of the above acts but Resolution No. 312 may be amended, including by market participants, under the procedure that varies in each case subject to the Regulator resolution in question.

The new design of electricity market aims to eliminate the current "single-buyer" model, and introduces six new markets as follows:

  • bilateral contract market – a market for bilateral power sale and purchase between power generators and power suppliers/consumers;
  • balancing market – a market for sale and purchase of necessary volumes of power by transmission system operator to balance daily volumes of power supply and demand and to settle imbalances;
  • day-ahead market – a market for trading power and its delivery the following day based on terms and conditions as earlier agreed on the trading day;
  • intra-day market – a market for power trading during a day after the day-ahead trading;
  • retail market – a market for end-consumers purchase of electricity directly from power suppliers and other market players rendering services related to power supply contracted at consumers’ discretion; and
  • ancillary services market – a market where transmission system operator may purchase numerous support services to secure stable power supply.

Below is an overview of the secondary acts that are expected to further transpose Ukraine's commitments on liberalization of electricity market under the EU Third Energy Package.

Transmission System Code

The Transmission System Code is a set of requirements and rules governing the relationship between the transmission system operator (the "TSO") and other users of the transmission system in order to plan, develop and operate the transmission system within the integrated power system (the "IPS") of Ukraine, as well as access and connect to the transmission system.

The Code sets a procedure for contemplating the development of power transmission networks, and it determines the procedure for contemplating, management and operation of transmission networks under normal and emergency conditions, as well as requirements to secure operational safety.

It is expected that adoption of the Code should enable soonest alignment of Ukrainian Transmission Network with technical standards of the European Network of Transmission System Operators for Electricity (ENTSO-E), eliminate the existing technical barriers, and ensure seamless exports/imports of power. This should enable more secure power supplies and, as a result, raise reliability of the Ukrainian energy system.

Distribution System Code

The Code structures functional duties, rights and obligations for operators of regional distribution power networks and sets a procedure for their development. Among others, it contains terms and conditions for users’ connection to distribution networks, the rules for operation of distribution networks, as well as regulates connection of small power plants.

Commercial Metering Code

The Code, among others, determines procedures for electricity metering and for registration of vendors providing commercial metering services. It also defines procedures for compiling data in respect of volumes of power generated, transmitted, distributed, imported/exported and consumed, for its use on the electricity market, as well as parties' rights and obligations to arrange commercial metering and obtain precise and credible data, for commercial settlements.

Market Rules

Market Rules define procedures, among others, for registration of electricity market participants, including producers, traders, and consumers, requirements for contracts on settlement of power imbalances, balancing rules, rules for ancillary services market, settlements for imbalances and ancillary services, issuing invoices, as well as a regulation on market functioning during emergencies of the IPS of Ukraine.

Day-ahead (DAM) and Intraday Market (IDM) Rules

The Rules are designed to operate sub-markets run by market operator and to govern relations between the market operator and power producers and power traders. They also include model agreements on activities in DAM and IDM, and applications for and contracts on power purchase.

The Rules define procedures, among others,for: registration of DAM and IDM participants, collateral to secure obligations under bilateral contracts, organization and conducting DAM and IDM auctions, power pricing, settlements on DAM and IDM, pricing and payment to market operator, information disclosure and dispute settlement.

Retail Market Rules

The Rules lay down a contractual foundation for power trading between the end consumers, electricity suppliers, and other participants of the retail electricity market, as well as establish a regime for (i) suppliers of universal services and (ii) last resort suppliers.

The Resolution adopting the Rules obliges consumers to conclude new contracts, among others, with other participants of the retail electricity market by 1 December 2018. This involves consumers acceding to public connection contracts (power distribution services contracts, power supply contracts). The relevant basis for accession would be effective contracts on power supply and power use entered into with regulated tariff power suppliers, upon an application as set out by the Resolution.

Overall, approval of the above secondary acts, as well as available mechanisms for their amending, demonstrates Ukraine’s commitment to transforming the Ukrainian energy market into an effective, competitive and investment attractive environment.

For further information please contact Asters' partner Yaroslav Petrov or senior associate Marta Halabala or associate Serhii Yaroshenko.

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