How will increasing of the TSO tariff impact final price of electricity?

National Commission for State Regulation of Energy and Utilities supported the Memorandum between the Government of Ukraine and RES producers with warnings.

This decision was made at the meeting of the State Regulator on 17th June 2020. Members of the commission Olga Babiy and Oleksiy Magda abstained from voting for it. One of the main warning expressed by the members of the commission was the increase of the TSO tariff (NPC “Ukrenergo”) more than three times when revising it in order to repay debts to RES producers.

Yuriy Kubrushko, Member of the Board of the European-Ukrainian Energy Agency, Managing Partner of IMEPOWER, expressed his expert opinion on this issue:

If the National Commission for State Regulation of Energy and Utilities complied with the Law of Ukraine “On the Electricity Market” from autumn 2019 and began systematically include sufficient RES compensation in the TSO tariff, we would see a moderate (+ 50 UAH per quarter) increase, which would be fully compensated by reduction of the price of DAM (from 1600+ UAH in September 2019 to the level of 1200+ UAH in May 2020, see the graphs below from the website of the Market Operator… And there would be no (i) crisis; (ii) no Guaranteed Buyer’s deficit; (iii) no debts.

If the National Commission for State Regulation of Energy and Utilities and the Ministry fulfilled the investors’ proposal in December 2019 / January 2020, there would be a need to increase the TSO tariff from 155 UAH to about 300 UAH for the whole 2020 (50 UAH is a saving from “green” tariff restructuring).

Now it is June 2020, there is a need for the TSO tariff up to 300-350 UAH to cover current monthly payments + since March, accumulated 15 billion UAH of Guaranteed Buyer (NEURC estimates 16 billion UAH by the end of June). Thus, it is necessary to provide an additional 100-120 UAH to the TSO tariff to ensure repayment of this debt according to the schedule in the Memorandum.

Conclusion 1: the longer NEURC waits, the more significant will be the increase of the TSO tariff.

Conclusion 2: retail prices for commercial customers will not increase compared to autumn 2019, as the reserve is 400+ UAH due to the fall in the price of DAM, so the increase in the TSO tariff by 300-350 UAH is still within this reserve. ”

Several graphs to familiarize and visualize the issue: