Electricity market is at risk of failing if tariffs for households and industry remain unbalanced

Electricity market is at risk of failing if tariffs for households and industry remain unbalanced
September 01, 2015.

Kyiv, September 1, 2015. Private households have benefited from paying lower energy tariffs at the expense of industrial consumers. “Since 2000, energy prices for industries have increased eight times, while tariffs for the population increased only two times in the same period, which resulted in significant imbalances in the electricity market,” said Andriy Perevertayev, expert at the NGO Coalition for Energy Reforms, at a press briefing at Ukraine Crisis Media Center.

According to Perevertayev, today the volume of cross-subsidization in the electricity industry amounts to around 35 billion hryvnia per year, creating additional pressure on electricity suppliers, such as regional power companies, and the state budget.

According to the National Commission for Regulation in the Energy and Utilities (NKREKP), electricity prices for private households should match those of industrial consumers by 2017. Then the transition to a new electricity market model is scheduled. “If NKREKP remains strong under public pressure and embraces the idea of ​​a gradual tariff increase, this model would allow new suppliers to enter the market and create a competitive environment. As a result, the quality of services received by the end user is expected to increased,” the expert said.

According to Perevertayev, the population, which consumers 30% of the total energy consumption, is the most responsible payer for electricity and it is interested in changing consumption patterns. The expert explained the current tariff policy provides a significant gap between the minimum consumption and electricity production at night on the one hand, and the maximum consumption and production during the day on the other. As a result, the state-owned Ukrenergo, as a regulator, must daily energize and de-energize a large number of heat units to balance the system. “The increase in tariffs is a great incentive for people not only reduce consumption, but also shift to consumer more energy during the night for less money,” emphasized Perevertayev.

Experts are actively discussing the idea of ​​creating the post of energy ombudsman. This position exists in many countries, and the man who holds it deals with pre-trial disputes between consumers and energy suppliers that in Ukraine would be regional power companies.