The head of the BRDO Energy sector Oleksiy Orzhel: “It is important for investors to be aware of the cost and time of connecting to electricity supply networks. However, dealing with these issues still takes a lot of time”. This one and a wide range of other burning issues have been discussed at the press briefing “The connection to electricity supply networks: suggestions to the draft law 4493 “On the electricity market of Ukraine”.
The issue of connecting to electricity supply networks is one of the key obstacles discouraging quality investors from Ukraine. The Doing Business ranking, where Ukraine ranks the 137th among 189 countries in terms of getting the electricity, partly reflects this difficult situation. The solution of this problem has been already found and, actually, it is even supported both by license holders and the NKREKP. However, in order to make this reform eventually successful, it is needed to ensure the fulfillment of a number of critical points of the reform.
“Today you need to spend a lot of time, efforts and nerves to at least find out the conditions you can connect. Even money can not speed up this process. In addition, a mandatory condition of today’s connection procedures is a direct involvement of investors in the discussion of complicated technical details they don’t understand by definition. We offer to “lock” the whole process between the license holders. There should be services on turnkey basis. If desired, investors can be involved in the technical process, but consumers should simply visit a licensee’s website, specify a point on the map, where he would like to connect and receive this connection within the given time by default,” a coordinator of the direction “USAID Leadership in Economic Governance Program” Dmytro Boyarchuk says.
“We know dozens of cases where foreign investors refused to build production facilities in Ukraine because of the problem of connecting to electricity supply networks. The problem is completely artificial and independent experts have developed its solution long ago. However, the current situation implying an individual agreement between customers and monopolists bring good “tips”, so nobody is in a hurry to introduce changes,” a former NKREKP member and now a border member of the Business-Council “The Price of the State” Andriy Gerus says.
Independent experts offer to introduce a so-called double-rate method of connection to solve the problem of connecting to electricity supply networks. Its basic idea is that the connection cost is calculated based on two rates – the rate per 1 kWh of connected capacity (at the appropriate voltage type and with consideration of networks load) and the rate per 1 km of power transmission lines. Such an approach makes it possible to answer immediately how much it will cost to connect at the given point and make you aware of time frames this connection can be performed.
“In order to plan their activities, it is important for investors to get an answer to two questions: how much the connection will cost and how long it will take. Unfortunately, it takes a lot of time to address these issues in Ukraine. It is clear that no business planning is possible under such circumstances and investors open the production in jurisdictions, where such problems do not exist. It should be mentioned that a dangerous point of the relationship in terms of corruption risks was getting technical specifications for connections by investors – a new concept implies that there will be no need to get technical specifications,” the head of the BRDO (Better Regulation Delivery Office) Energy sector Oleksiy Orzhel says.
The license holders and NKREKP take into account the offer of independent experts on the double-rate method to connect to electricity supply networks, and now this method is even considered as the one that can serve as a basis on the official website. However, there are still disputes over the rate per 1 kWh of connected capacity. Public representatives insist that the rate per 1 kWh of connected capacity should be calculated based on actual costs and considering the voltage type, transformers load and a peak responsibility factor. NKREKP and license holders offer to calculate the rate based on the value of assets and the average rate for the entire country or region. According to preliminary calculations, the rate per 1 kWh of connected capacity based on the value of assets will be higher than the cost of the connection procedure. The estimation based on real costs will be closer to reality and at the same time, the money received will be enough to carry out quality and timely connection procedures.
“According to our estimates, the method of calculating the rate per 1 kWh of connected capacity offered by license holders and supported by NKREKP may give a slightly inflated rate. It would be better to calculate on the basis of the prime cost of carrying out the works adjusted for inflation. In this case, the funds will be enough to perform the connection and license holders even will officially earn,” the director of the project organization “Power grids and systems” Oleg Playda says.
It is also important that the proposed double-rate method provides the opportunity for getting the connection service online. The calculation of the connection cost based on two rates for a given district electricity supply network known in advance allows to automatically estimate how much the connection will cost if it is performed at the given point by using the online calculator.