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22 April 2020

COVID-19 outbreak in Ukraine: measures on the electricity market during the quarantine

What happened?

On 17 March 2020, the Parliament of Ukraine adopted the Law “On Amending Certain Legal Acts of Ukraine aimed at Preventing the Onset and Spread of Coronavirus Disease (COVID-19)” (the “Law”). The Law banned for the period of quarantine and 30 days from the day of its cancellation any sanctions or administrative measures for untimely payments of housing and communal services. Furthermore, the Law prohibited termination and/or suspension of the provision of housing and communal services to citizens of Ukraine in case of non-payment (or a failure to pay in full). The above  amendments and introduction of the quarantine led to a significant reduction of payments for electricity from consumers to the electricity suppliers and the universal services suppliers. In turn, the electricity suppliers and the universal services suppliers reduced payments to the distribution system operators, while electricity producers and distributions system operators reduced payments to the transmission system operator – Ukrenergo. As a result, all market participants experience delays in payments and a daily increase of debts.

What measures have been applied?

On 8 April 2020, the National Energy and Utilities Commission of Ukraine (NEURC) adopted Resolution No. 766 “On Actions of Electricity Market Participants during the Quarantine and Restrictive Measures Related to the Spread of Coronavirus Disease (COVID-19)” (the “Resolution”), as amended on 15 April 2020. The Resolution includes the following measures to stabilise the situation with a decrease in consumer payments and debts of other participants on the electricity market:

  • For electricity suppliers:

The transmission system operator, Ukrenergo, shall not apply to electricity suppliers the Default Status measures under the Market Rules. In particular, Ukrenergo shall not apply the following measures to electricity suppliers in case of the Default Status:

  • notification on acquiring the Default Status to the market participant and NEURC with publication on its official website;
  • suspension of future and current registration of bilateral agreements on sale of electricity to market participants;
  • establishment of zero electricity sales for day ahead and intraday markets;
  • transfer of electricity supply to consumers to the supplier of the “last resort”;
  • sending at 12:00 on each banking day to the authorised banks a certificate containing information on the full and abbreviated name of the market participant and the final amount of the late payment by the electricity supplier of the cost of its electricity imbalance.

Therefore, for the period of quarantine electricity suppliers are exempted from the above measures in case of Default Status due to increase of consumer debt.

  • For distribution system operators:

The transmission system operator is allowed not to apply the following conditions to the distribution system operators within the framework of the model agreement for the provision of electricity transmission services and the model agreement for the provision of dispatch (operational and technological) management services:

  • application of penalty and fine for violation of any terms of payments under the agreement; and
  • suspension of transmission services in case of failure by the distribution system operator of its payment obligations.
  • For consumers:

Electricity Suppliers acting as universal services suppliers shall:

  • organise the work of mobile points of receiving payments from consumers in localities where regular and irregular public transport is suspended;
  • conduct appropriate educational work for all categories of consumers on their websites, in social media networks, and in the media regarding the possibility of making payment at mobile payment points and online.

At the same time, consumers shall take comprehensive measures to pay for electricity and other services received on the electricity market according to the relevant contracts. In case of technical or economic impossibility of payment due to the quarantine and the restrictive measures, consumers shall notify the electricity supplier and, in order to prevent an immediate shutdown, initiate the conclusion of a debt repayment schedule after the quarantine is over.

  • For the Guaranteed Buyer:

NEURC changed the order of pricing bids by the Guaranteed Buyer as follows:

  • the Guaranteed Buyer shall not apply the lowest possible price in its applications for the day ahead market under clause 6.1 of the procedure for purchase by the Guaranteed Buyer of electricity generated from alternative energy sources (“Procedure”);
  • the Guaranteed Buyer in its applications for day ahead market sets the price at the level not higher than the weighted average actual price for electricity produced at nuclear power plants in April-May 2019.

According to the Rules of the day ahead market and intraday market, the electricity prices indicated in the tender bids on the day ahead market shall be within the minimum price of UAH 10.00 / MWh and the maximum price of 50,000.00 UAH / MWh. Thus, in accordance with the Procedure, the Guaranteed Buyer must indicate in the applications for the day ahead market the price of 10.00 UAH / MWh. However, due to the temporary quarantine changes, the Guaranteed Buyer will apply bids for the day ahead market at the price of 566.7 UAH / MWh.

Timing: these measures apply for the period of quarantine and 30 days after the date of its cancellation.

Conclusion:

We hope the above will help you to deal with the impact of the quarantine on your business. To avoid negative impact of increased debts on the electricity market due to the quarantine measures, please contact the SK Energy practice team:

  • to receive qualified advice on further work on the electricity market,
  • to analyse the current strategy of work on the electricity market and to consider possible changes in this strategy to avoid risks,
  • to audit your electricity supply chain and protect against its potential risks in the current situation.

If you want to discuss the above issues  in more detail, please contact us.

Information contained in this legal alert is for the general information purposes only, does not constitute legal or other professional advice, and should not be relied upon as a substitute for the specific professional advice tailored to the particular circumstances.

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