The Next Steps to Introduce REMIT into Ukraine and the Journey to Adopt REMIT II

April 24, 2024

The EU adopted the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) in 2011, following which Ukraine adopted a similar law (3141-IX) in 2023. The REMIT law is one of Ukraine’s critical commitments under the European Union-Ukraine (EU-UA) Association Agreement and establishing mechanisms aimed at eliminating both manipulation and corruption in the energy markets. Regarding the following steps to introduce REMIT into Ukraine and the journey to adopt REMIT II, we talked with Alex Golas, Energy Markets Institutional/Regulatory Advisor to the USAID Energy Security Project (USAID ESP).

Question: With the adoption of the Law 3141-IX, Ukraine transposed key provisions of the EU Regulation 1227/2011 into Ukraine’s legal system. What are the most visible and impactful changes that indicate the success of REMIT’s implementation process? 

Answer: The most visible signal of REMIT’s successful implementation will be comparatively lower prices as a result of a more open, transparent, and fully competitive electricity and gas markets.

Question: As a preventive measure against market manipulation, the REMIT Law has faced strong opposition, and attempts have been made to delay its adoption and weaken its effectiveness. In your opinion, does the Law adopted by Ukraine incorporate all EU provisions to develop fully competitive and transparent energy markets?

Answer: Ukraine adopted Law #3141, the REMIT Law, only 12 years after the EU officially adopted the original REMIT into its internal markets. While  REMIT I made important advancements, recently, the EU Council approved REMIT II to provide even stronger measures to combat and prevent market manipulation so that consumers can fully benefit from energy trade. We believe that the benefits to consumers render it critical for Ukraine to adopt REMIT II.

Question: In addition to rules prohibiting insider trading and market manipulation, REMIT gives Ukraine’s Energy Regulator – the National Energy and Utilities Regulatory Commission (NEURC) – a wide spectrum of powers, mechanisms, and tools to monitor the energy markets. What are these powers and tools, and how is USAID ESP helping?

Answer: Law #3141 gives the Energy Regulator (NEURC) a broad range of powers, including the right to penalize market abusers. However, the ultimate goal of REMIT is to deter market manipulation, not solely to penalize it, in order to ensure open and fair competition.  USAID’s Energy Security Project (ESP) will continue to support the development of NEURC’s capacity, knowledge, and competency by providing targeted training and developing software to help NEURC fully and effectively  govern the energy markets.

Question: After adopting the REMIT Law, Ukraine is now developing secondary legislation to put the Law into practice. How does the EU Council’s recent adoption of REMIT II impact Ukraine and its current REMIT-related legal framework? 

Answer: NEURC successfully adopted the secondary legislation to Law #3141, which was the next benchmark after officially adopting the Law itself. The EU Council approved REMIT II on March 18, 2024, and Ukraine is ready to move forward and quickly adopt it. This upgrade to REMIT II will occur in parallel with the actual enforcement of the current framework by NEURC. It is an exciting time, and USAID ESP is eager and honored to be a trusted partner of the Government of Ukraine and NEURC as they embrace these latest developments, thus bringing Ukraine closer to integration with European markets.

Question: Does NEURC have sufficient human and institutional capacities to implement REMIT adequately?

Answer: REMIT is a new concept in Ukraine, necessitating a brand-new framework for both the market players and regulators. This new concept applies not only to Ukraine but also to a number of other countries in Europe that have adopted REMIT in the past decade or so. Because REMIT includes new provisions, USAID ESP is providing capacity and regulatory support to NEURC, which will enable the law implementation. A strong, independent regulator is critical to introduce, monitor, and enforce the EU-relevant legislation.

Why are international partners interested in the implementation of fully EU-compliant and effective REMIT in Ukraine?

Answer: Ukraine is a key part of the European energy market. Ukraine has the capacity to participate both as a buyer and seller of energy, which will bring many benefits to energy consumers in Ukraine. Crucial to leveraging, this is competitive and transparent energy markets that are bound by the same rules as other EU countries. EU integration is critically aligned with the core goals of REMIT.