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Expert discussion: Euro-reforms in energy – ups and downs of 2016

Київ, December 23, 2016.

The implementation of environmental aspect in framework of the Association Agreement has been long overdue and communication is rather poor, though there is a vivid progress in water resources management.

Regulation in the energy sector has improved, but there are still problems with transparency. “The latest decision of the regulator to switch to new differentiated tariffs – the formation of wholesale prices – was not communicated to the public. All 15 components of the reform are to be disclosed, but the regulator opened only nine, saying that the rest “are not very interesting,” noted Svitlana Golikova, independent expert, head of the company “TransEnergoConsulting”, at a discussion held at Ukraine Crisis Media Center. She pointed out the positive features of connecting to networks and improving consumer services. However, the result will not be visible instantly. “Domestic consumers will not immediately use the mechanisms suggested by the new market. They will experience the benefits only in 3-4 years,” she said.

Roman Nitsovych, projects and programs director, DiXi Group, commented on the 2017 budget. “Oil-industry workers celebrated the victory, as they managed to reduce the rent. The government did not declare becoming a big “oil state”, it only mentioned the creation of a “gas state” so that we would have enough gas and would not import it. Unfortunately, the intentions were not supported by actions,” he remarked. Mr. Nitsovych also mentioned some positive features: continuing liberalization and increasing competition in the wholesale gas market, where major customers are industrial plants. “European companies also join our market which proves its liquidity,” he considers.

However, the transitional period for gas supplies to households and utility companies will end on April 1, 2017 but many things are still not clear. Among them: the separation of gas transport and gas-saving functions of Naftogaz, the formation of market prices and subsidies. “It is very difficult for any other provider except monopolies to agree to supply gas to the population for subsidies but not for hard cash. Until the government offers a subsidies monetization model, no alternative supplier will come,” says Roman Nitsovych.

According to Gennadiy Ryabtsev, director of special projects, scientific & technical center “Psykhea”, Ukraine needs at least 2 million tons of oil and oil products to form minimum stocks. There are no resources for this and work in this area is constantly postponed. Monitoring, market control of oil products quality and safety are also postponed. “The energy community has put forward three allegations against Ukraine blaming it for non-performance of obligations,” said Mr. Ryabtsev.

Nataliya Andrusevych, head of the Board at resource & analysis center “Society and Environment”, emphasized that no deadlines for the environmental directives have been met. “When we talk about the implementation of the Association Agreement in the environmental area, we mean a process instead of the result,” she explained. A positive point is an adoption of the law on the implementation of integrated approaches to water resources management. It is the first European integration law in the environmental protection field pursuant to the Association Agreement. The Ministry of Energy has also submitted for public discussion the amendments to the technical regulations for reducing the sulfur content in certain fuels. “The issue of Ukraine not fulfilling obligations to reduce sulfur content is under consideration in the Energy Community. The adoption of this regulation would help to address this issue at the international level,” believes Ms. Andrusevych. She considers the notorious draft laws on environmental impact assessment and the strategic environmental assessment vetoed by the President to be a failure of the year.

Yuliya Cheberyak, expert of the civil network “OPORA,” considers the process of establishing the energy efficiency foundation to be non-public because the public neither developed nor supported the document. Besides, according to her, the public has been fighting for the “warm loans” program for six months. “This is the only state financial support for energy efficiency of residential buildings. But only UAH 400 million have been allocated in the budget. Despite the fact that the funds have been provided, the program continuation has not yet been adopted,” emphasized Ms. Cheberyak.

Andriy Bilous, “DiXi Group” analyst, considers the adoption of the law on the regulator to be a positive point. It lays the foundation for establishing an independent National Commission, which regulates energy sector and provides competitive conditions in the energy market. He also mentioned the decision on a new formula for calculating a charge for connection of the plants of 160 kW to 5 MW to the electric power network. “Owing to this regulatory decision alone Ukraine managed to increase its Doing Business ranking by 10 points,” he noted.

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