21 Apr 2023 14:53

Ukrainian regulator accuses Ukrenergo of failure to timely inform it of steps to resume electricity export to Slovakia

MOSCOW. April 21 (Interfax) - The National Commission for State Regulation of Energy and Public Utilities (NERC) is set to make a decision on an unscheduled inspection of the Ukrenergo power grid operator over failure to meet the deadline for providing information at the regulator's request with regard to auctions for the distribution of capacity of interstate power networks for the export of electricity to Slovakia, which was suspended from April 21.

The commission said on its website on Thursday evening that this issue would be discussed at a meeting on April 26.

The ground for such an inspection is Ukrenergo's failure to provide NERC with information by the April 19 deadline, set by the regulator's April 17 request, regarding the steps, organizational procedures and other measures undertaken by the company to arrange auctions for the distribution of capacity of interstate power networks linking Ukraine and Slovakia, it said.

The Ukrainian Energy Ministry, in turn, said on social media late on Thursday that the auction on electricity export to Slovakia had been disrupted by Ukrenergo.

The Slovak power grid operator on April 19 refused to provide access to its interstate power networks with Ukraine and suggested that this decision was prompted by Ukrenergo holding capacity distribution auctions 30 minutes earlier that the transmission system operators in neighboring countries, including Slovakia, the ministry said.

"This decision was not agreed with the Slovak operator," the ministry said.

Capacity distribution auctions should be bilateral, i.e. they ought to involve both Ukraine's power transmission system operator, namely Ukrenergo, and the power transmission system operator of the counterpart, it said. The Energy Ministry, however, had deleted its social media post to this effect by the time this publication was released.

Meanwhile, the stance given by the regulator in its media comment coincides with the ministry's position. The issue of bilateral auctions involving the power transmission system operators of Ukraine and its counterpart should be resolved in line with the existing regulatory framework, NERC said.

Distribution of capacity of interstate power networks is regulated by the electricity market law, specifically Article 43, and the procedure for distributing capacity of interstate power networks, endorsed by the regulator's April 3, 2020 decree, NERC said. In Ukraine, the party responsible for organizing and holding such auctions and for distributing their proceeds is Ukrenergo, and in other countries, it is their transmission system operator, it said.

"The transmission system operators hold capacity distribution auctions and are paid for that by importers/exporters in line with the procedure agreed by them," NERC said.

Ukrenergo's press service, in turn, said in its media comment late on Thursday that the existing procedure for distributing capacity of interstate power networks does not envisage the possibility of holding joint auctions, and Ukrenergo has asked the regulator at least three times to approve a procedure for such auctions.

"The last time the company appealed to the regulator was in February 2023. It submitted a proposal on changing the procedure for the joint distribution of interstate power networks' capacity to NERC. The regulator has not adopted any decision on this matter thus far," Ukrenergo said.

Furthermore, in order to hold joint auctions on the JAO European auction platform, which is used by a majority of transmission system operators in neighboring countries, an amendment should be introduced to Ukrainian laws that would envisage the possibility of compensation in the event of force majeure situations in the presence of any restrictions, it said. An amendment guaranteeing a level playing field for foreign and Ukrainian participants in such auctions needs to be introduced to Ukraine's tax legislation as well.

One of the ideas is to exempt operations to distribute capacity of interstate power networks from taxes, as it is envisaged in European legislation, Ukrenergo said.

Among other measures, it is necessary to add the provision of access to interstate power networks to the list of services in which import operations are provided with currency transfers by the National Bank of Ukraine (the government's resolution dated February 24, 2022).

"Ukrenergo has forwarded a request regarding the adoption of such legislative amendments to the Energy Ministry," the company said.

As reported, electricity exports from Ukraine to Slovakia continued only for four days after they were resumed on April 17. Over this period, traders paid nearly 17 million hryvni for power transmission, and Slovakia received over 19,000 mWh of electricity from Ukraine.

Ukrenergo did not offer interstate power networks' capacity to traders from April 21. Market players assert that it happened because the Slovak side insisted on joint auctions, which allowed it to receive half of the proceeds from capacity sales. Legislation, however, did not permit such auctions.

A new procedure for distributing capacity of interstate power networks during electricity export-import operations based on the common rules with Ukraine's neighbors in Europe was approved by NERC on April 5 and was published on its website, welcoming any comments and suggestions, which could be submitted through April 20, the regulator said on its website.

Head of Electricity Unit at the Energy Community Secretariat Jasmina Trhulj, for her part, said on April 20 at an Energy Club forum, which addressed challenges and achievements in Ukraine-EU electricity trade, that the Secretariat expects a solution to the issue of resuming electricity export to Slovakia to be found in the near future. Trhulj, however, declined to comment on the reasons behind the suspension of these exports.