The electricity market should take into account and protect the rights and interests of the consumer, but for today the readiness to do it is doubtful, Vsevolod Kovalchuk, the Head of NPC Ukrenergo says. First of all, there is doubt about the competitiveness in the market, besides technical and procedural training.
According to the Law “On the Electricity Market”, from July 1, 2019 a new model of the electricity market have to start working, which ideally provides for the introduction of competitive mechanisms and the creation of the “market” itself in its more or less classical definition – the consumer will have the right to freely choose their electricity supplier. At the same time, it is rumored now that the launch will be postponed, since it will be difficult to launch the new model normally.
Today there are several options for the course of events: the launch of the market in the timeframe provided by the law, from July 1, or the launch delay – there are proposals to postpone the WEM either to October 1, 2019, or April 1, 2020. Vsevolod Kovalchuk, the Head of NPC Ukrenergo, said it during a press conference on Tuesday:
“There is very little time left, there are still many unsolved problems... The identified problems are already good, and if some of them become too urgent (with the launch of market from July 1 – ed.), they will require immediate decisions from the Government, the Parliament and the Regulator, which will respond quickly. If there is trust and understanding that everyone will be able to work quickly under such conditions, then this option is absolutely normal”.
Among the “identified problems” the Head of Ukrenergo notes:
low level of competition, the lack of a system for controlling the electricity price for vulnerable consumers, the lack of an adjusted data transmission systems of commercial accounting from distribution system operators, the companies “Market Operator” and “Guaranteed Buyer” are not exist still, the absence of specific rules for conducting electronic auctions for bilateral agreements (and impossibility of state-owned companies to participate), insufficient level of involvement of market players in software testing and a number of other problems.
If the market starts on July 1, then all the shortcomings will have to be corrected in the course of the system operation. According to Kovalchuk, this option is quite real, but there is a risk that consumers will face a “price shock” because of rising electricity prices.
At the same time, the decision to postpone the launch of a new market model does not guarantee that the market will be prepared better during this time, while the delay will violate international obligations that Ukraine assumed.
“This is a compromise solution. Its main risk is that there is no guarantee that the necessary and correct things that have not been done in 2 years will be done in 2 to 3 months”.
“The option to postpone the launch to 2020 has one advantage, it gives more time to make the model better. But there are no other advantages to this option, because it also affects our international obligations, which provide for the launch of the market this year. It creates the same risks that the relevant decisions will not be taken at the level of the executive branch or the Parliament. Plus, these risks are compounded by the fact that at the end of this year the composition of both the Parliament and the Government will change”, Vsevolod Kovalchuk commented.
The key issue is competitiveness
“The key issue is the degree of competitiveness, which remains absolutely uncertain for me. We see many opportunities to pass control of the market into the hands of two or three companies, and it will only depend on their market behavior how much we will pay for electricity”.
The NPC notes that two companies occupy about 85% of the market – NNEGC Energoatom (55 - 60%), and DTEK (20 - 27%). And now, the AMCU justifies its decision not to recognize the monopoly position of some companies (read DTEK) that our electricity market operates in a regulated environment and that all tariffs are set by an independent regulator.
“The situation will change dramatically from the moment we switch to the market model. This will be a purely competitive market in which such a large concentration of energy generating facilities in the hands of a small number of producers demonstrates great opportunities for certain players in this market to abuse their market power. And then, just the cleanliness of the tools that the energy sector regulator, the Antimonopoly committee, and their pickiness becomes critical”, Mr. Kovalchuk noted.