On August 9th, 2023, the USAID Energy Security Project (ESP) and Verkhovna Rada’s Committee on Energy, Housing, and Utilities conducted a joint coordination session on further reforms of Ukraine’s energy markets.
The session was attended by Andriy Gerus, Committee Chairman; Oleksiy Kucherenko, First Deputy Chairman; Victoria Gryb, Chairman of the Energy Security Subcommittee, and other members of the Ukrainian Parliament. On the US side, the coordination session was joined by Kathleen Kirsch, Energy Team Lead, Office of Economic Growth, USAID/Ukraine; Michael Trainor, USAID ESP Chief of Party; and sector experts from the Project.
“I am happy to have the privilege to open this event dedicated to energy trading reorganization. A month ago, USAID ESP held a roundtable called “Energy markets: a pathway to standardized trading,” where it presented its vision for best energy trading practices and an energy market survey on the problems of energy trading. Approximately 130 people attended the event, illustrating great interest in the topic and a need to normalize energy trading,” Kathleen Kirsch said.
“The purpose of our session is to discuss energy trade issues and present an approach to phase out public service obligations (PSO). These are practical and necessary things for today’s Ukraine. We believe that common efforts will enable us to implement the proposed Four Pillars of integrated energy trading,” Michael Trainor added.
USAID ESP experts presented the Four Pillars of Integrated Energy Trading. They include:
1) harmonization of the regulatory framework;
2) standardization of energy products;
3) unification of trade rules; and
4) strengthening the powers of regulators – the National Energy and Utility Regulatory Commission (NEURC) and the National Securities and Stock Market Commission (NSSMC).
The Project experts are already working on analyzing legal gaps and best practices, creating a matrix of definitions, preparing amendments to the legislation, compiling a book of standardized energy products for organized and over-the-counter trading, and creating unified trading rules for regulators and trading platforms.
The participants of the coordination session also discussed the issues of imposing public service obligations (PSO) on energy market participants, improving a system of subsidies, and tariff regulation. USAID ESP experts presented a plan for the PSO phase-out.
The Project recommends avoiding cross-subsidization and covering tariff costs and a certain percentage of the energy component, which will gradually increase to 100 percent. USAID ESP is working on proposals for the necessary legislative changes.
When discussing the financial condition of market participants, Oleksiy Kucherenko, First Deputy Chairman, noted that solving the issues of debts in the market requires a constructive algorithm for resolving the situation. Andriy Gerus emphasized that the solution should be fair for market participants and consumers, as the changes aim to improve liquidity and transparent and efficient use of financial resources throughout the energy supply chain.
At the end of the session, Andriy Gerus, Committee Chairman, thanked USAID ESP for the delivered energy equipment to restore the damage and destruction that the power system suffered due to Russia’s military attacks and for the cooperation in drafting the laws.
“We are especially grateful for your assistance in lawmaking, particularly your work on the REMIT law. Not least, it was adopted thanks to the support of the USAID Mission to Ukraine, the USAID Energy Security Project, the Energy Community Secretariat, and several other European partners. We sometimes have active discussions with you, but professional expertise always wins. We are ready for further cooperation, including elaborating on the ideas voiced today,” said the Chairman of Verkhovna Rada’s Committee on Energy, Housing, and Utilities.
The parties agreed to continue working on energy market reforms.
“We look forward to continuing to work with you and other key stakeholders to ensure the Ukrainian market model is compliant with European requirements and applies the best international practices for a successful and thriving Ukraine,” said Kathleen Kirsch, Energy Team Lead, Office of Economic Growth, USAID/Ukraine.