The transmission system operator is not yet unbundled and certified, which requires changes to the Electricity Law. Distribution system operators are legally unbundled.
Access to the system
Access to the system
Network tariffs are public and applied also to generators. Access to cross-border capacities is allowed only to market participants registered in Ukraine. Implementation of the Transparency Regulation has started. The Connection Network Codes are transposed.
Bilateral, day-ahead, intraday, balancing and ancillary services markets are operational, but subject to many regulatory interventions. Non-compliant public service obligations and regulated prices of state-owned generation companies are impeding competition. Losses are procured by the transmission (Ukrenergo) and distribution system operators on the market. REMIT has not been transposed.
All customers in the retail market are free to choose their supplier. Universal service suppliers are obliged to supply electricity to households under regulated tariffs (different tariffs for consumed volumes below and above 100kWh) which do not cover their costs. They are also obliged to offer electricity to other categories of customers with capacity up to 150 kW until 31 December 2020 at the day-head market price.
Coordinated auctions for cross-border capacity allocation do not exist under the market rules and require changes to the Electricity Law. Arrangements for the settlement of unintended deviations were agreed between the transmission operators of Ukraine and Moldova.
State of compliance
The introduction of the ancillary services market in 2020 complements the earlier launched bilateral, day-ahead, intraday and balancing markets, which replaced the non-compliant single buyer model. However, there was no progress towards phasing out of excessive public service obligations. Together with price regulation, they continue keeping the market largely foreclosed in practice.
The regulator, NEURC, issued a preliminary decision certifying the transmission system operator, Ukrenergo, in October 2019 under the ownership model, despite that the separation of control is insufficient. In February 2020, the Secretariat issued a negative Opinion. The final decision by the regulator is still pending. In any event, amendments to primary legislation are needed to meet the requirements of ownership unbundling or the independent system operator model.
Legal unbundling of the distribution system operators from supply activities is in effect as of 1 January 2019. Compliance of the distribution system operators with the legal and functional unbundling requirements is still to be assessed by the Secretariat, upon which the open infringement case may be closed. The Law requires distribution system operators to be unbundled from production, supply and transmission also in terms of ownership.
Regulation (EU) 543/2013 was transposed by NEURC’s resolution of June 2018. Ukrenergo has started publishing a limited number of data on the ENTSO-E Transparency Platform. Amendments to primary legislation required for the transposition of the REMIT Regulation were drafted but their adoption is pending.
Ukraine’s retail electricity market is formally open since 1 January 2019. According to the Law, NEURC was required to phase out cross-subsidization between different categories of consumers before wholesale market opening on 1 July 2019. However, the prices for households remain the same (since 2017) and do not cover the costs of supply. The difference is covered by the guaranteed buyer (state-owned trader) through the public service obligation, and the state-owned generators Energoatom and Ukrhydroenergo are obliged to sell electricity at a low price determined by the non-compliant public service obligation act adopted by the Government. This impedes the development of competition and may affect safe operation of power plants, especially nuclear plants.
The latest amendments to the Electricity Market Law extended the scope of the customers entitled to universal service supplies at tariffs applied to households to apartment buildings, different types of cooperatives, legal persons - owners of properties used for compact settlement of internally displaced persons and religious organizations. The universal service supply and the supply of last resort are regulated by NEURC methodologies. The imbalance costs of the universal service supplier are not covered.
Until 1 January 2021, the incumbent regional suppliers will continue to be appointed to perform the functions of universal service suppliers. According to the provisions of the Electricity Market Law, the Government was to organise a tender procedure for universal supply before 1 July 2020 but with the amendments to the Law of 21 July 2020, the deadline was postponed until 1 July 2021.
The provisions of the Third Energy Package on vulnerable customer protection were transposed by the Electricity Market Law. The governmental act defining the vulnerability criteria is still missing.
According to the Electricity Market Law, Ukrenergo should have implemented coordinated auctions for cross-border capacity allocation not later than for the 2019 annual auctions. The rules for cross-border capacity allocation, adopted by NEURC in April 2020, fail to ensure coordinated auctions. The agreement in principle between the transmission operators of Ukraine and Moldova on the terms of financial settlement of unintended deviations is a positive development.