The president eliminated the influence of DTEK in the National Energy Regulatory Commission (NERC). The new body will pursue the policy of the Cabinet

New power regulator will be supported Cabinet

Photo: Konstantin Melnitskiy

Electricity and gas markets have experienced a slight shock. The president liquidated National Energy Regulatory Commission (NERC) and the National Commission for Public Utility State Regulation (NCPUSR). A new body will be created to replace them – the National Commission for Energy and Public Utilities Regulation (NCEPUR). For this purpose all members of both commissions were dismissed and new people were appointed to the NCEPUR. Experts expect that the new regulatory institution will fully support the government’s policy aimed at increasing the rates of electricity.

Look who came

Most experts from the electricity and gas market interviewed by Capital said they were not familiar with the staff of the new NCEPUR and, therefore, did not understand the principle of its composition.

Volodymyr Demchyshyn was appointed Chairman of the NCEPUR. Capital learned that prior to his appointment he served as Director of the Investment and Banking Division at ICU, which until recently belonged to the current Governor of the National Bank of Ukraine Valeria Hontareva and was sold after she was appointed to this post.

Another investment banker Andriy Herus, who served as Director for Investment and Trading at the Concorde Capital, was also appointed to the NCEPUR. Only three members of the newly formed committee are directly related to the energy sector, namely Volodymyr Yevdokymov, who served as Deputy Director and Head of the Financial Settlement Center at Energorynok, and Ruslan Mashlyakovskiy, who headed the Energy Market Administration at the liquidated NERC. Yulia Kovaliv has a degree in economics and has some experience both in the gas sector and in the power industry: in 2007 – 2010 she was Financial Director at Gazeks Ukraine, which managed the Donetskmiskgaz, Kryvorizhgaz, Kharkivgaz, Kharkivmiskgaz and Dniprogaz companies. Then she was a member of the Coordination Center for Introduction of Economic Reforms under President Yanukovych and developed new operating principles for the electricity market.

The remaining two members of the NCEPUR – Valeriy Tarasyuk and Andriy Tkachenko – are less known: Capital could not find any information about them in the public domains. Capital also could not learn more about the plans for the new body – Herus and Yevdokymov said in conversations with Capital that all members of the NCEPUR attended a meeting this past Thursday at which they mapped out the course of actions. “The new members of the commission are not associated with major market players. We will build equal relations with all players and will provide fair competitive market conditions. The main issue is the operation of the energy system in light of the current military operations in the east and the complicated gas relations with Russia,” said Herus.

Negated influence

In conversations with Capital experts and market players noted that the composition of the liquidated NERC was openly sympathetic to big business, in particular – Rinat Akhmetov’s energy holding DTEK. Among the “sins” of the previous NERC, Director of Information and Public Relations of the Ukrainian Nuclear Forum Association Olha Kosharnaya mentioned indulgence to monopoly on the electricity export market and a tariff policy favorable for heat generation controlled mainly by DTEK. “For example, the rate for thermal generation included an investment component, although heat generation is profitable and helped finance modernization at its own expense and not by the means of consumers. At the same time, there was no investment component in the rate of the unprofitable Energoatom. It was not even allocated funds for programs approved by the Cabinet, for example, a comprehensive program for improvement of the safety of Ukrainian nuclear power plants,” she said.

“The NERC had one problem – this body operated on behalf of certain oligarchs, and it was its only downside. Everything else was in order,” said Director of the Energy Programs at the Razumkov Center Volodymyr Omelchenko. Another market expert, who asked not to be named, described the former composition of the NERC as undoubtedly very professional, though politically motivated, particularly in favor of DTEK. “At the same time, even when they made decisions in favor of any company at the expense of others, they were able to explain why the decision was made without any weak spots,” he said.

One of the market players, on condition of anonymity, also said that the interaction between the NERC and the NCPUSR has not been that positive over the past few years. For example, the two sides could not reach a consensus on the issue of electricity tariffs for water service companies, which sustain heavy losses and are unable to pay for electricity at the current rates. He also noted that the new staff of the NCEPUR stands out for its experience and youth, as well as good relations with European regulators that will contribute to implementation of European energy legislation in Ukraine.

Sovereign’s will

The NERC was established back in 2011 by President Viktor Yanukovych. At the same time the government passed regulations governing its activities. Vice Chairman of the Energy Strategies Foundation Dmytro Marunych stressed the importance of the fact that the activities of this body should be regulated by law. “Without the law this commission is a subsidiary of the Cabinet, although it should not have such a status,” he said.

Marunych recalled Resolution No. 81 of the Cabinet of Ministers of March 25, 2014, which stipulated an increase in gas tariffs this year and in the following years up until 2017. “The new staff of the commission will implement this resolution of the Cabinet,” said the expert. Marunych also noted that drafting of the law on the regulator of electricity and gas markets was not an easy task, because the EU regulations for the gas market contained 20 pages describing the authority of the regulator.