The Verkhovna Rada of Ukraine
Effective Laws
On 23 May 2020, the Law of Ukraine No.466-IX dated 16 January 2020 “On Amendments to the Tax Code of Ukraine Concerning Improvement of Tax Administration, Elimination of Technical and Logical Inconsistencies in Tax Legislation” came into force. The Law is known as draft Law No. 1210, which introduced many material amendments to the Tax Code of Ukraine, in particular, it abolished the VAT exemption for SPPs and WPPs equipment.
Voted laws
On 20 May 2020, the Verkhovna Rada of Ukraine approved in the first reading the draft Law on Amendments to the Bankruptcy Procedure Code of Ukraine (concerning measures aimed at repayment of debts incurred in the wholesale electricity market) (registration No. 2390). It is one of five laws adoption of which is defined as a prerequisite for a comprehensive solution of the debts issue occurred before 01 July 2019 in the Wholesale Electricity Market.
On May 19, 2020, The Verkhovna Rada of Ukraine in the second reading and as a whole approved the draft law “On Amending Certain Laws of Ukraine Regarding the Safety of the Use of Nuclear Energy” (No. 2372). The adoption of the bill will allow Energoatom to attract additional loan funds in the amount of 200 million euros for security programs.
Registered draft laws: In May, three draft laws were registered on the issue of certification of the Transmission System Operator according to the ISO model, each of which also contained proposals for resolving the market situation. Two draft laws on debt repayment and crisis management were registered.
At its meeting on May 8, 2020, the Committee on Finance, Tax and Customs Policy of the Verkhovna Rada heard a report by the NBU Governor Yakiv Smolii on the activities of the National Bank of Ukraine.
The Governor of the NBU spoke about the measures taken by the Bank during the quarantine period. In particular, during the last two months: the key policy rate decreased from 11% to 8% – the lowest key policy rate in the history of Ukraine; introduced long-term financing for banks for a period of 1 to 5 years; currency swap agreement with the EBRD for USD 0.5 billion has been concluded, which will allow the NBU to receive dollars to replenish bank international reserves and the bank to receive hryvnias to lend to Ukrainian enterprises.
Government
In May two meetings of Anti-Crisis Energy Staff were held under the chairmanship of the Prime Minister of Ukraine Denys Shmyhal. The meetings discussed the steps necessary to overcome the crisis in the energy sector.
The implementation of one such steps was a resolution No.400 dated 20 May 2020 introducing amendments to Resolution No. 483 dated 05 June 2019 on the imposition of special obligations on the market participants for general public service within electricity market operation. The Government has partially amended the Regulation on imposing special obligations on electricity market participants, as well as the Procedure for conducting electronic auctions for the sale of electricity under bilateral contracts.
In particular, the mandatory share of electricity sales by Energoatom within PSO mechanism was reduced (from 85% to 80%) and the company entered the bilateral contracts market. Energoatom will be able to sell such available electricity in the bilateral contracts market at special auctions to final large non-domestic consumers, without the possibility of its resale. In addition, price caps for electricity selling by SE “Guaranteed Buyer” have been removed and the company is entitled to sell electricity under bilateral contracts.
The Prime Minister held a meeting of the Economic Development Council. Leading economists, government officials, and chairmen of the Verkhovna Rada Committees discussed the stages of quarantine withdrawal and business support measures.
Held personnel changes at Minecoenergo: dismissed Chyzhyk K. from the position of Deputy Minister of Energy and Environmental Protection of Ukraine and appointed Boyko Y.
Prime Minister of Ukraine Denys Shmygal declared that the Ministry of Energy and Environmental Protection of Ukraine will be divided into two relevant ministries.
Minecoenergo
The Expert Council of the Ministry of Energy was established. The tasks of the Expert Council will be monitoring of problematic issues that arose in the field of energy and environmental protection, developing recommendations for their solution, as well as economic modeling and calculations, analysis of documents from an economic point of view. Sergiy Chekh was elected as a Chairman of the Expert Council, within the council, seven working groups have been created.
Acting Minister of Energy Olga Buslavets held a video conference with the Director of the Energy Community Secretariat Janez Kopač, during which she commented recommendations and remarks sent by the Energy Community to the resolution by which the Cabinet of Ministers of Ukraine partially changed the Procedure for conducting electronic auctions for the sale of electricity under bilateral agreements: “Given the difficult situation on the energy market of Ukraine, the transition to the financial model of PSO, unfortunately, requires additional time and will take place gradually. That is why we have proposed a temporary solution, which will be valid until the introduction of the financial mechanism of the PSO”.
NEURC
In May, the Transmission System Code was amended. Changes to the Code: improvement of the procedure for amending the Transmission System Code; specification of requirements to customers and the procedure for the connection to the transmission system; editorial clarification of the procedure for the arrangement of investigations and recording of technological violations та ін.
Draft documents approved for publication and further discussion:
– amendments to the regulatory framework on the introduction of incentive regulation for Distribution System Operators (regulatory rate of return on the “old” regulatory asset base – 1.0%, on the “new” regulatory asset base – 15.0%);
– a draft resolution of the NEURC on the introduction of amendments to the Market Rules approved by Resolution of the NEURC No. 307 dated 14 March 2018 stipulating a mechanism for cost compensation and a methodology for estimation of the volume of dispatcher’s curtailment of electricity production by RES plants selling electricity at FiT. According to the Regulator, such compensation shall be provided by the transmission system operator, i.e., Ukrenergo, through the balancing market mechanism.
Ukrenergo
NPC Ukrenergo publishes its Audited financial statement 2019
In May there was a large electricity surplus in the electricity market, which is largely created by the Guaranteed Buyer SE and Energoatom. The daily volumes of this unsold to end-user electricity ranged from 50 million kWh to 31.5 million kWh. All of it was sold on a balancing market.
The circle of participants of the Ancillary Services Market is expanding: Kharkivska CHP-5 and Zaporizka TPP have joined; in May there are 11 power plants that can participate in auctions for purchasing ancillary services, including 8 HPPs that are part of state PJSC Ukrhydroenergo, Kurakhivska TPP of PJSC DTEK Skhidenergo, Kharkivska CHP-5, and Zaporizka TPP of PJSC DTEK Dniproenergo.
Ukrenergo clarified on the unbundling of the company and the issuance of permits for the grid connection of RES facilities.
During May 12-24, 2020 dispatch teams to limit the wind farm and solar power station were not given.
Guaranteed Buyer
The level of settlements in May with electricity producers from renewable energy sources is 7%, 220 million UAH were transferred.
The Guaranteed Buyer got the possibility to enter into bilateral agreements market, thanks to the amendments to the PSO mechanism.
In May a number of working meetings with international and state financial institutions regarding the possible opening of credit lines for the Guaranteed Buyer. Based on the results of the negotiations, a number of state-owned banks are ready to provide the enterprise with credit funds for a total amount of UAH 34 billion, but only subject to government guarantees.
NBU
Published NBU’s quarterly Inflation Report dated April 2020: according to NBU’s forecast, in April – June the economy will decline by 11%; сonsumer prices will be up 6% for the year. Recall that the Board of the National Bank of Ukraine has decided to cut the key policy rate to 8%. The continued monetary easing aims to support the economy during the period of pandemic and quarantine.
