Starting next month, transmission tariffs for using the electrical grid will go up by 54% — from Hr 155 per megawatt-hour to Hr 240.
The National Energy and Utilities Regulatory Commission made the decision to increase the revenue of grid operator Ukrenergo, which has struggled to afford expensive renewable energy.
The renewable feed-in tariff (FIT), which green energy companies get, is financed with Ukrenergo’s transmission fees.
NEURC’s original plan was to raise the transmission tariff fourfold or twofold. This provoked controversy and was voted down by the regulator.
Instead, the tariff will be increased by 54% and Ukrenergo will try to borrow money from international financial institutions to try to make up the difference.
Nevertheless, energy costs will increase, not just for business and industry but also for utilities and transportation.
Acting energy minister Olga Buslavets stated on July 6 that energy costs for the population will not go up. But some experts wrote that companies and utilities will be forced to pass on their higher electricity costs to consumers by raising prices for products and services.
“NEURC is aware that this tariff amount for electricity transmission services is burdensome for electricity consumers and may adversely affect the competitiveness of Ukrainian industry, but is forced to make this decision in accordance with Ukrainian legislation… and prompt settlement of problematic issues in the electricity sector,” the regulator said, in a statement.
The Federation of Employers of Ukraine, a major business association, asked the government to stop the tariff increase, saying it will increase the cost of electricity, reduce production and lead to growing unemployment at a time when business is already hit hard by the COVID-19 epidemic.
“The increase in tariffs… will be another negative factor for the loss of Ukrainian industrial competitiveness, in both domestic and foreign markets,” the Federation wrote, in a statement.
Last month, the Cabinet of Ministers signed a memorandum of understanding with two out of three major green energy business associations. Under the agreement, the greens agreed to take a cut to the FIT while the government promised to pay back the billions of hryvnias that it owes them. The deal has also been made into legislation.
Parliament has approved the bill in the first reading. A second reading is still pending.
The issue of expensive renewable energy has been the subject of major controversy over the past year.
In April, the energy ministry released a polarizing energy balance projection, which cut cheap nuclear power but not expensive renewable power.
Critics saw the hand of Rinat Akhmetov, who controls close to a fifth of renewable generation in Ukraine through his energy giant DTEK. They said that squeezing money out of energy consumers to pay greens was unfair and bad for the country.
But renewable players, who invested billions of dollars into Ukrainian projects, said they felt cheated when the government refused to pay the FIT they were expecting, then used that debt as leverage to extract concessions.
