The USAID Energy Security Project (ESP) congratulates the Verkhovna Rada of Ukraine, the national energy regulatory authority (the NEURC), other stakeholders engaged, and all fair market players with the passage of the draft law No. 5322 on amendments to laws regarding the prevention of abuses in the wholesale energy markets.
The law is crucial for the sustainable and resilient operation of liberalized electricity and gas markets in Ukraine and is among the key prerequisites for their effective integration into the energy markets of the EU, being equally important to the country’s pressing wartime priorities.
At the same time, USAID ESP is convinced that, after it enters into force, the law still needs to be improved and strengthened further to make the energy market surveillance truly comprehensive, cross-cutting, reliable data based, prompt, and effective.
The draft law No. 5322 was adopted by the Verkhovna Rada of Ukraine in the second reading and entirely on Friday, June 10, 2023, as a component of the European integration legislative package. It aims primarily to set up rules for fair energy markets built on trust and confidence by way of transposition, largely of provisions of the EU Regulation No 1227/2011 on wholesale energy market integrity and transparency (REMIT).
More specifically, the adopted draft law No. 5322 prohibits market abuse practices, such as insider trading and market manipulation, which threaten and distort the wholesale energy markets and affect the potential benefits to the energy customers from market liberalization. The law also provides a legal basis for the improvement of market transparency and enables the national energy regulatory authority, 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, prompt investigation of law infringements, and effective regulatory decisions against market abusers.
The urgency and necessity of the still pending transposition of the EU REMIT and its effective implementation in Ukraine have always been the focus of the country’s international partners, primarily the EU, the Energy Community, and the U.S. through USAID.
Being aligned with the international partners of Ukraine, USAID ESP has been emphasizing that the REMIT law, on the one hand, is among the most critical elements of the energy legislation yet to be put into effect in accordance with Ukraine’s commitments under the Association Agreement with the EU and the Energy Community Treaty, and, on the other hand, constitutes an indispensable building block for the liberalized markets in electricity and gas, which Ukraine launched and continues to develop in recent years, to the benefit of the energy customers in Ukraine.
A larger-scale and more intensive European integration process seem imminent as soon as Ukraine enters the negotiations with the EU on the Treaty of Accession. Apparently, the accession phase would facilitate and accelerate further convergence and integration of Ukraine’s electricity and gas markets into the EU markets. In that context, the fundamental pillars of the liberalized competitive energy market concept commonly shared and applied in the EU, the U.S., and other developed countries across the world should be duly acknowledged, respected, and implemented by Ukraine. One of those crucial pillars is to have in place an independent and capable national energy regulatory authority providing impartial and effective market surveillance, encouraging all market players to respect and comply with the rules and principles of fair competitive behavior in the market, and combating manipulations and abuses that affect competition and pricing.
Therefore, both for the sake of the sustainability of its liberalized energy markets and with a view to facilitate and accelerate the EU accession process, Ukraine urgently needs, in particular, to implement the principle of effective market surveillance and ensure that its surveillance system is in place, effective, and compliant with the EU REMIT.
USAID ESP believes that the optimal way would be the efficient implementation in Ukraine of the EU REMIT with the establishment of an effective and impartial system for ensuring the functioning of fair and transparent energy markets by way of the full transposition, to the largest extent possible, with no free interpretation, expansion or derogation, or any substantial exemptions, and with the minimum acceptable adaptation yet subject to appropriate substantiation, of key provisions of the EU REMIT, as provided for by the amended Annex XXVII of the EU-Ukraine Association Agreement.
USAID ESP is fully ready to assist Ukraine in effectively implementing this challenging task.