The reforms are taking a long time. Experts assessed the progress of the implementation of the new Law on the Electricity Market

The reforms are taking a long time. Experts assessed the progress of the implementation of the new Law on the Electricity Market

Publications about reform22 December 2017

It has been six months since the adoption of the Law on the Electricity Market, and several important steps have been made toward reforming the industry. However, according to experts interviewed by Energoreforma, the implementation of the law is going fairly slowly.

The reforms are taking a long time. Experts assessed the progress of the implementation of the new Law on the Electricity Market

It has been six months since the adoption of the Law on the Electricity Market, and several important steps have been made toward reforming the industry. However, according to experts interviewed by Energoreforma, the implementation of the law is going fairly slowly.

"The main thing is that the process has started," – says the advisor to the vice prime minister of Ukraine and head of the project office for the implementation of the new electricity market, Volodymyr Evdokimov. "This year, effective mechanisms were launched: the Coordination Center and the project office. Now they will gain momentum and prepare concrete reform proposals. A new system for considering legal acts has been implemented. This will enable us to bring together experts, who will put proposals forward. All proposals will be heard, and if their result would be positive, they will be taken into account. This is my promise as the head of the project office." 

The main regulatory and legal framework for the law is shaped by the NEURC, Ukrenergo, and Energorynok, Evdokimov said. They develop market rules for the next day, rules of the intra-day market, the codes of transmission and distribution companies, the procedure for getting connected to grids of transmission and distribution companies, the code of commercial accounting and the rules of the retail market. These documents comprise approximately 80% of all the regulatory and legal acts aimed at the introduction of the new market model, according to Evdokimov.

In addition to the development of a regulatory and legal framework, structural reforms are taking place. "2018 will be the year of restructuring infrastructure enterprises – Ukrenergo and Energorynok. Ukrenergo will have to be restructured, i.е. divided into two parts, and implement corporatization – separate its functions as a system operator and a transmission company. On the basis of Energorynok, two companies will be established: a guaranteed buyer, which will take care of all obligations in terms of purchasing green electricity, and a market operator, an interface of power exchange," Evdokimov explained.

"In the new market model, the green tariff will be provided by a state enterprise, a guaranteed buyer, which will be a legal successor of Energorynok. The law stipulates the necessity of creating branches. They have already been established. Efforts are being made so that next year they will be transformed into full-fledged operators," Director of Energorynok Yuriy Gnatyuk said in his presentation at the Ukrainian Forum for Renewable Energy '17.

The same work is taking place at Ukrenergo. "New divisions have been established, and we can clearly see a system operator, a commercial accounting operator, a settlements administrator and an operator of the balancing market. Like Energorynok, they have already started to create an organizational structure and prepare people to work in the new conditions," Evdokimov said.

Changes in some aspects of the market's functioning are less visible: for example, the change in the form of agreements between the energy market and green energy producers. According to Gnatyuk, the form was already partially changed in terms of the scheme for the signing of the agreement – it was simplified, as was requested by investors. "We've already received applications from potential investors. For now, the requirements are simple. They come to us, we give them the conditions of the agreement and they sign it. Financial obligations arise upon the fulfillment of a wider set of requirements – commissioning," he explained.

According to Evdokimov, one of the most important steps is Ukrenergo's commencement of preparation of a bidding procedure to purchase software for the new markets. The three main software modules are the balancing market module, the accounting administrator module and the commercial settlements module – these will enable administration to be carried out and settlements to be made for the entire Ukrainian market.

It will be impossible to launch the new market without settling debt issues; a relevant bill has already been developed by the Ministry of Energy and Coal Mining, the head of the project office said.

In addition, the ministry has starting putting together a questionnaire to assess companies' technical readiness to operate under the new conditions. "Being connected to market players is important, especially from the technical point of view. The new market is highly technological, and if the players are not ready for it technically,it won't work, whatever legal acts and software there are," Evdokimov said.

In general, at present, market players' readiness for reforms is extremely low, he believes. State authorities' readiness also leaves a lot to be desired. "There is no consolidation of executive authorities. As long as ministries and departments work in the same old way, they fail to understand and feel the need for the reforms," said Evdokimov.

Yuliya Nosulko, the head of DTEK's Department for Regulatory Policy, agrees. "At present, there is no common platform for the interaction of all the parties in promoting the reform. For the most part, everyone is left to their own devices. Market players' level of readiness for the reform is rather low. The level of understanding among the population of what will take place in the course of the reform, and what to expect in the end, is even lower. The main failure is that we are already behind in the implementation of the law, including with respect to such an important issue as the regulation of debts on the current market, without which it is hardly possible to move forward," Nosulko said.

Member of the Verkhovna Rada Committee for the Fuel and Energy Sector Lev Pidlisetskyi also sees the delay in the reforms as a significant problem. "The law was introduced in June. The Coordination Center had to be established within a month of the adoption of the law, but it was only established in September. The work schedule was followed until October, but then the problems started. As a result of the suspension of NEURC members' powers and the lack of a quorum, everything has come to a standstill, since the legislation that was supposed to be adopted was not adopted and not approved. It is already clear that it will hardly be possible to implement the law by 2019, as was stipulated," Pidlisetskyi said.

Nonetheless, the NEURC managed to develop its own package of documents before the quorum for decision making was lost. "The commission developed the necessary legislation in advance, and it will be placed on the website for discussion in the near future. The commission worked in full compliance with the schedule. All the documents were brought to an open meeting of the commission. Unfortunately, due to the temporary lack of a quorum, they were not adopted and are awaiting their approval for discussion," said the head of the regulator, Dmitry Vovk.

Pidlisetskyi, in turn, pointed out the need for a thorough analysis of the documents developed by the regulator. "Nothing has happened since November 13. For the most part, the approval of these acts of subisidiary legislation by the NEURC was planned for November 20. But as there was no quorum, they were not approved. Maybe this was for the better, as the current NEURC members developed subisidiary legislation that wasn't shown anywhere; they just wanted to approve it rapidly. So now there's time for a more profound analysis," he said.

Source: Terminal