MPs and experts: Compromise on the NKREKP draft law achieved, it can be voted in first reading 


Kyiv, March 2, 2016. “This regulator [NKREKP – Ed.] regulates the market of about 300 billion UAH value. That is, 300 billion in the same hands, so that you can manage the way you want, if you are not independent and professional,” said Lev Pidlesetskyi, MP, Samopomich faction, chairman of Electric Energy & Energy Transportation Sub-Committee, Parliamentary Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety, at the debate at Ukraine Crisis Media Center. That is why it is so important for it to be independent and impartial. At present, a draft law on the National Regulatory Commission on Energy and Utilities (NKREKP), created by MPs and experts as an alternative to the government one, has been supported by the parliamentary committee and proposed for adoption in the first reading, said the MP. According to Mr. Pidlesetskyi, one of the controversial issues was to create a Nominating Committee, which will elect NKREKP members. In the end, a compromise was reached on the composition of the tender committee, “five members of the tender committee are elected in the Parliament, the committee on fuel and energy delegates, three representatives, and the committee on utilities – two representatives,” explained Mr. Pidlesetskyi. Another controversial issue was rotation of members of the independent regulator. “Changes will begin in 2016 and will finish by 2018, it will be a gradual rotation,” noted the MP.

“The draft law has a fundamentally new aspect. We say that if there is a commission decision relating to the issue of tariff setting, reviewing and establishing investment programs, before making their decisions, the commission should discuss the issue in the area where the licensed business entity provides these services,” said Alyona Babak, MP, Samopomich faction, Deputy Head of the Parliamentary Committee on Construction, Urban Development and Housing. That is, the commission should delegate its representatives to the place where changes are proposed. So far, under the current legislation, all is decided by the regulator in Kyiv, and the communities have to arrive in the capital if they want to, said the MP. In addition, according to Ms. Babak, a new article has been added to the draft law on the procedure to develop market regulating rules. Another innovation is obligatory public discussion of all NKREKP decisions. “The commission will be obliged to consider and listen to everyone who submitted written comments and suggestions,” said Ms. Babak. After discussing, the commission’s comments and answers must be published on the website to make the process of developing rules public and transparent.

“The benefits of this draft law are that it does provide regulatory independence from other authorities and lobbying,” said Oleksiy Ryabchyn, MP, Batkivshyna faction, Chairman of Energy Saving & Energy Efficiency Sub-Committee, Parliamentary Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety. However, according to the MP, the rotation issue does not imply complete restart of the operating NKREKP. The issue of commission licensing also requires discussing and editing, according to Ryabchyn. According to this draft law, the commission independently develop and approve the licensing conditions, but it is contrary to the Law of Ukraine on licensing of economic activities, said the MP. According to it, there should be a single body to approve such license terms, and this body is the Cabinet.

Johannes Baur, Deputy Director of the Energy Experts Group, Support Group for Ukraine, European Commission, called the draft law a good compromise. “It is important that the law should be adopted by Parliament, and that the regulator should take the necessary functions and reflect the European practices,” noted Johannes Baur. However, he stressed that it is necessary to continue the reforms in the gas sector and the future reform in the electric power sector. According to him, it is important that the draft law stipulate the tasks and functions of the regulator, reflect the interests of consumers, be completely independent from politics and commercial interests, and have financial independence. The Deputy Director of the Energy Experts Group, Support Group for Ukraine, European Commission said that this draft law is discussed too long, for almost a year, which is indicative of the problems in the energy sector.

Yulia Nosulko, “DTEK” representative, emphasized that the regulator should be not only independent but also professional. “If in more stable economies the task of the regulator is rather to see to it that the situation remain stable, and more attention is paid to monitoring, in the transition countries such as Ukraine it is just the regulator that is responsible for how the markets are built and reformed, and how they operate, ” noted Yulia Nosulko.

Vasyl Kotko, president of the NGO “Energy Association of Ukraine,” viewed the draft law positively, but stressed that changes should be made efficiently and quickly. “Our draft law is following the formal procedures too long. And on the eve of privatization announced by the government it is a very bad signal to investors. This draft law is delaying. Thus, we confirm that the government and the executive branch do not want to have an independent regulator and want to continue managing the process manually,” said Vasyl Kotko.

According to Andriy Gerus, expert on energy issues, the law paragraphs on independence, impartiality, etc. are obvious things that are in the current legislation too, so that does not guarantee implementation of these rules. “De facto, the commission is a sort of a quasi-judicial collegial body composed of six members and a chairman,” said Mr. Gerus. As an example, the expert cited other bodies such as the Constitutional Court or the Central Election Commission, which have good legislation, but there are questions on their activities. For a commission cannot be put into a framework, because there will always be some specific thoughts or opinions, and responsibility shall only be collective. “In this case, the principle of transparent formation of the commission and its formation of people who can ensure the principle of impartiality and independence is extremely important. Since independence can come only at a scenario when people addressed with any questions will consider them,” said Mr. Gerus. In this context, the expert noted that rotating several committee members every year is too slow, and decision-making process will not change. “If we really want to restart and reform the commission, we must have at least a critical mass of commission members who will work on different principles, if the current principles do not satisfy us,” summed up Mr. Gerus.