Gas consumption: why it will be necessary to pay more

What is the situation with gas consumption in Ukraine, who and why was sued because of it, and what to expect from the court’s decision? Kosatka.Media asked Chairman of the UBA Committee on Energy, Oil and Gas, Head of Sayenko Kharenko’s energy practice, Maryna Hrytsyshyna.

Increasing of gas consumption by the population: what is it about?

The application of gas consumption by the population is primarily the implementation of the Law of Ukraine "On ensuring commercial metering of natural gas", which provides for the supply of natural gas to the population living in apartments and private houses. Gas is subject to its commercial metering:

- comprehensively, including for heating – from January 1, 2012;
- for heating water and cooking – from January 1, 2016;
- only for cooking – from January 1, 2021.

The law also provides for financing for equipping consumers of natural gas with individual gas meters and for compensating consumers in case of self-installation of meters.

For whom can gas consumption rates be applied?

The rates apply only in cases where no meters are installed. According to the NEURC Performance Report for 2019, as of 01.01.2020, the total percentage of the population with commercial metering of natural gas is 91%. In other words, only 9% of the population falls under the application of gas consumption rates.

However, even those who has no meter should be provided with it before the end of the year. To ensure commercial metering of natural gas for cooking, the Development Plans for gas distribution systems for 2020 - 2029 were approved, which provides for the establishment of about 126,730 units of individual gas meters for the population totaling about UAH 251.6 million excluding VAT.

So, if the situation with meters is more or less clear, then there are many questions regarding the determination of consumption rates. The establishment of consumption rates in 2019 was appealed in an administrative court at the suit of DSO Mykolaivgaz. According to the decision of the Sixth Administrative Court of Appeal in the case No.640/13591/19 of June 2, 2020, the provisions of the Cabinet of Ministers of Ukraine dated February 27, 2019 No.143 “Issues of Natural Gas Consumption” were recognized as illegal and invalid. Moreover, the lawsuit is justified in violation of the decision-making procedure and its coordination with other ministries. The decision of the court of appeal may be appealed to the cassation instance. However, if the decision is left unchanged, the previous norms of 1996 should be applied before the adoption of new norms by the Cabinet of Ministers of Ukraine.

Since the court decision is an appeal, it should already come into force. Moreover, gas consumption rates are set for all consumers. When a new-old norm appears in the bills, it depends on the decision of each regional gas company.

Why is the Resolution of the Cabinet of Ministers of Ukraine dated February 27, 2019 No.143 “Issues of Natural Gas Consumption” were appealed specifically by the gas distribution system operator?

With an increase in the supply rate, the gas distribution system operators will increase revenues from the distribution of natural gas, since the more gas the population consumes, the more payments will be made on the tariff for gas distribution services. Moreover, this tariff is one of the largest in Mykolaivgaz in comparison with other gas distribution system operators and amounts to UAH 1.35 per 1 cubic meter per month (excluding VAT), while the low tariff is UAH 0.28 AH per 1 cubic meter per month (excluding VAT) has Kyivgaz according to NEURC.

However, the court decision is not the only attempt to increase gas consumption rates for the population. It should be noted that at the end of May there was information about the Ministry’s intentions to bring gas consumption rates to a reasonable level by amending the Decree of the Cabinet of Ministers of Ukraine dated February 27, 2019 No.143 “Issues of Natural Gas Consumption”. However, the draft changes were quickly removed from website. At the same time, gas consumption rates remain controversial, and the introduction of new rates requires discussion and compliance with all procedures for the adoption of a regulatory act.

Tags: The Cabinet of Ministers, gas, tariffs, court, legislation, облгаз

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