On September 12, 2024, the USAID Energy Security Project (ESP) kicked off the DSO Operating Model Development project, which aimed to develop a viable operating model for the financial and operational independence of Gas Distribution System Operators (DSOs) in Ukraine. The model will be built on a detailed analysis of the current business processes, revenue streams, asset structures, and regulatory frameworks. It will also include benchmarking with European DSOs to determine necessary improvements for attracting investments and ensuring market competitiveness.
Ukraine stands at a pivotal moment of transformation, striving to build a dynamic and competitive gas market that is efficient and resilient. The country’s gas distribution sector, with its extensive network of 290,000 kilometers, is vital to Ukraine’s energy independence. However, it faces significant challenges—aging infrastructure, regulatory uncertainties, financial constraints, and capacity issues. These challenges underscore the need for a comprehensive transformation of Ukraine’s DSOs to enhance their operational efficiency, investment attractiveness, and alignment with European standards. To lay a solid foundation for the future secure, sustainable, and fully aligned with European standards in Ukraine’s gas sector, USAID Energy Security Project (ESP) started the DSO Operating Model Development project and gathered Ukrainian stakeholders to discuss its implementation.
Kathleen Kirsch, Deputy Director, Office of Critical Infrastructure, USAID/Ukraine, opened the meeting by stating, “To enhance the efficiency, resilience, and sustainability of Ukraine’s gas distribution system, we embark on a project that is not only technical in nature but strategic in its impact on Ukraine’s energy sector. Our ambitious vision for this project is to develop a modernized and resilient operating model for Ukraine’s DSOs that ensures reliable service delivery and attracts future strategic investments.”
Deputy Minister of Energy of Ukraine Mykola Kolisnyk thanked the U.S. Agency for International Development (USAID) and its Energy Security Project for their expertise and assistance in implementing the DSO Operating Model Development project, additionally engaging KPMG’s worldwide experts. He also underlined that the project would help the Ministry of Energy of Ukraine and other Ukrainian stakeholders get a comprehensive review of European gas DSOs and their business models, identifying factors that drive operational efficiency.
The analysis to develop a viable operating model to ensure the financial and operational independence of Ukrainian gas DSOs also foresees benchmarking and gap analysis, including comparing at least five European DSOs with Ukrainian DSOs to identify gaps and areas for improvement. As a result of the project, USAID ESP and KPMG will provide recommendations on optimizing business processes, revenue, expenditure, and asset structures and identify regulatory changes to ensure Ukrainian DSOs’ financial independence and attractiveness for investment.