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22 July 2020

Energy sector of Ukraine: main changes

Last week, the laws regulating the procedure for the environmental impact assessment, as well as settlements of debts that arose in the wholesale electricity market before the introduction of a new electricity market in Ukraine, came into force. Additionally, Verkhovna Rada of Ukraine adopted the first reading of the Draft Law of Ukraine “On Amendments to the Electricity Market Law” proposing to introduce a new instrument on the electricity market.

Amendments to the environmental impact assessment procedure

On 16 July 2020, amendments to the Law of Ukraine “On Environmental Impact Assessment” (the “Law on EIA”) aimed to regulate specifics of the public discussion of the planned activity during the quarantine period were made.

The changes apply within the territory of the quarantine established by the Cabinet of Ministers in order to prevent the spread of COVID-19 during the period of the quarantine and within 30 days from the date of its cancellation.

The following special rules were introduced:

  • a public discussion of the planned activity is carried out exclusively in the form of submitting written comments and proposals (including in an electronic form)
  • no public hearings are held and no dates are scheduled for the period of the quarantine and within 30 days from the date of cancellation of the quarantine
  • public hearings planned within the period of the quarantine and 30 days from the date of its cancellation are considered invalid and will not be held again

Wholesale electricity market debt repayment

On 16 July 2020, the Law of Ukraine “On Measures Aimed at Paying Off the Debts Formed on the Wholesale Electricity Market” (the “Law on Payment of Debts”) defining the legal, economic and organisational framework related to repayment of debts arising on the wholesale electricity market of Ukraine came into force. We analysed the norms of the Law in more detail earlier.

Amendments to the electricity market law

On 13 July 2020, Verkhovna Rada of Ukraine adopted the first reading of the draft Law “On Amendments to the Electricity Market Law” No. 3199, dated 11 March 2020 (the “Draft Law on Bilateral Agreements”) introducing the following changes:

  • the Cabinet of Ministers of Ukraine may establish a mandatory volume of electricity sales exclusively to the end consumers for the state-owned electricity producers under long-term (at least five years) bilateral agreements
  • the sale of electricity can be carried out at special electronic auctions, the procedure for which is approved by the Cabinet of Ministers of Ukraine
  • mandatory volume of electricity sales to the end consumers is excluded from the special obligations assigned or which may be assigned to the producer
  • the minimum/starting price for the sale of such electricity volume is set by NEURC at the request of the producer. At the same time, the methodology for calculating the starting price for the sale of electricity is determined by the Cabinet of Ministers of Ukraine in a decision on the relevant electricity sale
  • NEURC may establish a special tariff of the Transmission System Operator for the transmission services of such electricity volume
  • a consumer that is eligible to participate in the special electronic auctions must meet the following criteria:
    • consumer aims to create and operate consumer facilities with an aggregate design capacity of 100 MW and above
    • such facilities should have constant consumption, should be predictable and have a minimal risk of imbalance
    • the production of such enterprises is not associated with greenhouse gas emissions
  • the Cabinet of Ministers of Ukraine needs to develop and approve the procedure for confirming compliance of the consumer with the above criteria
  • the Draft Law on Bilateral Agreements establishes that the new type of electricity sale is not a state aid and does not require mandatory notification of the authorised body for the state aid
  • limitation of the maximum validity period of bilateral agreements for the sale and purchase of electricity is canceled (according to the Law of Ukraine “On the Electricity Market”, at present the maximum validity period of the bilateral contracts is one year, except for the contracts with electricity producers under the “green” tariff)

Conclusion:

Amendments to the Law on EIA establish measures in the environmental impact assessment procedure related to social restrictions during the quarantine period. The Draft Law on Bilateral Agreements is intended to stimulate the creation of new powerful consumers of electricity, with less impact on the balance of the United Power System of Ukraine due to their sustainable and predictable consumption.

To avoid being negatively impacted by the Law on EIA, the Law on Payment of Debts and the Draft Law on Bilateral Agreements, as well as to take advantages provided by the legislation changes, you can contact the SK Energy practice team:

  • to get a qualified advice regarding environmental impact assessment procedures under the Law on EIA and repayment options under the Law on Payment of Debts
  • to analyse your current business strategy in the electricity sector, avoid risks and take advantages provided by the Draft Law on Bilateral Agreements
  • to audit your possible risks and benefits in the current situation

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

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