On April 28, 2023, the long-awaited draft Law on Prevention of Abuse in Wholesale Energy Markets (No. 5322), after a lengthy refinement, was approved by the Energy and Utilities Committee and recommended for adoption by the Verkhovna Rada in the second reading, and as a whole. The draft law was registered yet two years ago, on April 1, 2021, approved by the Rada in the first reading on September 20, 2022, and, until now, has been in preparation under a shortened procedure.
The draft law No. 5322 is a component of Ukraine’s European integration package. It aims to ensure that Ukraine fulfills its commitment under international treaties with the European Union and the Energy Community in terms of transposition into its national legislation, to the extent possible, the provisions of the EU Regulation No 1227/2011 on wholesale energy market integrity and transparency (REMIT). Once adopted, the law will prohibit market abuse practices, such as insider trading and market manipulation or attempted manipulation, which are threatening and distorting the wholesale energy markets and negatively affecting the potential benefits to the energy customers from the market liberalization. It will also provide a legal basis for the improvement of market transparency and enable the energy regulator the National Energy & Utilities Regulatory Commission (NEURC) to put in place an adequate and effective market regulation system comprising the mechanisms and tools for monitoring and near-real-time surveillance of the energy markets, the impartial and prompt investigation of law infringements, and the enforcement of regulatory decisions against market abusers.
During the Committee’s meeting, the representatives of Ukraine’s international partners — the European Union, the Energy Community, and the technical assistance program “Energy Security Project” funded by USAID — addressed the People’s Deputies with words of support for the draft law.
Vadym Virchenko, deputy head of the USAID Energy Security Project, noted the following:
“We have been actively supporting the development of the draft law on prevention of abuse in wholesale energy markets since the very beginning because we consider it one of the key prerequisites for sustainable and efficient operation of the recently liberalized markets in electricity and natural gas in Ukraine and one of the most urgent and crucial components of the European integration package of the Ukrainian Parliament’s legislative initiatives.
We deem that the current improved version of draft Law No.5322 is the best among all available alternative options developed and considered so far. This is why we support in general that particular draft law, as we have informed the Committee earlier by a respective letter of opinion.
First, the quick passage of draft Law No.5322 will enable the transposition and effective implementation of basic provisions of the EU REMIT and adapted REMIT of the Energy Community. The Ukrainian energy market in general will benefit from it. Both the fair energy market participants and the energy consumers in Ukraine will soon be able to appreciate the benefits from providing the appropriate tools and powers to the National Regulatory Authority (NEURC), which will be able to quickly identify and duly address instances of significant market abuses as well as take effective measures to prevent such abuses.
It will also demonstrate Ukraine’s adherence to its commitments under the EU-Ukraine Association Agreement and the Energy Community Treaty, which is particularly important in anticipation of the so-awaited start of EU accession negotiations.
At the same time, and especially in light of the imminent even closer approximation of Ukraine’s legislative framework to the EU acquis, the need and scope of which is being currently assessed by the Government of Ukraine during the self-screening of the EU acquis transposition status and legal gap analysis, in our experts’ opinion, the draft Law No.5322, already following its eventual passage into law — as this is the highest priority today — will still need to be further improved as soon as possible, particularly regarding enhancing powers of the Regulator, adjusting roles, obligations and responsibilities of market participants, persons professionally arranging transactions (PPATs) and other persons who may be affecting the market, tailoring the system of penalties and enabling preventive measures against market abuse (primarily, adjustment of market and trading rules).
Our detailed recommendations were presented in February to the Energy Committee, NEURC, and the Energy Community Secretariat and shared for awareness with our partners from the European Commission.
It would be worth considering that the recent European Commission’s proposal on amending its REMIT Regulation 1227/2011 was finalized and published in mid-March, which has a good chance to be adopted this year and which Ukraine should subsequently transpose into its legislation as well. Thus, we are hopeful that, after draft Law No. 5322’s passage, there will be another opportunity for its further improvement.
And we are ready to provide our Ukrainian partners with the necessary assistance in doing that, as well as to assist NEURC in the further effective implementation of REMIT in Ukraine.”
The USAID Energy Security Project welcomes the Committee’s decision and believes that the Verkhovna Rada of Ukraine will manage to pass the draft law 5322 in the near future, during its current plenary session.