RE: “The status of NEURC as an independent body for regulation of energy and utilities sectors”
European-Ukrainian Energy Agency (EUEA), which unites investors from Austria, Belgium, Great Britain, Norway, Spain, Switzerland, Turkey, Ukraine, USA, etc. with a total investments of more than 1.5 billion Euros in construction of more than 1 GW of renewable energy generation capacities using sun, wind and biomass/biogas, has prepared a consolidated Position Paper on the status of the NEURC as an independent body for regulation of energy and utilitie sectors.
The relevance of the problem
On June 13, 2019 the Constitutional Court of Ukraine (the “CCU”) in the case concerning the Energy and Utilities National Regulatory Commission (the “Regulator”) has resolved that certain provisions of the Law of Ukraine “On the Regulator” (the “Law”) are unconstitutional and will become invalid beginning of December 31, 2019:
The resolution of the CCU concerns certain provisions of articles 1, 4, 5, 8 of the Law, namely:
- establishment of the Regulator as a collegial body independent of any governmental branches and having the features of a central executive body, but not subordinating to the Cabinet of Ministers;
- procedure for appointment and termination of powers of the members of the Regulator by the President, which goes beyond his authority;
- principles of Regulator’s independence in the spheres of energy and utilities;
- grounds for early termination of powers of the members of the Regulator.
At the same time the resolution does not question the constitutionality of other provisions of the Law defining the powers, legal status of the members and organization of work of the Regulator.
Thus, the Constitutional Court of Ukraine emphasizes that the formation of a permanent independent state collegial body, which by function, sphere of activity, powers has the characteristics of a central body of executive power, but is not subordinated to the Cabinet of Ministers of Ukraine and does not belong to the system of bodies of executive power is inconsistent with the Constitution of Ukraine. Also, the powers of the Head of State and the only legislative body in Ukraine to form a competition commission, as well as the President of Ukraine’s right to appoint members of the Commission and terminate their powers ahead of time, are not provided by the Constitution of Ukraine. These powers, enshrined in the Law, go beyond the constitutional competence of the Parliament and the Head of State.
The content of the decision of the Constitutional Court is that the NEURC “by functional purpose, sphere of activity, powers has the characteristics of a central body of executive power”, that is, sees a solution to the change in the status of the NEURC.
However, the existing legal conflict cannot be resolved by the NEURC’s inclusion in the system of executive authorities, as it, in particular, contravenes the international obligations of Ukraine within the framework of the Association Agreement with the EU, the Treaty establishing the Energy Community of Ukraine on the implementation of EU legislation in the field of energy a key principle of which is the independence of national energy regulator and will lead to a direct conflict of interest, since the largest energy companies licensed by the NEURC operate under the Cabinet of Ministers of Ukraine.
Suggestions of the European-Ukrainian Energy Agency
On July 5, 2019, the European-Ukrainian Energy Agency held a meeting to consult with representatives of the EU Delegation, the Energy Community Secretariat, the NEURC Commissioners, the Parliament representatives, the DIXI Group and USAID experts, as a result of which the independent status of the NEURC state regulation in the fields of energy and utilities should be maintained.
So we offer the following:
- Solving the problem by amending the Constitution of Ukraine and creating a separate chapter of the Basic Law of Ukraine about institutions independent from the authorities (regarding the procedure for their formation and scope of their activities for the final solution of the problem of independent institutions, including not only the NEURC, but the National Securities and Stock Market Commission, National Anti-Corruption Bureau of Ukraine, National Agency for the Prevention of Corruption, etc.).
- Changes should also be made to the Law of Ukraine “On the NEURC” with the clarification that the independence of the NEURC is a direct requirement of the international agreement ratified by the Parliament of Ukraine. International acts and treaties ratified by the Verkhovna Rada have higher legal force than national legislation, and the Association Agreement with its requirements for the independence of the Regulator is just that. The decision of the Constitutional Court is a precedent for violation of the Association Agreement, which cannot be allowed.
It is important that in the process of change the basic principles of NEURC activities, enshrined in the international commitments agreed by the Secretariat of the Energy Community of Ukraine, are ensured and maintained:
- Independence from state and private structures;
- Independence in decision making;
- Obligation to enforce decisions of the Regulator with possibility of appeal in court;
- Financial independence;
- Organizational independence;
- Independence of management (appointment for fixed terms, rotation of members of the Commission).
European-Ukrainian Energy Agency (EUEA) is an independent non-profit organization, established in 2009, open to all stakeholders in the Ukrainian Energy Efficiency (EE) and Renewable Energy (RE) sectors who want to work constructively with like-minded members to contribute to the gainful and transparent development of these markets in Ukraine, through the promotion of fair and sustainable business practice, raising of public awareness of energy issues, and by influencing government energy policy.
Among EUEA members are: Acciona, Avenston, Celynx AG, CES, DTEK, EMSOLT, Eurocape, GOLAW, Guris, Greenworx, iC consulenten, IMEPOWER, Indian Solar, Khmelnytsky Bio Power Plant, NBT AS, Scatec Solar, Schletter Group, Sinnalba, Smart Energy, SPU “Thermosystems”, Ukraine Power Resources, Ukrwindinvestments.