Payment debts, dehumanized PSO, problems with balancing and other problems of the new market model, which have been revealed for the first two weeks of work.
A round table was held in Verkhovna Rada, during which participants of the electricity market gave their assessment of the first two weeks of work in the new model.
About the calculations of the percentage increase in the price of electricity (three versions), read here. Now we offer an assessment of work in the new market model from its key players: Energoatom, DTEK, Ukrhydroenergo and SOE Energorynok. The main problems are payment debts, dehumanized PSO and problems with balancing.
“The apocalypse did not happen”, but: debts, PSO and denial of access to the market itself
“The first two weeks of work in the new conditions showed well that the apocalypse that frightened us did not happen”, said Yuriy Nedashkovsky, President of NNEGC Energoatom, stressing that one of the main problems is debts to the company. Today it is 12 billion UAH, of which more than 3.5 billion were formed this year.
“Nearly 3 billion debts have been accumulated over the past two months, before the launch of the market on July 1. And if the full-scale implementation of the new model did not happen on time, then everyone would stop paying. And this problem of debts must be urgently addressed... We also need to figure out where these funds are, because we do not balance the payments with SOE Energy Market – both artificially created debts over the past two months and accumulated over previous periods ”, told Y. Nedashkovsky.
Another sore point is imposing of PSO to NNNEGC. Mr. Nedashkovsky immediately noted that Energoatom will understand the temporary PSO in order to ensure the availability of electricity for the population. But the company was additionally charged with the obligation to sell 90% of electricity at a special auction in fact “at dumping prices” to compensate for technological losses to the distribution system operators and the transmission system operator.
“On market conditions, Energoatom can sell only what remains – 10%... This situation does not contribute to the availability of electricity for all categories of consumers”.
“Thus, during these two weeks, not a single kilowatt-hour was sold on ordinary, outside the PSO, auctions, as provided for by a government decree. Thus, industrial consumers were cut off from cheap electricity. According to our calculations, they could, depending on the tariff for distribution services in each region, receive electricity at a price of at least 30% cheaper”, the Head of Energoatom stressed.
In addition, Mr. Nedashkovsky raised the problem of the need to resolve the issue with market speculation – it is necessary to exclude the resale of distribution system operators and universal service providers of the electricity that they buy cheaply from NNEGC and thus receive “not really legitimate income”.
Debts, the absence of auxiliary services market, emergency applications
“I would like first of all to raise the issue of debts. I don’t know why in the last month the company, which should receive 600 million, is losing 370 million from the market. What could have happened in the last month, which led to such non-payments”, said Ihor Sirota, Head of Ukrhydroenergo.
Regarding the launch of a new market model, Mr. Sirota said that the company is fully ready and works in full, but is limited in this segment – there is a balancing market, the day-ahead market, and the auxiliary services market is not working – the company does not receive anything.
“The main auxiliary services and balancing services are provided by our company – this is our main income... There is a proposal to load Ukrhydroenergo with PSO – 75% on payments. I'm sorry, friends, but we perform the role of balancing. We are not a PSO resource. We have another function – to ensure the stable operation of the system”, said the Head of Ukrhydroenergo.
The hydropower industry of the country, according to him, is now working on “emergency applications”:
“Instead of covering peak loads and night falls, we have to work at the expense of emergency applications in the database at night and for loading during the peak period. I understand that the dispatcher has to file emergency applications, but we also have to fulfill them. And it happened, at first, that by fulfilling them, we violated the State Agency of Water Resources resolution and lowered the level of the Kremenchuk reservoir”.
About super profits
“Today it’s very early to assess how much was earned and who has super profits. We have to work three months, look at the trend, and only then we will understand the new market model”, said Mr. Sirota.
“We recognize the need to accept price restrictions. These two weeks, the company works below the price restrictions in all market segments in which it is present”, said Maksym Tymchenko, General Director of DTEK energy holding.
Secondly, Mr. Tymchenko stressed that it is necessary to “correctly” consider the increase in tariffs for TTPPs (which is often referred to by Andriy Gerus, who also attended the round table):
“If to compare with July, it (tariff – ed.) increased, but if to compare with February 2019, then it fell by 38%. In general, over the period of the first half of 2019 the tariff fell by 12%”.
The Head of DTEK also noted the importance of imports, which, “as expected,” was launched on July 1 from Belarus and Slovakia:
“In terms of further increasing imports, it will grow. I am convinced that there are opportunities to increase imports from Slovakia... The consumption of the Burshtyn energy island is about 650 MW, the possibility of importing to the island is about 900 MW. It means that we, as a player within the price zone of the energy island, are actually working in the European energy system. This creates competition and affects the price. In order to completely remove the issues of fair prices and competition, we need to actively work on synchronization with the European energy system”, said Mr. Tymchenko.
About the market monopoly: “During these two weeks, DTEK’s share in the bilateral contracts market was 24%, in the day-ahead market – 15%. This is about the question of whether there is competition, and whether there is a dominant position of the company in the market”.
The Head of the energy holding noted that one of the most important achievements of the market launch was the opportunity for large industrial consumers to “work directly with producers and with traders and manage their consumption regime in order to conserve”.
“I am convinced that it will be possible to sum up the results from the point of view of the consumer only in 2–3 months”, Mr. Tymchenko said.
Energorynok, on the basis of which two enterprises were created: Market Operator and Guaranteed Buyer.
“Not the opening of the market, but just a change of the model”
“I warned to introduce a new model of the market without proper preparation... In fact, the market was not opened, in my opinion, there was just a replacement of the model”, said Yuriy Hnatyuk, Head of Energorynok.
According to him, it is difficult to argue that there is a market model and real competition if there are regulated restrictions in the operation of the market.
“In my opinion, due to the lack of a real quality test regime that would reveal address and system errors, we have a problem of calculations”.
“It’s worth assessing the successful launch of a new market model after seeing the reporting period – a month, a quarter, a year. And the conclusions as to whether the market works successfully or not successfully should be made by the consumer”, concluded the Head of Energorynok.