On 02 July 2023, the Law of Ukraine No. 3141-IX "On Amendments to Certain Laws of Ukraine on Prevention of Abuse in Wholesale Energy Markets" (the "Law") came into force. The Law was developed in accordance with the European Union Regulation on the prevention of abuse in the natural gas and electricity markets, known as REMIT (Regulation (EU) No. 1227/2011 of the European Parliament and of the Council of 25 October 2011).
The Law includes several new definitions, including "wholesale energy market", "wholesale energy products", "insider information", and others. It establishes restrictions on the treatment of insider information in the gas and electricity markets, namely:
- defines what information is considered insider information
- establishes lists of prohibitions for categories of persons who have access to such information
The regulator should approve the requirements for disclosure of insider information and the platforms for its disclosure will be operating:
- the Ukrainian GTS operator will ensure the functioning of the platform for the natural gas market
- the transmission system operator (NPC Ukrenergo) and the market operator will ensure the functioning of the platform for the electricity market
The Law defines the actions that are considered manipulation or attempted manipulation in the energy markets. It is stated that the regulatory authority, the National Energy and Utilities Regulatory Commission (NEURC), must approve a non-exhaustive list of practices that may be recognized as manipulation or attempted manipulation.
In addition, the GTS Operator of Ukraine, NPC Ukrenergo and the market operator, as entities that professionally organize operations with wholesale energy products, should have a monitoring system and procedures to detect violations. In case of violations or suspicious transactions, they should notify the regulatory authority. For example, fines for manipulation or attempted manipulation can reach up to UAH 459 million (more than EUR 11 million). It should be noted that the NEURC will impose fines for two years after consultation with the Energy Community Secretariat.
Additionally, the NEURC will perform the following actions:
- report to the Parliament on its activities and fulfilment of tasks in the energy and utilities sectors
- interact with the Antimonopoly Committee of Ukraine, the National Securities and Stock Market Commission, and financial control authorities during the investigation of violations in the wholesale energy markets
- register wholesale energy market participants and maintain a register of such participants
- establish requirements and provide recommendations for maintaining integrity and transparency in the wholesale energy markets
In addition to the implementation of the REMIT regulation, the Law solves a long-standing problem. According to the previous version of Article 38 of the Law of Ukraine "On the Electricity Market", NPC Ukrenergo had to simultaneously agree on the procedure for allocating the capacity of cross-border interconnections with all TSOs of neighbouring states – members of the Energy Community. This procedure was very time-consuming and complicated. Now NPC Ukrenergo can submit to the NEURC for approval the Rules for the allocation of cross-border transmission capacity in one or more directions, which will include the approval of the transmission system operator of the neighbouring state. NPC Ukrenergo will also distribute the income it received in 2023 from the distribution of cross-border capacity in the following proportions:
- 10% - to ensure the actual availability of the allocated transmission capacity, maintenance and increase of transmission capacity, repayment of debts under agreements on access to the cross-border transmission capacity
- by 45% each - to pay off debts in the balancing market and to the guaranteed buyer for services provided to ensure an increase in the share of electricity production from alternative sources for settlements with RES producers and nuclear generation
Certainly, the adoption of this Law and the implementation of the REMIT Regulation is a positive step for the energy sector in the process of implementing European legislation. The implementation process does not end there, and there is still much work to be done to bring secondary legislation into compliance.
For more information, please contact Asters Partner Yaroslav Petrov and Junior Associate Marko Malinovskyi.
