Based on the Ukrainian Crisis Media Center’s report
The NKREKP’s resolution on new prices to connect to electricity grids is totally unacceptable and should be revised. The experts of some organizations, people’s deputies and representatives of local authorities unanimously agreed on this opinion during the discussion held in the Ukrainian Crisis Media Center today.
“We will pay a very high price for access to electricity grids and fund the regional power distribution company due to the linear component,” the head of the Energy sector Oleksiy Orzhel said in his speech during the discussion.
Issue of calculations
According to the people’s deputy of Ukraine (Union “Self Reliance” faction) Lev Pidlisetsky, the NKREKP applied the law provisions when using the formula completely improperly. “We had no idea on the asset valuation they applied and no one could assume that they wouldn’t use any discount rates,” he said.
The first issue is referred to the transparency of the valuation of regional power distribution company’s assets, which is the numerator of the formula. For example, according to the new valuation formula of the State Property Fund, the cost of “Dniprooblenergo” increased from 6.2 billion hryvnas in 2015 to 13.4 billion in 2016, although there have been no changes in the company, the former NKREKP’s member Andriy Herus said. Secondly, the facilities that don’t operate in depressed regions any more have been also included to the asset valuation. As a result, the connection cost for these regions is more than doubled compared with Kyiv and Dnipro. “There is a distortion: connection procedures are expensive in the regions where the production should be stimulated, and the connection will cost less in the center of Kyiv, where the facilities are overloaded,” the expert explained. It is also illogical that the denominator includes the rated capacity of transformers instead of the contracted capacity of consumers, as well as that they apply the same approach both to generating enterprises and to all others and that new schools, kindergartens and high-rise buildings will also pay for the connection on a non-preferential basis.
The connection price has risen by 6 times and it should be noted that it doesn’t include the construction cost of electric lines to facilities. “The linear component is a “store”, where you buy products. That is, you also have to build a shop for sellers to buy a product. We will pay a very high price for access to electricity grids and fund the regional power distribution company due to the linear component,” the head of the BRDO’s Energy sector Oleksiy Orzhel said. Experts also said that the new tariff is a visible attempt to legalize the “corrupt rent” – the funds the regional power distribution company previously received as bribes.
“The formula contains mistakes not only by definition, but also from a legal point of view. The resolution hasn’t been published yet, but if it is published – there will be a lawsuit with all grounds to abolish it,” Andriy Herus said.
A risk to investments and the green energy
The sharp increase in prices to connect to electricity grids will be a serious blow to the industry and small generating enterprises, especially in the green energy sector, lead to the freezing of initiated investment projects and discourage foreign investors. “Now connection procedures take up 30% of the project budget instead of 10%, and it is paid not to the state but to another business,” the member of the Ukrainian Union of Businessmen Serhiy Petrov said.
“This factor creates an investment barrier to enter the industry, whereas Ukraine has to destroy these barriers. This does not correspond with the principles proclaimed by the government. We can’t build a strong economy in that way and will always depend on IMF’s loans,” the people’s deputy of Ukraine from the Radical Party of Oleh Lyashko faction Viktor Halasyuk said. “We will review these valuations [based on which the calculations were made]. I have already sent a deputy request to get them, and we will initiate an independent examination,” he added.
A threat to the development of territorial communities
The chief of staff of the Sumy Regional State Administration Dmytro Zhyvytsky said that the new resolution would slow down the development of new integrated territorial communities. For example, if some community establishes agricultural cooperatives, now the cost of new construction for them will be considerably more expensive, so the idea of consolidation is not viable.
A number of organizations call to review this decision
Experts of the Intensive Care Reforms Package published an official statement, in which they supported all above reservations and called to review this decision taking into account the interests of all participants. The experts also remind that it is necessary to provide a full rotation of the NKREKP. “If we do not really have independent decisions, it makes no sense to speak about the further reforming of the energy sector and the electricity market,” the statement says.
The co-chairman of the Energy Committee of the European Business Association Maksim Sysoyev said that the organization was also deeply concerned about the NKREKP’s decision and was preparing an appeal to the Prime Minister and the regulator.
The representative of agricultural associations Denys Marchuk said that new rules would create serious difficulties for processing enterprises in the agricultural industry, so 9 agrarian associations have already appealed to the President and the NKREKP’s head.
The discussion participants also stressed that it was important to clarify all the details in the law carefully in the future to narrow the scope for abuses.
Follow the link to watch the video from the discussion: http://uacrisis.org/ua/stream