How and who will be affected by the increase in the electricity transmission tariff

On July 11, 2020 NEURC revised the size of the transmission tariff and increased it from UAH 155.40 per MWh to UAH 240.23 per MWh. The new transmission rate will become effective on August 1, 2020.

Maryna Hrytsyshyna, Chairperson of the UBA Committee on Energy, Oil and Gas, Head of Energy Practice at Sayenko Kharenko, told Kosatka.Media how the increase in electricity transmission tariffs will affect consumers.

According to the materials of the meeting, NPC Ukrenergo proposed setting a tariff at the rate of UAH 604.51 per MWh. However, at the same meeting, a draft resolution on transmission tariff of UAH 327.97 per MWh was adopted, which was reduced at the time of adoption to UAH 240.23 per MWh.

Why have the transmission tariff been revised?

The main reason is the costs of the transmission system operator – NPC Ukrenergo – for the performance of special duties to ensure an increase in the share of electricity generation from alternative sources.

According to the Law of Ukraine "On the Electricity Market", at the expense of these costs, Guaranteed Buyer provides NPC Ukrenergo with services to increase the share of electricity production from renewable energy sources. Guaranteed Buyer uses the received payments for the services to pay renewable energy producers at FIT.

However, the current size of the transmission tariff was insufficient to pay for the services of Guaranteed Buyer and this led to a deficit in its budget and debt to renewable energy producers. As of July 10, 2020, the indebtedness of Guaranteed Buyer to renewable energy producers is UAH 17.5 billion.

In addition, on June 10, 2020, the Cabinet of Ministers of Ukraine and the Ministry of Energy signed a Memorandum of Understanding on the settlement of problematic issues in the field of renewable energy in Ukraine with the European-Ukrainian Energy Agency and the Ukrainian Wind Energy Association. The terms of the Memorandum also provide for a revision of the transmission tariff to ensure timely and full payments to renewable energy producers.

However, as the experience of the previous year showed, transmission tariffs have a significant impact on industrial producers. In particular, since the start of the introduction of the new electricity market on July 1, 2019, Nikopol Ferroalloy Plant JSC filed a claim with the administrative court to cancel NEURC regulations, including Resolution No.954 of 07.06.2019 on the transmission tariff in the amount of UAH 347.43 per MWh. Taking into account the previous experience of judicial appeals, it is clear why the size of the transmission tariff this time was reduced several times and was approved at the rate of UAH 240.23 MWh.

Who is affected by the transmission tariff?

In accordance with the Transmission System Code, NPC Ukrenergo provides electricity transmission services to distribution system operators, electricity suppliers, electricity consumers and electricity producers for their own needs. For all these electricity market participants, new transmission tariff rates will apply from 1 August 2020.

However, these changes in transmission tariff will not affect the population.

According to the Law of Ukraine "On the Electricity Market", household consumers and small non-household consumers have the right to receive universal services. In accordance with the Procedure for setting prices for universal services, electricity is supplied to residential consumers by a universal service provider at fixed prices. Electricity tariffs for household consumers were established by NEURC decree No.220 dated February 26, 2015 "On setting tariffs for electricity supplied to the population" and have not changed since 2015.

The new transmission tariff rates will affect industrial consumers and other market participants other than households.

At the same time, it is necessary to assess the economic impact of an increase in the transmission tariff in conjunction with the average price of electricity on the market. A possible consequence of an increase in the tariff may be an increase in prices for goods and services.

Tags: tariffs, legislation, electricity, NEURC, Ukrenergo, feed-in tariff, electricity market, Guaranteed buyer, renewables, price, The National Energy and Utilities the Natuonal Regulatory Commission, electricity consumption, consumers

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