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State-run energy generating companies aren’t on an equal footing with private ones

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Two years ago, in July 2019, a new model of the energy market started to operate in Ukraine. This was to be an indisputable advantage for the development of the energy sector, so great hopes were put on the introduced model. However, something has not happened as expected, and there are a growing number of complaints about unfair competition, lack of equal conditions for all traders, «air trade», understated prices in the day-ahead market as well as breach of agreements in the bilateral contracts market.

This was stated by Olexandr Vizir, Advisor to the President of SE «NNEGC «Energoatom», during a discussion at the Energy Club on the topic «Two years of the electricity market in Ukraine: what achievements and what needs to be improved?».

«State-run companies aren’t currently on an equal footing with private ones. Firstly, Energoatom and Ukrhydroenergo are imposed service obligations to provide the population with affordable electricity, according to which these companies are obliged to turn over part of their products at an unfavorable price. Secondly, both companies must sell the entire amount of their electricity under bilateral contracts on the stock exchange. However, there are no such requirements for private generation,» said Mr. Vizir, emphasizing the need and importance of market participants «equality».

Furthermore, he stressed the large-scale manipulation in the energy market, mentioning as an instance the situation in the day-ahead market: «We have all witnessed that on the weekend electricity in the day-ahead market cost 35 kopecks per kWh, and this does not even cover the cost of its production at nuclear power plants, which is certainly cheaper than at thermal power plants». As a result, the Advisor to the NNEGC President added, the contracts concluded in the day-ahead market are not being fulfilled: as it becomes cheaper to buy in the day-ahead market, such bilateral contracts are terminated, which causes the system to collapse. «In this situation, Energoatom, Guaranteed Buyer and Ukrhydroenergo do not put up their electricity amounts for sale below cost, while unscrupulous traders put them up at a significantly lower price than it was bought from the three above-mentioned state-run companies.»

While looking for possible ways to overcome the problems, all generations submitted their proposals to the industry specific regulator, but NEURCU did not evaluate all of them. At the same time, the actions taken by the regulator did not improve the market. «Regulation of the electricity market allows for improprieties and earning on such improprieties,» Olexandr Vizir states.

 «I am bound to acknowledge that we are not celebrating two years of the energy market in an upbeat mood given the medium-term horizon,» he said, «but we still believe that together we’ll be able to address all the issues.»

At the same time, Mr. Vizir noted that SE «NNEGC «Energoatom» plans to effect forecasted sales of the liquid product in the day-ahead market upon PSO model updating. This will allow suppliers not to quote the price for the end user according to the day-ahead market, but to offer a fixed price or a set of indications.

«Energoatom will make every effort to make the energy market work as a market,» the Advisor to the NNEGC President summed up.