This publication has been produced with the assistance of the European Union in the framework of the EU4Energy Initiative and with the support of the International Renaissance Foundation. The contents of this publication are the sole responsibility of NGO “DIXI GROUP”, as well as Civil Network “OPORA”, All-Ukrainian NGO “Energy Association of Ukraine”, Resource & Analysis Center “Society and Environment”, Association “European-Ukrainian Energy Agency”, and can under no circumstances be regarded as reflecting the position of the European Union and/or the International Renaissance Foundation. The EU4Energy Initiative covers all EU support to improve energy supply, security and connectivity, as well as to promote energy efficiency and the use of renewables in the Eastern Partner countries Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. It does this by financing projects and programmes that help to reform energy markets and to reduce national energy dependence and consumption. Over the longer term, this makes energy supply more reliable, transparent and affordable, thus reducing energy poverty and energy bills for both citizens and the private sector. More information on: www.EU4Energy.eu
The project “Enhancing impact of civil society in monitoring and policy dialogue on energy and related sectors’ reforms in line with the Association Agreement implementation” aims at strengthening the role of civil society in advocating reforms in the energy and related sectors. The key objectives of the project are: • monitoring of the implementation of the energy provisions of the Association Agreement, including relevant environmental and trade-related commitments; • strengthening the civic experts’ and local actors’ capacity to track actual implementation of the reforms; • facilitation of public dialog to lead in proper implementation of the European energy and environmental reforms; • informing stakeholders and the Ukrainian society about the meaning and potential benefits of European reforms in energy and related sectors in order to empower them to keep the government accountable for pursuing these reforms. The Project is supported by the European Union within the framework of EU4Energy initiative and cofunded by the International Renaissance Foundation
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Executive Summary Gas sector experts note the adoption of two laws during the session: No. 6229 on transparency in extractive industries (first reading) and No. 2314-VIII on deregulation at early stages of gas production (enacted). In addition, the Coordination Council for Energy Reforms established by the Cabinet of Ministers has decided on changing Naftogaz unbundling model and gave the task of finalizing the new model to working groups established specifically for that purpose. Electricity and Nuclear Safety Task Force experts note a serious delay (almost two months) in passing important legislative acts due to the absence of quorum at the NEURC. The regulator became operational again on May 29, when the President appointed five new members. Energy Efficiency and Social Aspects Task Force noted the continuing delay of government agencies responsible for the sector’s reform (first of all, the Ministry of Regional Development) of development and adoption of bylaws required by the "energy efficiency package". However, the biggest concern is the intention of the Ministry of Regional Development to submit to the Verkhovna Rada the amendments to these bylaws that would de-facto postpone their implementation by at least six months. One of the conclusions made by Environment and Renewable Energy Sources Task Force is that the draft law on the strategy of the national environmental policy for the period until 2030, registered at the Verkhovna Rada of Ukraine, is still pending hearing, while the draft bylaws required to start strategic environmental assessment according to the recently adopted law still haven’t been published for public comments. Experts of the oil and oil products sector note the absence of any significant progress in the implementation of Ukraine’s international commitments in the oil sector. The work on the draft law on the minimum oil and petroleum products reserves was suspended until the contract with European experts is renewed. Speaking about business climate, experts note the completion of the first competition for five vacancies at the NEURC and the appointment of new commissioners by President Poroshenko, restoring quorum at the NEURC. Still, experts point out that the second competition for another two vacancies was blocked by a court ruling. In the meantime, the Cabinet of Ministers has adopted a number of important resolutions on development of entrepreneurship and formation of a favorable business climate, which concern delimitation of functions of controlling bodies, optimization of the process of approving investment projects by various agencies, and other matters.
Executive Summary Most frequently used acronyms WANO - World Association of Nuclear Operators CSFSF - Centralized Spent Fuel Storage Facility IAEA - International Atomic Energy Agency SNRIU - State Nuclear Regulatory Inspectorate of Ukraine SCNRS - State Scientific and Technical Center for Nuclear and Radiation Safety SAEZM - State Agency of the Exclusion Zone Management RAW - radioactive waste SNF - spent nuclear fuel NEFCO - Nordic Environment Finance Corporation DS - detached subdivision SE - state enterprise NNEGC - National Nuclear Energy Generating Company NPP - nuclear power plant SIFCI - State Innovative Financial and Credit Institution SSE - specialized state enterprise CMU - Cabinet of Ministers of Ukraine Verkhovna Rada - Verkhovna Rada of Ukraine FEC Committee – Verkhovna Rada Committee for the Fuel and Energy Complex, Nuclear Policy and Nuclear Security NEURC - National Energy and Utilities Regulatory Commission LRW - liquid radioactive waste LNG - liquefied natural gas GTS - gas transmission system DHC - district heating company AA - Ukraine-EU Association Agreement
Gas As of the end of May, this year’s achievements of the Verkhovna Rada of Ukraine concerning reform of the gas sector remained: a) adoption of two laws at the March session, No.6229 1 on transparency in extractive industries (first reading) and No.2314-VIII 2 on deregulation at the early stages of gas production (enacted); and b) registration by MPs of the attempts to regulate the metering of gas consumed by households 3 and the conditions for developing competition among gas suppliers on the domestic market (amendments to the Law on the Natural Gas Market 4). During May, MPs have registered only two draft resolutions of the Verkhovna Rada. The government has managed to keep the current regulation on Public Service Obligations (PSO) in force until August 1, 2018, thus bringing the launch of a new mechanism of pricing gas for households and DHCs back for another two months. The Coordination Council for Energy Reforms established by the Cabinet of Ministers has decided on changing Naftogaz unbundling model and gave the task of finalizing the new model to working groups established specifically for that purpose 5. Since Gazprom continues to ignore the Stockholm arbitration ruling, concerning both the supply of gas to Ukraine and payment of compensation awarded to Naftogaz, the latter started a legal action to collect the awarded compensation in European courts. Ukrtransgaz PJSC changed its official name to Ukrtransgaz JSC and became a private joint-stock company, as reflected in the revised version of its charter. The company continues to stably operate transit gas pipelines and the gas storage system, enabling uninterruptible supplies of Russian gas to Europe. At the same time, 40 (including foreign) gas traders have already taken advantage of Ukrtransgaz service of underground gas storage in the "customs warehouse" regime (almost three years without paying customs duties). The European Commission has suggested to start trilateral talks (European Union, Ukraine, Russia) as soon as possible to settle the issue of gas transit to Europe via Ukrainian GTS after 2019 and agree on the terms and key parameters of a new transit agreement. Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (Articles 338 and 341, Annex XXVII of AA) according to Article 278 of AA In May, the Verkhovna Rada FEC Committee has reviewed and suggested declining the draft law No 6547 6 on the access to information in the natural gas supply sector (and other housing and utilities services), registering a draft of the relevant Verkhovna Rada resolution (No 6547/P 7). The draft law increases the scope of information regarding economic and financial activity of monopolistic suppliers to which household consumers will be guaranteed to have free (unrestricted and free of charge) access. MPs believe that the key flaw of this document is that it contains no substantiation of costs related to the access to this information, thus creating uncertainty as to whether these costs will be borne by the state or paid for by increasing tariffs (additional expenses in this area are currently undesirable, because they would cause further growth of the cost of supplying energy carriers, in particular, gas). A draft Verkhovna Rada resolution 8352 8 was also registered at the initiative of one MP, proposing to create a working group of MPs to inquire into the spending by Naftogaz of Ukraine NJSC of funds paid by http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61409 http://zakon5.rada.gov.ua/laws/show/2314-viii 3 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=63571, http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=63582, http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=63629 4 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=63918 5 https://ua.interfax.com.ua/news/economic/508963.html 6 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61957 7 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=64032 8 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=63988 1 2
Gas natural gas consumers. The reason for that was the decision of Naftogaz’s Supervisory Board 9 to pay US 46.3 million in bonuses to the company’s representatives involved in winning the Naftogaz vs Gazprom case in Stockholm Arbitration Institute 10. During May, the Cabinet of Ministers was considering several scenarios of raising gas prices for households and DHCs, but neither was approved 11. The proposal from Naftogaz 12, declined by the government, suggested charging different prices depending on consumption volume with the simultaneous removal of gas supply companies from the chain of gas delivery to households and DHCs and their replacement with Naftogaz. Besides the unacceptability of the latter, the government’s specialists also objected in their analysis 13 to the further decrease by 15% of the so-called "social rate" of gas consumption (5.4 m3 per person per month for households with centralized water supply system and 3.3 m3 per person per month for households without it) proposed by Naftogaz. The company suggested to charge the current gas price (6.96 UAH/m3) on this consumption rate only, and introduce а new, 60-65% higher price for the volumes consumed above the social rate, thus increasing it to 10.99 UAH/m3 effective June and 11.47 UAH/m3 effective October, respectively. According to media reports 14, IMF also did not support such a drastic increase, but at the same time, the Fund’s representatives continue to insist that gas prices in Ukraine must be charged at the market level and that only the most vulnerable consumer categories must be protected by subsidies 15. As a result, the government has postponed the decision to change the gas price until at least 1 August of this year (Resolution 415 16). At the same time, the European Commission also supports the abolition of special obligations to supply gas to households in Ukraine and the leveling of prices, placing hopes upon acceleration of reforms by new members of NEURC 17. The European Commission prompts the government to not only completely abolish PSO but also develop, within 2-3 years, a plan for abolition of subsidizing gas prices for households. According to Vice-President Maroš Šefčovič 18, the European Commission also expects Ukraine to act more resolutely in unbundling Naftogaz and organizing a competitive selection of a partner for the joint management of GTS. These problems were discussed by the governmental Coordination Council for Energy Reforms at its meeting of 29 May. Prime Minister Volodymyr Groysman who presided over the meeting has emphasized19 that Ukraine must build a new, reliable GTS management system as a modern, stable structure of delivering gas to European consumers. Simultaneously with implementation of a partnership institute, an independent GTS operator reformed on the basis of a new algorithm required
http://www.naftogaz.com/www/3/nakweb.nsf/0/B3C6C51AD098CD12C225829D00359112?OpenDocument&year=2018&mo nth=05&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8 10 As we know, payments to Naftogaz under arbitration judgment haven’t started yet as of today 11 According to earlier reports, the government’s proposal to raise the gas price for these categories by 3% every quarter wasn’t approved by IMF 12https://ukranews.com/publication/2432-neftegaz-predlagaet-dyfferencyrovat-ceny-na-gaz-s-povyshenyem-na-60-65 13 Ibid. 14http://ua-banker.com.ua/articles-and-analytics/financial/29091 15 From the interview with David Lipton, First Deputy Managing Director of IMF (https://www.rbc.ua/rus/news/mvfnastaivayut-povyshenii-tarifov-gaz-obespechennyh-1524723536.html) 16 https://www.kmu.gov.ua/ua/npas/pro-vnesennya-zmin-do-postanovi-kabinetu-ministriv-ukrayini-vid-22-bereznya-2017-r187-010101 17 Maroš Šefčovič, Vice-President of the European Commission said after the meeting with Ukraine Prime Minister Volodymyr Groysman in Brussels (https://www.epravda.com.ua/news/2018/05/26/637188/) 18 https://interfax.com.ua/news/economic/507880.html 19 https://www.kmu.gov.ua/ua/news/spilne-upravlinnya-ukrayinskoyu-gts-garantovano-zabezpechit-yevropejskih-spozhivachivenergoresursom-volodimir-grojsman 9
Gas due to specifics of the Stockholm Arbitration Institute’s judgment in the Naftogaz vs Gazprom case must become the pivotal element of this system. The Coordination Council for Energy Reforms has developed a model 20 placing the newly-established company Trunk Gas Pipelines of Ukraine PJSC (MGU) under Naftogaz’s management, providing it with gas transmission assets, certifying as the GTS operator and making it fully operational by 2020. According to media reports21, this algorithm does not contradict the Stockholm Arbitration Institute’s judgment concerning transit contract. All that is left is to enforce this judgment. For that purpose, specialized working groups (with participation of MGU Supervisory Board) are going to clarify and finalize the required measures within the algorithm’s framework, a job that might take several weeks to accomplish. In May, the State Service for Geology and Mineral Resources took its step toward the transparency of extractive industries by enabling open access to the register of oil and gas wells in Ukraine 22. In addition, the agency’s acting director Oleh Kyryliuk says23, the State Service for Geology and Mineral Resources proposes to accommodate suggestions and demands from extraction companies and abolish the licensing procedure outside auctions by removing the approbation mechanism which offsets the auction sale of hydrocarbons. The five new members of NEURC, whose appointment was signed off by the President of Ukraine on 29 May 24, took office on 30 May 2018. NEURC has published the average figures of natural gas consumption by households in 2017 for various regions 25, based on the Commission’s continuous monitoring. At the same time, NEURC said that they received no suggestions or proposals regarding the draft resolution amending provisions of the Code of Gas Storage Facilities concerning formation of their development plans, published back in March 26. In the meantime, the deadline for compliance with the regulator’s requirement (related to the introduction of daily balancing) to all consumers other than households to install, at their own expense, equipment for remote communication of gas meter reading data (Resolution 2494 27) has expired on 27 May, so the collision caused by this requirement now requires resolution. What it means is that as of today, the largest group of non-household consumers – small consumers using up to 10 thousand cubic meters of gas per year – are left without this equipment, and for them, the cost of this equipment is unbearable 28. Gas distribution companies warn small businesses, which this group is mostly comprised of, about suspension of gas supply if they do not install data communication equipment. Deputy Head of Naftogaz’s Energy Efficiency Department Oleksii Khabatiuk29 says that Commission Regulation (EU) No 312/2014, which NEURC referred to when approving the Code of Gas Storage Facilities, does not contain provisions making this requirement obligatory; it only states that there are https://ua.interfax.com.ua/news/economic/508513.html Ibid. 22 http://geo.gov.ua/novyna/derzhgeonadra-vidkryly-dostup-do-reyestru-gazovyh-ta-naftovyh-sverdlovyn-ukrayiny 23 http://geo.gov.ua/novyna/oleg-kyrylyuk-prezentuvav-resursnyy-potencial-vuglevodniv-zahidnoyi-ukrayiny 24 Oleksandr Formagei-http://www.president.gov.ua/documents/1502018-24238; Yevhen Magliovanyi http://www.president.gov.ua/documents/1512018-24242; Olena Antonova -http://www.president.gov.ua/documents/152201824246; Dmytro Kovalenko-http://www.president.gov.ua/documents/1532018-24250; Oksana Kryvenkohttp://www.president.gov.ua/documents/1542018-24254 25 http://www.nerc.gov.ua/?news=7588 26 http://www.nerc.gov.ua/?id=31929 27 http://www.nerc.gov.ua/index.php?id=18017 28 According to expert estimates (https://biz.censor.net.ua/m3068292), this equipment will cost consumers some 1-2 billion hryvnias 29 https://www.facebook.com/photo.php?fbid=1853513341337988&set=a.873775642645101.1073741832.100000380206273 &type=3&theater 20 21
Gas consumers whose intake is forecasted, or is not forecasted, on a daily basis. The aforementioned small non-household consumers "do not need this equipment, and may be categorized as consumers whose intake/consumption/delivery is not measured daily". MP Lev Pidlisetskyi, member of the Verkhovna Rada’s FEC Committee, has the same opinion30. According to his estimates, over 80 thousand consumers became hostages of this legal collision, and therefore, it would have been logical to abolish the contradictory requirement and to do it as soon as possible. In the meantime, RGC Group’s gas distribution companies have completely switched to daily balancing, the platform for which was developed by the company’s specialists 31. Naftogaz has revealed new pricing proposals for June 2018 32. Comparing to May 2018 prices, gas prices for industrial and other consumers not falling within the scope of application of the Regulation on Special Obligations have been raised by 8.5-8.9%. According to the revised price list 33, the price of gas as a commodity (including VAT) was set, effective 1 June 2018, as follows: for monthly gas consumption of up to 50 thousand cubic meters inclusively, unregulated monthly consumption and monthly consumption of over 50 thousand cubic meters without prepayment: UAH 10,893.6 per thousand cubic meters; for monthly consumption of over 50 thousand cubic meters with prepayment 34: UAH 9952.8 per thousand cubic meters (the same price of UAH 9952.8 per thousand cubic meters was set for Naftogazfounded subsidiaries in which it holds 100% of the authorized capital).
Regulation (EC) No 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 (Articles 338 and 341, Annex XXVII of AA) according to Article 278 of AA, trade aspects (Articles 269 to 274 of AA) The expiration in 2016 of the long-term contract on reservation by Gazprom of the transmission capacity of Transit-1 gas pipeline 35 used to deliver Russian natural gas to Bulgaria necessitated harmonization of the rules of using gas transmission infrastructure with requirements of European legislation, in particular, by facilitating free access of market participants to the said gas pipeline. In the context of this task, having agreed upon enabling two-sided gas flows in the connection point at the UkrainianRomanian border, the Romanian and Ukrainian GTS operators have decided to assess the unbinding demand of gas market participants in Ukraine and the neighboring countries for the Transit-1 gas pipeline’s guaranteed transmission capacity of up to 5 bcm of gas per year in Romania-Ukraine direction, which has been done by Ukrtransgaz. The result has exceeded all expectations: "Eleven leading European and Ukrainian gas traders expressed interest in transmitting natural gas in Romania-Ukraine direction in the total amount of up to 10 (!) bcm of gas per year" 36. Upon expiration of the transit contract with Gazprom in 2020, Ukrtransgaz plans to switch to direct relationships, regulated by European rules, with operators of all neighboring countries in all international inlets/outlets.
https://biz.censor.net.ua/m3068292 https://interfax.com.ua/news/economic/508582.html 32 http://www.naftogaz.com/www/3/nakweb.nsf/0/02FDBE62ABDDCC29C22582940036CED3?OpenDocument&year=2018&m onth=05&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 33 http://www.naftogaz.com/files/Information/Naftogaz-gas-prices-ne-PSO-June-2018.pdf 34 Payment within one calendar month preceding a gas delivery month 35 One of the three gas pipelines of the Trans-Balkan route 36 http://utg.ua/utg/media/news/2018/05/results-isaccea-1-orlovka.html 30 31
Gas On 15-18 May, Ukrtransgaz attended a dispatcher conference featuring representatives of countries transiting natural gas from Russia: Ukraine, Moldova, Balkan countries and Turkey 37. The participants of the conference have decided to reduce the daily unevenness in gas intakes under contractual terms and synchronize maintenance periods in 2019. According to the revised version of Ukrtransgaz’s charter registered on 22 May 2018, the company has ceased to be a public joint-stock company, and therefore, the company’s official name was changed from Ukrtransgaz PJSC to Ukrtransgaz JSC 38.
Directive 2004/67/EC concerning measures to safeguard security of natural gas supply (Articles 338 and 341, Annex XXVII of AA), "Early prevention mechanism" action (Annex XXVI to AA), actions in emergency situations (Articles 275, 276, 309 and 314 of AA) According to Ukrtransgaz’s data as of 27 May 39, underground gas storage (UGS) facilities have received 1,921.37 million cubic meters of gas after the end of the 2017-2018 heating season. The total stock of gas in Ukraine’s UGSs reached 9.4 bcm, i.e. one-third of their capacity. According to media reports40, Ukrtransgaz summed up the results of launching the service of gas storage in the "customs warehouse" regime 41. As of present, Ukrtransgaz has signed 40 contracts with gas traders on this service. The company reports that the entire system of underground gas storage facilities in Ukraine operates in a flexible mode and, given the existing filling rate of approximately 30%, allows to withdraw from UGSs the maximum of 87-95 million cubic meters per day (up to 200 million cubic meters per day if the storage facilities are filled up). During the past month, Gazprom has only rigidified its stance in the fight for reversal of the Stockholm Arbitration Institute’s judgment in its dispute with Naftogaz under the transit contract. While in its application for appeal dated 29 March 2018 Gazprom demanded only partial reversal of this judgment, the application for appeal filed on 30 May with Svea District Court of Appeals in Sweden contains the demand for complete reversal of the said judgment 42. Since according to international law, an appeal against an arbitration ruling cannot stop its enforcement, the legal obligation upon Gazprom to pay the amount awarded to Naftogaz remains in force. Therefore, the litigation between Gazprom and Naftogaz concerning the transit contract may affect the stocks of companies running Nord Stream and Nord Stream 2 gas pipelines. We are talking about the imposition by the Stockholm Arbitration Institute of enforcement security measures upon the stocks of Nord Stream AG and Nord Stream 2 AG 43 (according to media reports, these stocks have already been frozen and may be potentially placed under arrest 44). Considering that the Russian monopolist continues to ignore the obligation to pay US 2.6 billion to Naftogaz under the final judgment of the Stockholm Arbitration Institute in both cases (regarding supply and transit of gas), Naftogaz has launched collection proceedings by applying to Swiss courts 45. http://utg.ua/utg/media/news/2018/05/26th-dispatching-meeting-2018.html http://utg.ua/utg/media/news/2018/05/company-name-changes-and-charter-updates.html 39 http://utg.ua/utg/business-info/live.html 40 https://economics.unian.ua/energetics/10122515-ukrtransgaz-uklav-40-kontraktiv-na-zberigannya-gazu-u-rezhimi-mitnogoskladu.html 41 This service offers storage of gas in an UGS during 1095 days without paying customs duties, enabling traders to choose the right moment for sale of gas (depending on price) and pay the duty only after completing the sale. 42 https://www.kommersant.ru/doc/3643132 43 http://www.interfax.ru/business/614877 44 Ibid. 45 http://www.naftogaz.com/www/3/nakweb.nsf/0/850FEC1AA570A670C225829D003EAC38?OpenDocument&year=2018&mo nth=05&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 37 38
Gas According to media reports 46, Gazprom confirmed the launch of collection proceedings in Switzerland. In addition, Naftogaz filed an application to court for arrest of Gazprom’s stock in its Dutch subsidiaries 47. The Dutch court granted this application, but six out of seven Gazprom’s subsidiaries in the Netherlands refuse to cooperate with court enforcers, although that shouldn’t affect the arrest. In order to facilitate operation of Ukraine’s gas transmission system in accordance with European reliability, safety and environmental standards, Ukrtransgaz has developed a ten-year GTS modernization plan for 2018-2027 envisaging, among others, reconstruction of four compressor stations. Presently, consultations continue with the regulator for the purpose of approving this plan 48. At the same time, the features and capabilities of Ukraine’s GTS were presented to the OSCE delegation headed by OSCE Parliamentary Assembly President George Tsereteli 49. During their visit to the dispatch control center, Ukrtransgaz’s specialists discussed with European visitors possible consequences of changing the routes for transmission of natural gas to Europe that Russia wants to make (in particular, Nord Stream 2 gas pipeline project), and the resulting threats to Ukraine and EU states. It’s hard to tell whether actions of Poland, which strongly opposes this project, would help frustrate it. In 2016, Polish specialists analyzed the application for the establishment by Gazprom and five foreign companies of a joint venture (JV) to build Nord Stream 2, and concluded that the creation of JV may result in limitation of competition. This year, Poland’s antimonopoly regulator UOKiK opened a new case against these six companies responsible for financing Nord Stream 2, and the Polish party made an official statement about it on 9 May 50. If an agreement was made in the concentration sphere without consent of the office president, the latter has the right to charge a fine of up to 10% of JV’s revenues. If concentration has already been implemented, and UOKiK suspects that the parties to the JV agreement continue with joint implementation of their project despite recalling the notice of concentration, the agency "may demand to sell a portion of JV’s assets, sell the controlling stock or dissolve JV". Let’s wait and see which of these threats the Polish regulator will carry out in its decision. Ecologists from Finland and Germany are also trying to prevent construction of Nord Stream 2. ClientEarth has filed an appeal with the administrative court of the Finnish city Vaasa against the permission issued by the country’s government to build a 380-km section of the gas pipeline within Finland’s economic zone 51. Members of NABU (Germany’s Nature and Biodiversity Conservation Union) went to court as well 52, believing that construction of the gas pipeline’s maritime section may cause "irreparable damage to fragile ecosystem". Having placed in early May an additional inquiry with the Higher Administrative Court of Mecklenburg-Vorpommern, they asked for an interim court ruling that could prevent the start of excavation in the Bay of Greifswald in the middle of the same month. Nevertheless, the preparatory work on digging ditches for two pipe ducts inside the bay has begun 53. https://ria.ru/radio_brief/20180530/1521692581.html http://www.naftogaz.com/www/3/nakweb.nsf/0/06844285AF769BD7C22582A3002373C0?OpenDocument&year=2018&mo nth=06&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 48 http://utg.ua/utg/media/news/2018/04/ukrtransgaz-developed-gts-10-years-modernization-plan.html 49 http://utg.ua/utg/media/news/2018/05/delegaczya-obse-oznajomilas-z-robotoyu-mozhlivostyami-gts-ukrani.html 50 https://www.uokik.gov.pl/aktualnosci.php?news_id=14322 51 https://www.tvp.info/37175377/fundacja-clientearth-skarzy-zgode-na-budowe-nord-stream-2 52 http://www.dw.com/uk/%D0%BD%D1%96%D0%BC%D0%B5%D1%86%D1%8C%D0%BA%D1%96%D0%B5%D0%BA%D0%BE%D0%BB%D0%BE%D0%B3%D0%B8-%D0%BF%D1%80%D0%B0%D0%B3%D0%BD%D1%83%D1%82%D1%8C%D1%87%D0%B5%D1%80%D0%B5%D0%B7-%D1%81%D1%83%D0%B4%D0%BF%D0%B5%D1%80%D0%B5%D1%88%D0%BA%D0%BE%D0%B4%D0%B8%D1%82%D0%B8%D0%B1%D1%83%D0%B4%D1%96%D0%B2%D0%BD%D0%B8%D1%86%D1%82%D0%B2%D1%83%D0%BF%D1%96%D0%B2%D0%BD%D1%96%D1%87%D0%BD%D0%BE%D0%B3%D0%BE%D0%BF%D0%BE%D1%82%D0%BE%D0%BA%D1%83-2/a-43748401?maca=ukr-rss-ukr-all-1496-rdf 53 https://www.nord-stream2.com/ru/dlia-pressy/novosti-i-meropriiatiia/nachalis-podgotovitelnye-raboty-na-morskom-uchastkesevernogo-potoka-2-v-germanii-93/ 46 47
Gas In May, Maroš Šefčovič, Vice-President of the European Commission put forth an initiative 54 to organize, as soon as possible, the talks between the EU, Ukraine and Russia to discuss the problem of transit of Russian gas across Ukraine after 2019. During the high-level international conference in Brussels, attended by Ukraine Prime Minister Volodymyr Groysman, Mr. Šefčovič said that the subject of talks must include the minimum annual transit amount, transit tariff and possible guarantees to Ukraine 55. "The continuation of a long-term transit of Russian gas via Ukraine is strategically important, and it has huge effect on energy security of the EU and Ukraine from the viewpoint of both economic and delivery security factors", the Vice-President of the European Commission said, adding that EU member states have complete consensus on this matter while admitting that Russian gas remains an important source for the European Union. Naftogaz in the person of its Chairman Andrii Kobolev welcomed the talks with participation of the European Commission, but said that they must include not only Russia’s Energy Ministry but also Gazprom 56, because as the experience of past talks of this kind proves, Gazprom Chairman Alexey Miller always takes the stance that Gazprom is a joint-stock company, "and therefore, the minister’s stance is not decisive for him". In the meantime, the European Commission has entered in late May an antimonopoly ruling in Gazprom’s case 57 that has been considered for over six years. The ruling sets out a detailed package of rules that should change the Russian company’s policy in gas markets of Central and Eastern Europe. These rules include lifting of all contractual barriers to free gas flows, prohibition on taking advantage of dominating position in the supply of gas, and facilitating a structured process that would allow Gazprom’s clients to have competitive prices. If Gazprom breaches any of these rules, the European Commission may charge it a penalty of up to 10% of its annual turnover without the need to prove violation of EU’s antimonopoly rules. However, Lithuania believes that the results of this investigation could be appealed, because the European Commission’s actions did not include penalties 58.
https://ria.ru/economy/20180523/1521143161.html https://interfax.com.ua/news/economic/507847.html 56 https://interfax.com.ua/news/economic/507825.html 57 http://europa.eu/rapid/press-release_IP-18-3921_en.htm 58 https://ua-energy.org/uk/posts/lytva-mozhe-oskarzhyty-rishennia-yevrokomisii-v-spravi-hazpromu 54 55
Gas EUROPEAN LEGISLATION UPDATES Applications for the first competition of infrastructure projects under Connecting Europe Facility (CEF) program in 2018 were accepted from 19 March to 26 April. EUR 200 million in financing is allocated for projects that could strengthen the EU’s internal market, enhance security of deliveries and help implement clean energy goals. The results are expected in August 2018, and another competition will be announced in June. On 21 March, the European Parliament Committee on Industry, Research and Energy (ITRE) has approved the European Commission’s proposal to amend the Directive 2009/73/EC concerning common rules for the internal market in natural gas. The purpose of these changes is to ensure conformity with EU rules – concerning transparency and access of other suppliers – of all trunk gas pipelines entering the territory of EU member states from third countries (with clearly defined exceptions). According to reports, these requirements concern separation of operators from suppliers, independent regulation and third party access. ITRE has clarified certain provisions of the project, in particular, the scope of application (territorial waters and exclusive economic zones of EU member states); the maximum 5-year period of exceptional conditions for the new infrastructure and the list of the necessary conditions (including diversification of supply and energy security); demand of third countries to provide response within three months as part of consultations; enabling the European Commission to take into account economic sanctions against third countries when considering permits for exceptional conditions; and a short period (three months) for introduction of these amendments to the Directive. In April, the European Parliament formally agreed to the start of a trilogue with the Council of the EU. Back on 27 March, the Bulgarian presidency in the EU has prepared the first version of the draft, reflecting the previously received comments from the legal department of the Council of the EU. In particular, this version proposes to change certain definitions ("pipelines" must become "transmission lines", "interconnectors" – "transmission systems") and the scope of application ("EU territory", unlike "EU jurisdiction" proposed by the European Commission), to make the consultation procedure optional for third parties, and allow exceptional conditions to remain in force for up to 20 years (with the extension clause), in particular, from the viewpoint of returning investments or energy security. On 17 May, during the Western Balkan Summit, representatives of Bulgaria and Serbia signed an agreement on construction of the first gas interconnector between the two countries. The connecting gas pipeline with the capacity of 1-1.8 bcm in the Serbian and 0.15 bcm in the Bulgarian direction is expected to reduce dependence on the monopolistic supplier and enhance security. The EU provided support to the Serbian section in the form of a EUR 49.6 million grant. Another two agreements were signed during the Energy Infrastructure Forum held in Copenhagen on 24-25 May: a EUR 33 million grant agreement for Baltic-Pipe project (interconnector between Denmark and Poland) and a EUR 276 million investment agreement for GIPL project (Poland-Lithuania interconnector). Both gas pipelines are part of the EU’s joint interest projects: the former would increase diversification and competition, and the latter would put isolation of the Baltic States’ gas markets to an end. On 24 May, the European Commission imposed obligations upon Gazprom as part of the resolution of an antimonopoly case (for details, see: main part of the monitoring report). The Eurostat data regarding gas prices for households in the EU was also published in May. In the second half of 2017, they declined by 0.5% on average versus the similar period of 2016, down to 6.3 cents per kWh. The average share of taxes and duties in the price was 27%. The price per kWh in various countries varied from 3 cents in Romania to 9 in Denmark and over 11 in Sweden.
Electricity and Nuclear Safety For almost two months, the NEURC did not have quorum and was unable to adopt regulatory acts required for the new electricity market. The Commission became operational only on May 29, when President Poroshenko appointed five new members of the Regulator. On May 23, the government approved the issuance of guarantees to secure UAH 1.054 billion worth of loans taken to finance modernization and upgrading of state coal mining enterprises. Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (Article 269, Chapter 11, Title IV of the Ukraine-EU Association Agreement) On 16 May, Verkhovna Rada’s FEC Committee has reviewed a number of draft laws concerning Ukraine’s electricity market. One of these documents was the draft Law of Ukraine on the settlement of debt occurring in the wholesale electricity market (registration No 8253), submitted to the Verkhovna Rada by the Cabinet of Ministers of Ukraine. The purpose of this draft law is to ensure that the debt occurring in the wholesale electricity market is settled in full in order to launch a new model of the electricity market in accordance with the Law of Ukraine on the Electricity Market. According to data by the draft law’s authors, Energorynok SE’s accounts receivable and payable as of 01.02.2018 amounted to UAH 29.8 billion and UAH 28.1 billion, respectively. The new market model envisages liquidation of Energorynok SE and creation of a commodity exchange. A significant portion of receivables (38%, or UAH 11.4 billion) is the debt owed by Regional Electricity Networks SE (supplier of electricity to state coal mining enterprises) and other enterprises supplying electricity to water supply and housing maintenance companies. In the opinion of CMU as the draft law’s author, the main reasons for such a backlog with payments include "absence of the full coverage of coal’s cost price paid to coal mining enterprises from the state budget; low level of payment discipline at water supply and sewage companies; overdue payments to water supply and sewage companies from the state budget to cover the difference in tariffs" 59. The implementation of this law would require, among other things, amendment of the Tax Code of Ukraine, because it proposes the following mechanism of settling debt occurring in the wholesale electricity market: • • •
settling debts owed by wholesale electricity market participants to each other, and writing off debts; assigning the right of claim or replacing a party to the obligation; adding a specific-purpose surcharge to the distribution system operators’ tariff for electricity distribution via local electricity networks.
Verkhovna Rada’s FEC Committee recommended the Verkhovna Rada of Ukraine to pass the draft law 8253 in the first reading and adopt it as the basis 60. The Committee has also reviewed the draft Law of Ukraine amending certain legislative acts of Ukraine by establishing an algorithm of remitting funds to current accounts of companies supplying electricity at regulated tariffs (registration No 7390) 61. The draft law envisages amendment of the Laws of Ukraine On the Electricity Market and On Electricity Generation by improving the disbursement of funds using an algorithm set by NEURC. Thus, it proposes to introduce guarantees of remittances of payroll funds from a current account with special usage regime to current accounts of companies supplying electricity at http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=63830 http://kompek.rada.gov.ua/uploads/documents/30438.pdf 61 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=63131 59 60
Electricity and Nuclear Safety regulated tariffs to ensure timely payment of wages. Verkhovna Rada’s FEC Committee recommended the Verkhovna Rada of Ukraine to pass the draft law 7390 8253 in the first reading and adopt it as the basis, and subsequently accommodate provisions of this draft law when working on amendments to the Law of Ukraine On the Electricity Market 62. On 26 May, Ukraine President Petro Poroshenko completed the rotation of NEURC members and dismissed the Commission’s Chairman Dmytro Vovk and the regulator’s member Ruslan Mashliakivskyi 63. On 29 May 2018, O.Antonova, D.Kovalenko, O.Kryvenko, Y.Magliovanyi and O. Formagei were appointed, based on an open competitive selection, as new members of NEURC per Decrees of the President of Ukraine No 150-154/2018. In the past, Olena Antonova worked at DTEK and AES Kyivoblenergo, Dmytro Kovalenko at NEURC and Ukrenergo NEC, Oksana Kryvenko at NEURC, Yevhen Magliovanyi at the State Agency for Energy Efficiency and Energy Conservation and at public bodies controlling and regulating the utilities sector, and Oleksandr Formagei at Ukrgidroenergo PrJSC and Centerenergo PJSC 64. NEURC has finally become operational again, and the Commission’s newlyelected members have to elect, in the nearest future, a new Chairman for a two-year term. During the open discussion held on 8 May, the regulator has reviewed a draft budget of NEURC for 2019. According to the said draft budget, NEURC’s expected need in financing is UAH 450,772.20 thousand with the planned rate of deductions for regulation in 2019 amounting to 0.064% of the licensee’s income 65. On 18 May, NEURC published the results of generalized suggestions and proposals from market participants regarding the draft of NEURC’s resolution approving the Methodology of calculating the government-regulated electricity price for cogeneration plants. Suggestions concerned mostly the procedure of setting the government-regulated price formed for a planned period that cannot be shorter than one calendar year. The regulator also took into account the suggestions stating that the government-regulated electricity price shall be set only when it becomes higher than prices on the dayhead market during the last 10 calendar days 66.
Regulation (EC) No 714/2009 of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (Article 270, Chapter 11, Title IV of the Ukraine-EU Association Agreement) On 15 May, Ukrenergo NEC SE held a joint working meeting with representatives of SEPS, Slovakia’s system operator. According to information by the Ukrainian party, SEPS agreed to delegate to Ukrenergo NEC SE the right to distribute the flow capacity of cross-border exchanges at the UkraineSlovakia exchange. At the same time, the parties agreed to use the existing Ukrainian e-auction platform. Ukrenergo NEC SE and SEPS are expected to sign an emergency assistance agreement 67. Besides the conference with Slovakia’s system operator, the management of Ukrenergo NEC SE had a meeting on 15-16 May with Moldova’s system operator, Moldelectrica, where the parties signed a
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Electricity and Nuclear Safety methodology of calculating electricity in a virtual point fully compliant with ENTSO-E Operation Handbook 68. During the meeting of system operators of Ukraine and Georgia (GSE) held on 21-22 May in Lviv, the Georgian party proposed to sign a Memorandum on coordination of actions aimed at integration of system operators of the two countries into ENTSO-E. The Ukrainian party welcomed this initiative, and proposed a memorandum preparation plan 69. Directive 2009/72/EC of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (Article 274, Chapter 11, Title IV of the Ukraine-EU Association Agreement) On 18 May, Ukrenergo NEC SE held a public discussion of the draft Transmission System Development Plan for the next 10 years. The Transmission System Development Plan for 2019-2028 70 ensures conformity of transmission system with the electricity market’s demand and requirements to security of electricity supply, and was developed in accordance with the Law of Ukraine on the Electricity Market. The Development Plan contains: "1) description of measures aimed at ensuring security of electricity supply; 2) key facilities of the transmission system that should be built or reconstructed during the next 10 years; 3) information regarding facilities of the transmission system that need to be built and/or reconstructed during the next 10 years, period of their construction and/or reconstruction, and sources of financing; 4) information regarding investments in facilities of the transmission system that have already been approved and are undergoing the implementation phase, stating forecasted investments that must be made during the next three years." 71 Discussion of the draft Transmission System Development Plan was preceded by publication of a report on the assessment of conformity (sufficiency) of generating capacity, and by publication of development plans of adjacent electricity transmission and distribution systems. Ukrenergo NEC SE believes that almost UAH 52 billion will be required to invest in the construction and reconstruction of infrastructure in 2019-2021 alone, including the start of isolated operation of Ukraine’s IPS 72. In the course of discussion, the participants supported the Development Plan prepared by Ukrenergo, but at the same time, outlined a number of points and areas that need to be improved. In particular, it was proposed to present alternative network construction/modernization versions and their probable consequences in the future to enable their comparison.
Article 338, Chapter 1, Title V of the Ukraine-EU Association Agreement Cooperation agreements with IMF On 24 May, the Guarantee Agreement between Ukraine and the European Investment Bank (EIB) and the Financial Agreement between EIB and Ukrenergo NEC SE for the amount of EUR 136 million were signed in Brussels. This money will be used to finance the Program of Improving Reliability of https://ua.energy/osnovni-podiyi/ukrenergo-ta-moldelectrica-prodovzhuyut-realizatsiyu-spilnyh-dij-v-ramkah-integratsiyienergosystem-entso-e/ 69 https://ua.energy/osnovni-podiyi/ukrenergo-ta-gse-spilnyj-yevropejskyj-vektor/ 70 https://ua.energy/wp-content/uploads/2018/03/PROEKT-Planu-rozvytku-systemy-peredachi-na-2019-2028-roky.pdf 71 https://ua.energy/osnovni-podiyi/16609/ 72 https://ua.energy/media/pres-tsentr/pres-relizy/plan-rozvytku-systemy-peredachi-z-urahuvannyam-majbutnoyi-integratsiyientso-e/ 68
Electricity and Nuclear Safety Substations, which includes comprehensive replacement of obsolete generating equipment and complete automation of 12 substations in South-Eastern Ukraine 73.
Article 339, Chapter 1, Title V of the Ukraine-EU Association Agreement Coal market On 10 May, the Cabinet of Ministers of Ukraine has issued the Directive 358-r approving the list of stateowned large-privatization assets slated for privatization in 2018. The aforementioned privatization list includes Krasnolymanska Coal Company SE. On 10 May, the Cabinet of Ministers of Ukraine has issued the Directive 313-r on redistribution of certain expenditures from the state budget, allocated to the Ministry of Energy and Coal Industry for 2018. The said Directive slashed financing of the Program of Liquidating Unprofitable Coal Mining and Coal Benefaction Enterprises by UAH 200 thousand, and increased, by the same amount, financing of the program of measures aimed at promoting domestic coal production and reforming the public sector of the coal industry 74. On 17 May, Verkhovna Rada’s Special Privatization Control Commission held the hearing "Privatization of Coal Mines: Problems and Prospects". The attendees discussed contemporary problems of reforming Ukraine’s coal mining industry, problematic aspects obstructing privatization and complicating the inflow of investments in the coal industry’s development, and completion of the creation of stateowned National Coal Company, stressing the need to define the criteria and terms of privatization and social security of personnel of the coal mines earmarked for privatization. After generalizing the proposals voiced during the Committee hearings, recommendations will be developed for bodies of executive power 75. On 23 May, the Government has approved amendments to the Procedure of funds allocated in the state budget to finance measures of promoting domestic coal production and reforming the public sector of the coal industry. According to the government resolution, an enterprise having outstanding wages payable to its personnel may be eligible for budget financing if it allocates at least 70 percent of the net income from coal sales to the payment of wages and payroll taxes 76. The government agreed to the proposals from the Ministry of Energy and Coal Industry to issue in 2018 government guarantees to secure loans taken to finance modernization and upgrading of Lvivvuhillia SE’s Vidrodzhennia Mine 77, Selydivvuhillia SE’s 1/3 Novohrodivska Mine 78, Pervomaiskvuhillia SE’s Girska Mine 79, Toretskvuhillia SE’s Tsentralna Mine 80, Lvivvuhillia SE’s M.S. Surgai Mine 81 and Stepova Mine. 82 https://ua.energy/osnovni-podiyi/yevropejskyj-investytsijnyj-bank-pidtrymuye-modernizatsiyu-merezh-ukrenergo/ https://www.kmu.gov.ua/ua/npas/pro-pererozpodil-deyakih-vidatkiv-derzhavnogo-byudzhetu-peredbachenih-ministerstvuenergetiki-ta-vugilnoyi-promislovosti-na-2018-rik/ 75 http://scpp.rada.gov.ua/fsview/72900.html/ 76 https://www.kmu.gov.ua/ua/npas/pro-vnesennya-zmin-do-poryadku-vikoristannya-koshtiv-peredbachenih-/ 77 https://www.kmu.gov.ua/ua/npas/pro-nadannya-u-2018-roci-derzhavnoyi-garantiyi-za-zobovyazannyami-derzhavnogopidpriyemstva-lvivvugillya-z-metoyu-realizaciyi-investicijnogo-proektu-tehnichne-pereosnashennya-vp-shahta-vidrodzhennyadp-lvivvugillya/ 78 https://www.kmu.gov.ua/ua/npas/pro-nadannya-u-2018-roci-derzhavnoyi-garantiyi-za-zobovyazannyami-derzhavnogopidpriyemstva-selidivvugillya/ 79 https://www.kmu.gov.ua/ua/npas/pro-nadannya-u-2018-roci-derzhavnoyi-garantiyi-za-zobovyazannyami-derzhavnogopidpriyemstva-pervomajskvugillya/ 80 https://www.kmu.gov.ua/ua/npas/pro-nadannya-u-2018-roci-derzhavnoyi-garantiyi-za-zobovyazannyami-derzhavnogopidpriyemstva-toreckvugillya/ 81 https://www.kmu.gov.ua/ua/npas/pro-nadannya-u-2018-roci-derzhavnoyi-garantiyi-za-zobovyazannyami-derzhavnogopidpriyemstva-shahta-im-m-s-surgaya/ 73 74
Electricity and Nuclear Safety The total amount of government guarantees is UAH 1.054 billion, and the amount of fee for the issuance of a government guarantee is set at 0.001 percent of the outstanding loan amount per annum. The 2016 National EITI Report of Ukraine was published on 24 May. This Report is a third report of Ukraine under the Extractive Industries Transparency Initiative. The contextual and financial information presented in this Report concerns operations in Ukraine’s extractive industries during 2016. Section 5.1 of the Report covers the state of Ukraine’s coal industry, revealing information regarding budget programs in the coal mining industry, payments guaranteed by the government, coal reserves itemized by coal grades, distribution of special extraction permits valid in 2016, coal production dynamics, coal export volumes, etc.
Article 342, Chapter 1, Title V of the Ukraine-EU Association Agreement, Cooperation in the nuclear sector, Council Directive 96/29/Euratom, Council Directive 2006/117/Euratom, Council Directive 2003/122/Euratom On 3 May, Energoatom NJSEC Press Service announced the signature of a contract with Orano on assessing the possibility for processing spent nuclear fuel from Ukrainian reactors of VVER-1000 type at the La Hague site in France 83. On 10 May, a public hearing was held in Rivne NPP’s satellite city regarding continuing operation of Rivne NPP’s reactor No 3 beyond the rated period. This proposal received support 84, and on 17 May, the final public hearing of this matter approved the decision to continue the reactor’s operation 85. On 14-15 May 2018, an internal audit of Energoatom NJSEC’s integrated control system was held at Khmelnytskyi NPP for compliance with ISO 9001:2015 (quality management system), ISO 14001:2015 (environmental management system), OHSAS 18001:2007 (occupational safety and health management) and regulatory documents of the State Inspectorate of Ukraine for Nuclear Regulation setting out requirements to operator’s control system 86. A similar audit at Rivne NPP ended on 21 May 87. On 17 May 2018, speaking at this year’s second meeting of the interagency group and field operations center "Construction of the Centralized Spent Fuel Storage Installation for VVER reactors of Ukraine’s NPPs" held at the CSFSF construction site, Energoatom NJSEC President Yurii Nedashkovskyi said that construction of CSFSF and all related operations are financially secure 88. During the Sixth conference reviewing fulfillment of commitments under the Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management, held on 23 82https://www.kmu.gov.ua/ua/npas/pro-nadannya-u-2018-roci-derzhavnoyi-garantiyi-za-zobovyazannyami-derzhavnogo-
pidpriyemstva-lvivvugillya-z-metoyu-realizaciyi-investicijnogo-proektu-osnashennya-novih-lav-vp-shahta-stepova-dplvivvugillya/ 83 http://www.energoatom.kiev.ua/ua/press/nngc/53801-energoatom_pdpisav_kontrakt_z_kompanyu_orano/ 84 http://www.energoatom.kiev.ua/ua/press/nngc/53826gromadskst_pdtrimu_prodovjennya_termnu_ekspluatatc_energobloku__raes/ 85 http://www.energoatom.kiev.ua/ua/press/nngc/53836rvnenska_aes_zavershila_tcikl_gromadskih_sluhan_schodo_prodovjennya_termnu_ekspluatatc_energobloku_/ 86 http://www.energoatom.kiev.ua/ua/press/nngc/53831na_hmelnitckyi_aes_provedeno_vnutrshnyi_audit_ntegrovano_sistemi_upravlnnya_na_vdpovdnst_vimogam_mjnarodnih_stan dartv/ 87 http://www.energoatom.kiev.ua/ua/press/nngc/53846na_rvnenskyi_aes_vdbuvsya_vnutrshnyi_audit_ntegrovano_sistemi_upravlnnya/ 88 http://www.energoatom.kiev.ua/ua/press/nngc/53842yuryi_nedashkovskiyi_budvnitctvo_tcsvyap_ta_vs_zahodi_scho_z_nim_povyazan_fnansovo_zabezpechen/
Electricity and Nuclear Safety May, the Ukrainian delegation successfully presented the National Report on the proper fulfillment of Ukraine’s commitments under the Joint Convention during the three-year period after the Fifth conference. At this year’s conference held at IAEA headquarters in Vienna, Austria, Ukraine also presented the progress in implementing measures that ensure adequate nuclear and radiation safety when handling spent nuclear fuel and radioactive waste as required by the Joint Convention 89. On 25 May, Energoatom NJSEC Press Service announced that Zaporizhia NPP plans to launch commercial operation of a RAW processing complex by the year’s end. According to the announcement, one of the key objectives for the Zaporizhia NPP team in 2018 is to launch commercial operation of an improved RAW processing complex 90. A WANO support mission (SM) started on 29 May at Yuzhnoukrainsk NPP. The mission is devoted to the improvement of processes involving implementation and use of specialized human factor (HF) simulators. The international team includes representatives of Torness NPP (United Kingdom), Mochovce NPP (Slovakia) and Kozloduy NPP (Bulgaria). During the four-day mission at the Yuzhnoukrainsk site, the experts will learn more about HF simulators, take part in the trainings of NPP operation and maintenance personnel on these simulators, and monitor the execution of preset scenarios. A report with recommendations will be issued at the end of the mission 91. On 30 May, a regular meeting of the field operations center for introduction of modernized nuclear fuel produced by Westinghouse (ТВС-WR) at Ukrainian NPPs was held at Zaporizhia NPP. The meeting was attended by a Westinghouse Electric (Asia) S.A. delegation headed by President and CEO José Emeterio Gutiérrez, representatives of SNRIU, Ministry of Energy and Coal Industry of Ukraine, Energoatom NJSEC, SCNRS and the Verkhovna Rada of Ukraine 92. Article 342, Chapter 1, Title V of the Ukraine-EU Association Agreement, Cooperation in the nuclear sector, Cooperation on solving problems occurring as a result of the Chornobyl Disaster, and decommissioning of Chornobyl NPP According to the announcement of SAEZM Press Service of 3 May, the project of international technical assistance in rehabilitation of storage sites for radioactive waste (RAW) of Chornobyl origin located outside the alienation zone is entering the implementation phase. With the financial support from the European Union under the Program "Instrument for Nuclear Safety Cooperation", the aforementioned sites used for temporary RAW storage were ranked by the degree of radiation hazard 93. On 7 May, the State Agency of Ukraine for Management of the Alienation Zone (SAEZM) and the State Innovative Financial and Credit Institution (SIFCI) have signed a Memorandum on Cooperation. Joint activity of these institutions will be aimed at bringing investments in energy projects and to finance economic and social development of the alienation zone, at deepening international economic, scientific and technical cooperation, and implementing new investment projects in this area 94.
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Electricity and Nuclear Safety During the starting conference concerning the IAEA project UKR9038 in Vienna, specialists of the State Agency of Ukraine for Management of the Alienation Zone have prepared a work plan and mechanism of implementing the National Project on Further Support for Decommissioning of Chornobyl NPP, Handling of RAW and SNF. This project is devised for two years, during which, IAEA experts would provide their assessments and recommendations to ensure implementation of these measures by Ukraine according to international standards 95. A WANO technical support mission reviewing the methodology and practice of identifying nuclide vectors worked at Chornobyl NPP between 14 and 18 May 96. During the 22 May session of the Presidium of the National Academy of Sciences of Ukraine, experts discussed strategic areas of activity aimed at transforming the Shelter Object into an environmentally safe system after launching the New Safe Confinement, and presented a report on analysis of the Shelter Object Transformation Strategy by Chornobyl NPP specialists 97. During the VI conference reviewing fulfillment of commitments under the Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management, held in Vienna, the Ukrainian delegation presented the VI National Report on the fulfillment of Ukraine’s commitments under the Joint Convention during the three-year period. Experts noted the proper fulfillment of Ukraine’s commitments 98.
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Electricity and Nuclear Safety EUROPEAN LEGISLATION UPDATES The Ministerial Council of the Energy Community has resolved that every Contracting Party shall enact, by 1 March 2018, the laws, rules and administrative provisions required for compliance with Regulation (EU) 2016/1952 of 26 October 2016 on European statistics on natural gas and electricity prices and repealing Directive 2008/92/ЕC On 12 January 2018, the Permanent High Level Group of the Energy Community has adopted a number of important decisions concerning unification of European electricity markets, including: • Decision 2018/05/PHLG-EnC of 12 January 2018 on incorporating Commission Regulation (EU) 2016/1388 of 7 August 2016 establishing a Network Code on Demand Connection in the Energy Community. Each Contracting Party shall transpose Regulation (EU) 2016/1388 of 7 August 2016 no later than six months after the adoption of this Decision; • Decision 2018/04/PHLG-EnC of 12 January 2018 on incorporating Commission Regulation (EU) 2016/1447 of 26 August 2016 establishing a network code on requirements for grid connection of high voltage direct current (HVDC) systems and direct current-connected power park modules in the Energy Community. Each Contracting Party shall transpose Regulation (EU) 2016/1447 by no later than 6 months after the adoption of this Decision. • Decision 2018/03/PHLG-EnC of 12 January 2018 on incorporating Commission Regulation (EU) 2016/631 of 14 April 2016 establishing a Network Code on requirements for grid connection of generators in the Energy Community. Each Contracting Party shall transpose Regulation (EU) 2016/631 by no later than 6 months after the adoption of this Decision. • Decision 2018/02/PHLG-EnC of 12 January 2018 on adopting Commission Regulation (EU) No 2015/703 of 30 April 2015 establishing a Network Code on Interoperability and Data Exchange Rules. Each Contracting Party shall transpose and implement Commission Regulation (EU) No 2015/703 by 1 October 2018. On 02 February 2018, the Ministerial Council of the Energy Community has adopted Decision 2018/02/MC-EnC on the failure of Ukraine to comply with the Energy Community Treaty in Case ECS-1/12 with regard to free cross-border capacity for electricity. Ukraine shall immediately take all appropriate measures and report to the EC Secretariat on implementation of Directive 2009/72/EC, Article 16(1) of Regulation (EC) 714/2009 as well as Sections 1.1; 1.6; 2.1; 2.5, 2.10 and 2.13 of the Congestion Management Guidelines.
Energy Efficiency and Social Issues In May, despite relative success on the way toward the launch of Energy Efficiency Fund, recordbreaking popularity of the “warm loan” program, and continued active information and advocacy campaigns of the State Agency for Energy Efficiency, the actual absence of any progress in, and even the risk of curbing reforms in certain other areas remains the cause for concern. E.g., the draft law on energy efficiency shows no signs of movement, and the Ministry of Regional Development continues to drag out development of regulatory acts required by the laws on energy performance of buildings and other laws from the “energy efficiency package”. However, the deepest concern among experts is caused by the intention of the Ministry of Regional Development to submit to the Verkhovna Rada the amendments to these laws that would de-facto postpone their implementation by at least 6 months. If this scenario does take place, reform of the housing sector would be frozen till the end of 2018, and the parliamentary election campaign that will start the next year would diminish whatever little chances remain to make unpopular yet necessary decisions. Directive 2012/27/EU on energy efficiency The first year after enactment of the Law of Ukraine on Commercial Metering of Heat and Water Supply ends in late June, which also means expiration of the period during which heat suppliers were required to install commercial heat meters in all buildings connected to external engineering networks but not having these meters. Judging by the absence of reporting information from either the Ministry of Regional Development or NEURC, suppliers will hardly be able to reach the 100% metering coverage as required by law. Unfortunately, when this problem was discussed at a meeting of the Verkhovna Rada Committee for Construction, Urban Planning, Housing and Utilities 99, MPs considered postponement of actual penalties for noncompliance with this requirement instead of the ways of furthering installation of metering units and accelerating the compliance of suppliers with law. Besides the Law on Commercial Metering of Heat and Water Supply, a similar decision to postpone the applicability of the Law of Ukraine on Housing Maintenance and Utility Services was considered. In both cases, the Committee decided to recommend the Verkhovna Rada of Ukraine to support the postponement. The Minister of Regional Development expressed the hope that MPs would support this decision in the parliament in the nearest future. In particular, Vice Prime Minister Gennadii Zubko said that the Ministry of Regional Development is preparing the relevant draft laws of Ukraine: • postponing the application of penalties to heat and water supplying companies for failing to meet the deadline for installation of commercial metering units (continuation of postponement after 02.08.2018); • postponing the enactment of the Law of Ukraine on Housing Maintenance and Utility Services that was slated for 10 June 2018 to enable selection of a new model for the relationship between the service provider and the consumer (prolongation of existing housing maintenance and utility service agreements until the end of the 2018-2019 heating season). The meeting also discussed the matter of engaging funds of bodies of local self-government and other additional sources of financing the installation of meters 100. Considering the pressing need for implementation of the complete metering of heat supplied to consumers as an indispensable precondition for almost all subsequent measures of improving energy performance of the housing stock, the initiative postponing the occurrence of real consequences for suppliers failing to ensure the required metering represents a substantial step back and a new threat of Ukraine defaulting on its commitments concerning implementation of Directive 2012/27/EU in Ukraine. The postponed enactment of the entire law on housing maintenance and utility services also poses the risks of undermining the progress achieved so far. 99
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Energy Efficiency and Social Issues In May, the Ministry of Regional Development has published on its website certain draft regulatory acts for public discussion as required by the Rules of the Cabinet of Ministers of Ukraine, including certain acts drawn up pursuant to the Law of Ukraine on Commercial Metering of Heat and Water Supply. In particular, a draft order of the Ministry of Regional Development approving the Methodology of Distributing among Consumers the Volume of Utility Services Consumed in a Building 101, developed pursuant to Article 10 of the said Law, was brought up for public discussion. This document offers a quite detailed regulation of the matters of calculating and distributing among consumers the total volume of heat consumed in a building in the event of availability and unavailability of distribution metering units / heat distribution devices. The said draft methodology also regulates the methods of distributing among consumers the volume of energy consumed for heating of residential and nonresidential premises representing independent objects of immovable property, heating of public and ancillary facilities of an apartment building, hot water supply, and for operation of intra-building heating and hot water supply systems. In addition, the document envisages detailed regulation of the procedure of calculating the minimum share of the average specific consumption of heat in a building, identification of hot and cold water leaks from intra-building networks, refund to consumers of payments for the volume of leaked water distributed among them, and the use by co-owners of an apartment building of adjustment coefficients for distribution of the volume of consumed heat among particular consumers (in corner apartments or rooms), apartments located on the first and last floors of a building, etc. These norms would allow, inter alia, for the fuller use of information contained in certificates of the building’s energy characteristics, which would soon appear on buildings of certain categories. Energy service market (Article 18) Activity of the State Agency of Ukraine for Energy Efficiency and Energy Conservation aimed at developing the energy service market becomes systemic. The Memorandum of Cooperation between the Agency and the Defense Ministry on the implementation of energy service to improve energy performance of public buildings would help accelerate thermal modernization of a large number of the Ministry’s buildings. The Defense Ministry became another government agency desirous of implementing the ESCO mechanism to modernize buildings in its possession. According to data by the Defense Ministry, 33 thousand buildings under its management spend over UAH 1.9 billion every year on utility and maintenance bills. It is expected that the State Agency for Energy Efficiency and Energy Conservation would provide the necessary consultative support to public procurements of energy service, procedure of making agreements with investors and other matters 102. In addition, the Agency continues to inform municipalities about the features and advantages of energy service. Thus, during a meeting of Odesa City Council’s Commission for Housing and Utilities held in Odesa, the State Agency for Energy Efficiency and Energy Conservation presented the advantages of ESCO mechanisms, their legislative framework and implementation prospects. After the meeting, the proposals regarding approval of essential terms of ESCO contracts will be enclosed with the draft resolutions submitted for the next session of the city council 103. In addition, during a seminar for city mayors, the Agency presented energy efficiency and renewable energy projects most suitable and beneficial for local communities and thermal insulation options for budget-financed institutions using the ESCO mechanism. After the talks, a Memorandum of Cooperation was signed between Mayors Club and the Ukrainian-Arab Business Council 104. In the wake of an active campaign advocating this instrument and thanks to the creation of a proper legislative and regulatory framework, 158 ESCO contracts worth the total of over UAH 125 million have been signed in Ukraine since 2016, and the total number of these contracts that will be signed this year https://bit.ly/2JbXFxl http://saee.gov.ua/uk/news/2392 103 http://saee.gov.ua/uk/news/2394 104 http://saee.gov.ua/uk/news/2364 101 102
Energy Efficiency and Social Issues is estimated by the Agency’s specialists at over 200. Also, the database of public buildings that require thermal modernization and may interest ESCO investors was updated and supplemented during May. Presently, this database includes 12,727 ESCO properties of local authorities, 61,118 buildings of budgetfinanced institutions and 3,525 ESCO buildings of bodies of public administration, of which 3,499 are published on the official websites of these bodies 105. National Energy Efficiency Fund, financing and technical support (Article 20) According to Press Service, the Government has decided on its meeting of 23 May to approve the Procedure of Electing, Appointing and Dismissing Members of the Supervisory Board of Energy Efficiency Fund, State Institution after the document was finalized by the Ministry of Regional Development jointly with the Secretariat of the Cabinet of Ministers of Ukraine. Unfortunately, only the version of this document disseminated by mass media is presently available for public access 106. Judging by the report of Vice Prime Minister Gennadii Zubko, a draft Procedure was adopted after certain improvements by government agencies. The adopted document is expected to be published in early June. Based on the available unofficial version of the Procedure, it is worth noting that although the Ministry of Regional Development is going to be in the overall charge of the competitive selection of members of the Energy Efficiency Fund’s Supervisory Board, three out of the six members of the selection commission must be representatives of donors. Still, the key decision regarding appointment of the chairman (who will have the decisive vote when votes of the commission’s members are split even) and secretary of the commission remains with the Ministry of Regional Development, which is also authorized to engage, if desired, professional consultants on personnel selection to work in the commission with the right of advisory vote. The Ministry will also announce the start of the selection procedure, and considering the terms stated in the document, this process would take some three months. The commission’s powers also include development and approval of its rules of procedure, competitive selection phases, evaluation criteria and additional requirements to candidates. A commission meeting is to be considered legitimate if attended by at least five members, and decisions would require approval by a majority of votes of members in attendance. The list of documents required to be submitted to the competition commission includes the document package usually required for competitive selections of this kind (copy of ID, work record book, higher education documents, CV (resume), consent to personal data processing), references and a motivation letter for being a Supervisory Board member, and may include a proposal regarding the Fund’s development strategy or business plan. The competition will be held in several phases according to the procedures approved by the commission, and any phase may be conducted by way of video conference. The winner will be announced at a commission’s meeting, and a written notice of the competition’s results will be sent to the Ministry of Regional Development and the Cabinet of Ministers of Ukraine. After that, the Ministry of Regional Development would submit to the Government a draft resolution on the appointment of the competition winners as members of the Supervisory Board representing the Cabinet of Ministers. The government’s “warm loan” program, the financing of which began only in April due to uncoordinated actions of public bodies, enjoys even greater demand among the public that far exceeds supply. In particular, according to the latest information by the State Agency for Energy Efficiency and Energy Conservation, 203 housing associations took loans for the astonishing amount of UAH 50 million during just two weeks, from 14 to 25 May, whereas during the week ending on 25 May alone, over UAH 103 million in bank loans was taken under the “warm loan” program; of that amount, UAH 26 million were loans to housing associations, UAH 75 million went to finance thermal insulation of individual 105 106
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Energy Efficiency and Social Issues houses, and further 93 loans for the total of almost UAH 3 million were taken to finance purchase of solid fuel-fired boilers. 107 Because of such a high rate of taking out financing, the program will be predictably suspended again due to the lack of resources. As we know, UAH 400 million was allocated to finance the program in 2018, including almost UAH 200 million earmarked for housing associations. Therefore, depending on the specifics of issuing “warm loans” by various participating banks, the funds allocated for this program may run out in the next two months. According to the Energy Efficiency Agency’s forecast, UAH 998.3 million will be required to finance the continuation of this program in normal operating mode at the current rate of demand. Experts stressed on numerous occasions that annual financing of the governmental “warm loan” program must be increased. However, the required amount of financing (approximately UAH 3 billion) was limited in the past two years to UAH 400 million. Considering high demand for the program’s products and the degree of public trust, the available amount of financing is obviously insufficient. Therefore, OPORA civil network applied to the Head of Government and the Minister of Regional Development to initiate amendments to the State Budget of Ukraine for 2018 in order to allocate additional financing for energy saving and energy efficiency measures in the housing stock 108. Directive 2010/31/EU on the energy performance of buildings During May, there were no updates concerning implementation of the Law of Ukraine on the Energy Performance of Buildings, in particular, as regards development and publication of draft regulatory acts, which must be a priority area for the Ministry of Regional Development, while the status of development and adoption of these acts remains the same as in April. Considering that the implementation of a system for energy certification of buildings is falling more and more behind schedule, members of the expert group also expect a significant postponement of the implementation of not only the aforementioned law but also the Law of Ukraine on Energy Efficiency Fund. Considering the development of a similar situation with the implementation of the law on commercial metering of heat, which may be postponed as well, the law on the energy performance of buildings is exposed to the same risk. Directive 2010/30/EU on the indication by labeling and standard product information of the consumption of energy and other resources by energy-related products During May, the website of the State Agency of Ukraine for Energy Efficiency and Energy Conservation offered no information regarding the three documents published in April for public discussion. According to the Rules of Procedure of the Cabinet of Ministers of Ukraine, the draft order of the Ministry of Regional Development invalidating the Order 118 of the State Committee of Ukraine for Energy Conservation of 28.10.2003 and two draft technical regulations setting requirements to ecodesign of simple digital television receivers and to the electricity consumption by external sources of power in unloaded mode and their average efficiency factor in active mode shall be finalized by the chief developer after public discussion and processing suggestions and proposals concerning the draft acts, and submitted to the Minister of Regional Development for approval.
http://saee.gov.ua/uk/news/2389 https://zhytlo.in.ua/ua/novini/zhkp1/gromadyanska-merezha-opora-zaklikae-prodovzhiti-finansuvannya-programi-teplihkreditiv.html 107 108
Energy Efficiency and Social Issues Social issues Pursuant to the Law of Ukraine on Housing Associations and the Law of Ukraine on Housing and Utilities Services, the Ministry of Regional Development has developed, and posted on its official website during May, a number of draft documents intended to regulate full-fledged realization of the rights of energy and utility service consumers, including housing associations. Thus, the following draft documents were published: •
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resolution of the Cabinet of Ministers of Ukraine approving the Procedure of settling debt with co-owners owing overdue amounts to their associations of apartment building co-owners for maintenance of common premises in an apartment building 109; resolution of the Cabinet of Ministers of Ukraine on certain aspects of professional certification as a “manager of an apartment building (apartment complex)”, approving the Procedure of professional certification as a “manager of an apartment building (apartment complex)” and the Criteria that enterprises, institutions and organizations must meet to perform professional certification as a “manager of an apartment building (apartment complex)” 110; resolution of the Cabinet of Ministers of Ukraine approving the Procedure of verifying conformity of the quality of utility and apartment building management services with parameters stipulated in the relevant service agreement 111; order of the Ministry of Regional Development approving amendments to the Procedure of organizing competitive selection of an apartment building manager 112; order of the Ministry of Regional Development approving the Obligatory list of services, the costs of which must be included to the apartment building and adjacent area maintenance costs 113.
The Ministry of Regional Development has also developed and brought up for discussion new versions of the procedure of tariffing heat production, transmission and supply, procedure of tariffing centralized heating and hot water supply services, and procedure of reviewing by bodies of local self-government calculations of heat production, transmission and supply tariffs and calculations of utility service tariffs submitted for the purpose of setting the said tariffs. All these measures are intended to improve the quality of utility and heat supply services and establish a fair procedure of tariffing these services.
http://www.minregion.gov.ua/base-law/reg-politics/povidomlennya-pro-oprilyudnennya-proektiv-regulyatornihaktiv/povidomlennya-pro-oprilyudnennya-proektu-postanovi-kabinetu-ministriv-ukrayini-pro-zatverdzhennya-poryadkuprovedennya-rozrahunkiv-zi-spivvlasnikami-yaki-mayut-zaborgovanist-pered-ob-yednannyam/ 110 http://www.minregion.gov.ua/base-law/reg-politics/povidomlennya-pro-oprilyudnennya-proektiv-regulyatornihaktiv/povidomlennya-pro-oprilyudnennya-proektu-postanovi-kabinetu-ministriv-ukrayini-deyaki-pitannya-profesiynoyiatestatsiyi-za-profesiyeyu-menedzher-upravitel-zhitlovogo-budinku-grupi-budinkiv/ 111 http://www.minregion.gov.ua/base-law/reg-politics/povidomlennya-pro-oprilyudnennya-proektiv-regulyatornihaktiv/povidomlennya-pro-oprilyudnennya-proektu-proekt-postanovi-kabinetu-ministriv-ukrayini-pro-zatverdzhennyaporyadku-perevirki-vidpovidnosti-yakosti-nadannya-komunalnih-poslug-ta-poslug-z-upravlinnya/ 112 https://bit.ly/2kM2wuF 113 https://bit.ly/2J9XvGQ 109
Energy Efficiency and Social Issues EUROPEAN LEGISLATION UPDATES On 17 May, the European Parliament has finally approved the revised version of the Energy Performance of Buildings Directive (EPBD), thus completing the first of eight phases for legislative implementation of the ambitious plan Clean Energy for All Europeans. The innovations are mainly intended to substantially accelerate the rate of investment in energy modernization of the existing housing stock and promote construction of even more energyefficient buildings. In particular, among the key provisions of the revised Directive is the specific objective of achieving low-carbon and carbon-free housing stock in the EU by 2050 (to be achieved via national action plans), and promoting the use of information and communication technologies and smart solutions to reduce energy consumption in apartment buildings. In order to make the use of new technologies easier and, therefore, more widespread, lawmakers introduce standards and smart readiness indicators unified for the construction industry in all EU member states. In addition, the revised Directive would accelerate deployment of infrastructure for the broader use of e-mobility in all buildings (although the final text contains less ambitious goals than initially proposed by the European Commission). To make sure that the goals set out in the Directive remain attainable, it also contains concrete long-term strategies of investing public and private capital in renovation of apartment buildings and in new “smart� construction. After completion of all required formalities and the entry of the revised Directive into force, the national governments of EU member states would have 20 months for the complete transposition of the said Directive into their national legislative frameworks.
Environment and Renewable Energy Sources The draft law on the National Environmental Policy Strategy for the period until 2030, registered at the Verkhovna Rada of Ukraine, is still pending consideration by MPs. The draft bylaws required to start the strategic environmental assessment procedure in accordance with the recently adopted law still haven’t been published for public comments. Presently, substantial attention is devoted to the reform of governmental control and oversight over environmental protection. Having said that, the National Transport Strategy adopted by the Cabinet of Ministers proves the government readiness to devote much more attention to the creation and use of electric transport in Ukraine. Directive 2008/50/EC on ambient air quality and cleaner air for Europe (Article 363 of AA) On 23 May 2018, the Government has approved the Action Plan for implementation of the Concept of Reforming the System of Governmental Oversight (Control) over Environmental Protection in Ukraine. This document sets out key measures intended to facilitate the Concept’s implementation and the list of bodies to be engaged to carry out these measures. The Action Plan envisages, inter alia, creation and operation of a national automated information and analytical system, creation of a network of Environmental Monitoring Service laboratories, harmonization of environmental monitoring legislation with Directive 2010/75/EC on industrial emissions, etc. For your information, on 31 May 2017 the Cabinet of Ministers of Ukraine has approved the Concept of Reforming the Environmental Monitoring System in Ukraine. Besides creating a new environmental protection service and updating legislative framework, the Concept also envisages creation of a new monitoring system closely related to the implementation of Directive 2008/50/EC on ambient air quality and cleaner air for Europe.
Directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC (Article 338 of the Association Agreement) On 24 May, the State Agency of Ukraine for Energy Efficiency and Energy Conservation and NEFCO signed an agreement on the Finnish-Ukrainian Trust Fund created for the purpose of financing preparation of "green" projects. The Fund will provide technical assistance in developing energy efficiency and "clean" energy projects. The available financing amounts to almost EUR 6 million 114. The establishment of this Fund was planned back in the last year’s fall. The Cabinet of Ministers of Ukraine has approved, at its meeting of 30 May, the National Transport Strategy for the period until 2030. The project is titled Drive Ukraine 2030. According to this document, two electric transport assembly plants producing, in particular, electric cars, buses and marine vessels must be built in Ukraine by 2030.
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Oil The reporting period saw no significant progress in the implementation of Ukraine’s international commitments in the oil sector. The work on the draft law on the minimum oil and petroleum products reserves was suspended until the contract with European experts is renewed. The State Regulatory Service again returned several draft documents concerning upstream operations to their developers because of their low quality. Another area of concern is the absence of progress in the work on a draft action plan for implementation of the first phase of Ukraine’s Energy Strategy for the period until 2035, which hasn’t been slated for review by the government yet. The only notable event occurring in May was the long-awaited publication by the State Service for Geology and Mineral Resources of its register of oil and gas wells. Directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC Pursuant to requirements of Directive 2009/28/EC concerning promotion of the use of energy from renewable sources, two draft laws aimed at promoting development of electric transport in Ukraine (registration numbers 8159 115 and 8160 116) were included on 15 May 2018 to the agenda 117 of the eighth session of the Verkhovna Rada. In particular, these draft laws temporarily, until 01 January 2028: – enable taxpayers to include expenses related to the purchase of electric motor vehicles to a tax discount and reduce their taxable income; – relieve components imported to the customs territory of Ukraine for manufacture of electric motor vehicles from value added tax; – relieve components for manufacture of electric motor vehicles from import duty; – relieve from taxation the profit from sales of own-produced lithium, lithium-ion (lithium polymer) batteries, chargers for these batteries and own-manufactured electric motor vehicles; – relieve car bodies imported to the customs territory of Ukraine for manufacture of electric motor vehicles from excise duty; – relieve individuals who become owners of an electric car from the obligatory state pension insurance deduction; – envisage installation of charging stations for electric motor vehicles in at least 5% of parking spots. Directive 99/32/EC 118 relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC, as amended and supplemented by Regulation (EC) No 1882/2003 and Directive 2005/33/EC On 10 May 2018, the Ministry of Energy and Coal Industry submitted to the State Regulatory Service a finalized draft resolution 119 amending the Terms of Reference 120 for the purpose of their harmonization with Directives 98/70/EC and 2016/802/EC (objective 1702.4 of the action plan 121). However, a preliminary analysis of this document shows that the Terms of Reference need more serious amendments necessitated, in particular, by the fact that the deadline for marketing of automotive gasoline and diesel fuel with the grades below Euro 5 has expired on 31 December 2017. Pursuant to the requirements of Directive 99/32/EC concerning designation of a competent authority, the Government has designated 122 the State Environmental Inspectorate of Ukraine as the body responsible for governmental market oversight of automotive gasoline and diesel, vessel and boiler fuels (paragraph 21 of the list approved by the government resolution). However, the State Environmental Inspectorate has no http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=63677 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=63678 117 http://zakon3.rada.gov.ua/laws/show/2414-viii 118 Directive 99/32/EC (otherwise titled as 1999/32/EC) was codified on 11 May 2016 (Directive 2016/802/EC). 119 http://www.drs.gov.ua/wp-content/uploads/2018/05/6795-10.05.18.pdf 120 http://zakon.rada.gov.ua/go/927-2013-п 121 https://www.kmu.gov.ua/ua/npas/pro-vikonannya-ugodi-pro-asociaciyu-mizh-ukrayinoyu-z-odniyeyi-storoni-ta-yevropejskimsoyuzom-yevropejskim-spivtovaristvom-z-atomnoyi-energiyi-i-yihnimi-derzhavami-chlenami-z-inshoyi-storoni 122 http://zakon3.rada.gov.ua/laws/show/1069-2016-%D0%BF 115 116
Oil subdivision charged with these functions, because it is going to be transformed into the State Environmental Protection Service by the end of 2019 (objective 1.2 of the action plan 123). Considering the foregoing, the government resolution 124 needs to be corrected in order to designate as soon as possible the market oversight body responsible for organizing an efficient system of controlling fuel quality by taking samples, using modern methods of determining sulphur content, and charging penalties for violation of national requirements approved in accordance with Directive 99/32/EC. Directive 98/70/EC relating to the quality of petrol and diesel fuels and amending Council Directive 93/12/EEC, supplemented by Directives 2000/71/EC, 2003/17/EC and 2009/30/EC and Regulation (EC) No 1882/2003 (Annex ХХХ, Articles 360 to 363, 365 and 366 of AA) Despite designation of the Ministry of Energy and Coal Industry responsible for creation of “uniform legal, organizational, economic and financial foundations for controlling the quality of petroleum products in accordance with EU’s norms and rules” and designation of MASMA Research & Development Institute of Oil Refining and Petrochemical Industry SE responsible for monitoring the quality of fuel on the Ukrainian market (objectives 1702 and 1702.8 of the action plan 125), work in this area didn’t even start yet, even though the deadline for accomplishment of these objectives has expired on 20 March 2018. The deadlines for assessment of nationwide fuel consumption; development and implementation of a system for monitoring of quality and safety of petroleum products; facilitating operability of a system for inter-laboratory comparisons of test results to confirm test quality; development and implementation of a system for collection of national fuel quality data (objectives 1703.1-3 and 6), set out in the same action plan, haven’t been adjusted, either. The objective 1703.4, setting requirements to off-road motor vehicles and agricultural and forest industry tractors “enabling the use of unleaded gasoline”, which has been accomplished back in 2003 (law 126), hasn’t been removed from the action plan 127, either. Directive 94/22/EC on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons (Annex XXVII, Articles 279, 280 and 341 of AA) On 07 May 2018, the State Regulatory Service issued the Resolution 202 128 denying approval of the draft Government resolution amending the Methodology of Valuating Extractable Reserves and Resources of a Deposit or Site Provided for Use 129 submitted by the State Service for Geology and Mineral Resources (goal І, objective 203 of action plan 130; the deadline postponed until December 2018 131,132) due to the failure of the document’s developers to adhere to key principles of the national regulatory policy. Despite two official statements from Ostap Semerak, Minister of Environment and Natural Resources of Ukraine, dated 15 March 133 and 04 April 134 2018, the list of documents approved by the Government still doesn’t contain a resolution amending the procedures approved by the Resolutions 594 and 615 of the Cabinet of Ministers of Ukraine of 30 May 2011.
https://www.kmu.gov.ua/ua/npas/pro-zatverd http://zakon3.rada.gov.ua/laws/show/1069-2016-%D0%BF 125 https://www.kmu.gov.ua/ua/npas/pro-vikonannya-ugodi-pro-asociaciyu-mizh-ukrayinoyu-z-odniyeyi-storoni-ta-yevropejskimsoyuzom-yevropejskim-spivtovaristvom-z-atomnoyi-energiyi-i-yihnimi-derzhavami-chlenami-z-inshoyi-storoni 126 http://zakon2.rada.gov.ua/laws/show/2786-iii 127 https://www.kmu.gov.ua/ua/npas/pro-vikonannya-ugodi-pro-asociaciyu-mizh-ukrayinoyu-z-odniyeyi-storoni-ta-yevropejskimsoyuzom-yevropejskim-spivtovaristvom-z-atomnoyi-energiyi-i-yihnimi-derzhavami-chlenami-z-inshoyi-storoni 128 http://www.drs.gov.ua/wp-content/uploads/2018/04/4384-vid-07.05.18.pdf 129 http://www.drs.gov.ua/wp-content/uploads/2018/04/5795-16.04.18.pdf 130 http://www.kmu.gov.ua/document/249935381/R0275.doc 131 https://menr.gov.ua/files/docs/nakazy/nakaz_475.pdf 132 http://geo.gov.ua/sites/default/files/imce/nakaz_no_557.pdf 133 https://menr.gov.ua/news/32164.html 134 https://www.kmu.gov.ua/ua/news/ostap-semerak-uryad-sproshuye-umovi-dlya-nadrokoristuvachiv-zahishayuchi-interesiderzhavi 123 124
Oil The aforementioned document supplementing the draft resolution 135 is intended to eliminate nonconformities in the Procedure of Issuing Special Extraction Permits and the Procedure of Organizing Auction Sales of Special Extraction Permits based on the practice of their application, in particular, by: – excluding the program of extraction works from the package of auction documentation enclosed with the application for the action sale of a special extraction permit; – allowing the application to be submitted, along with the documents required for a special extraction permit, in electronic form as well; – excluding the provision prohibiting the issuance of a permit outside the action sale procedure to a person not carrying out work on the sites for which the said person has already been issued a permit or a person violating extraction rules on these sites as documented in inspection reports, writs or directives of authorities responsible for oversight of extraction operations, before these violations are fixed; – excluding the provisions requiring obligatory stamping of applications and other documents submitted for special extraction permits. The aforementioned draft resolution also established a transitional period for the assessment of environmental impact by extraction companies (until 18 June 2018). Because of its absence, the State Service for Geology and Mineral Resources had to suspend at least 17 special permits held by state enterprises. It did not happen only because of direct intervention into work of the Commission for Extraction Affairs 136. The situation around the Subsoil Code of Ukraine, a revised version of which had to be approved back in 2016 137, hasn’t been changing for a long time. As of 20 May 2018, it was still being “worked on by the agencies concerned” 138, while the deadline for its submission has been postponed until 4Q 2018 (objective 1 of action plan 139). However, it is surprising that: – the State Service for Geology and Mineral Resources is going to prepare amendments to Article 62 of the existing version of the Code (objective 4) according to the same action plan and by the same deadline; – the Government resolution140 published on 07 March 2018 states that a draft law amending the Subsoil Code of Ukraine by introducing transition from the system of procuring special extraction permits to extraction contracts must be submitted to the Cabinet of Ministers by 31 October 2019 (objective 1765.1, responsible agency: Ministry of Environment and Natural Resources of Ukraine). Preparation status of the following draft Government resolutions remains unknown: – amending the Methodology of calculating the starting price for the auction sale of a special extraction permit 141 (goal І, objective 204 142), intended to introduce a differentiated approach to evaluation based on the purpose of work (exploration or production), degree of certainty of geological materials (resources or reserves) and type of deposit depending on complexity of extraction (conventional or unconventional methods); – amending the Classification of Extractable Reserves and Resources of State-Owned Sites, intended to enable extraction companies to use the 2009 United Nations Framework Classification for Fossil Energy and Mineral Reserves and Resources (UNFC 2009). It was proposed to supplement the Classification 143 with paragraph 28, enabling extraction companies to use, if requested, the international standards UNFC 2009, CRIRSCO, PRMS, etc 144.
http://www.geo.gov.ua/sites/default/files/imce/proekt_postanovy_0.doc http://geo.gov.ua/novyna/derzhgeonadra-vidterminuvaly-zupynennya-diyi-17-specialnyh-dozvoliv-na-korystuvannya-nadramy 137 http://www.kmu.gov.ua/document/248102926/Dir_94_22.pdf 138 http://www.drs.gov.ua/deregulation/plan-deregulyatsiyi-2016-2017-rr/ 139 http://geo.gov.ua/sites/default/files/imce/nakaz_no_557.pdf 140 https://www.kmu.gov.ua/ua/npas/pro-vikonannya-ugodi-pro-asociaciyu-mizh-ukrayinoyu-z-odniyeyi-storoni-ta-yevropejskimsoyuzom-yevropejskim-spivtovaristvom-z-atomnoyi-energiyi-i-yihnimi-derzhavami-chlenami-z-inshoyi-storoni 141 http://zakon0.rada.gov.ua/laws/show/1374-2004-%D0%BF 142 http://www.kmu.gov.ua/document/249935381/R0275.doc 143 http://zakon2.rada.gov.ua/laws/show/432-97-%D0%BF 144 http://www.geo.gov.ua/sites/default/files/imce/proekt_pkmu_pro_zminy_do_pkmu_no432_okk.doc 135 136
Oil Article 279 of the Association Agreement concerning equal access to and exercise of the activities of prospecting, exploring for and producing hydrocarbons Since Article 279 (3) requires each Party to ensure that entities, as regards access to and exercise of these activities, are treated on an equal basis, the State Service for Geology and Mineral Resources announced on 15 May 2018 an auction sale of special permits for geological exploration (including experimental commercial development) of two oil and gas fields in the Lviv Oblast (Chernytska and Lypovetska) 145. On 11 May 2018, the Scientific and Technical Council of the State Service for Geology and Mineral Resources recommended another nine licensed sites located, first of all, in Eastern Ukraine for auction sale 146. The possibility of selling permits for development of 22 sites on the continental shelf in the Black Sea and the Sea of Azov is also being discussed. According to the Geological Service’s Acting Head Oleh Kyryliuk, 40 special extraction permits have been earmarked for auction sale “by the end of the year” 147. Article 280 of the Association Agreement concerning transparency of issuing licenses for prospecting, exploring for and producing hydrocarbons On 25 May 2018, the State Service for Geology and Mineral Resources has published the State Register of Oil and Gas Wells 148. This information system is designed for registration, accumulation, processing and storage of information regarding the owners and characteristics of wells. The Register’s administrator is Geoinform Ukraine 149. Notwithstanding this achievement, the Ministry of Environment and Natural Resources had to implement, according to objective 206 of the Government’s action plan 150, a simplified real-time digital access to secondary geological information back in 1Q 2017 151, but could not bring the stances of government agencies concerned into agreement. Only on 05 April 2018 did the State Regulatory Service approve, by the Resolution 152 152, the “compromise version” of the draft resolution submitted by the Ministry of Environment and Natural Resources and titled “On the approval of the Procedure of Managing Geological Information, amendment of certain resolutions of the Cabinet of Ministers of Ukraine and invalidation of the Resolution 423 of the Cabinet of Ministers of Ukraine of 13 June 1995” 153. In particular, this document: – sets out the geological information acquisition procedure ensuring equal access of all parties concerned to it; – abolishes the requirement concerning approval of the sale of geological information created (purchased) by legal and natural persons at their own expense; – replaces approval by the State Service for Geology and Mineral Resources of the sale of geological information with notification of the Service about the sale; – introduces exceptional grounds for denial of the sale of geological information; – enables communication to third parties of geological information provided to an extraction operator under agreement on purchase-sale of the right to use the said information for the purpose of performance by these third parties of certain works and/or services; – creates the Catalog of Geological Information, allowing to identify the location and owner of information. As of 05 June 2018, the draft resolution was pending review by the government committee.
http://geo.gov.ua/sites/default/files/imce/166.doc http://geo.gov.ua/novyna/ntr-derzhgeonadr-rekomenduye-vystavyty-na-aukcion-9-naftogazonosnyh-dilyanok-yaknayshvydshe 147 http://geo.gov.ua/novyna/derzhgeonadra-planuyut-vystavyty-na-aukcion-22-naftogazovi-dilyanky-na-shelfi-chornogo-i 148 http://geoinf.kiev.ua/sverdlovini/ 149 http://geo.gov.ua/novyna/derzhgeonadra-vidkryly-dostup-do-reyestru-gazovyh-ta-naftovyh-sverdlovyn-ukrayiny 150 http://www.kmu.gov.ua/document/249935381/R0275.doc 151 http://zakon2.rada.gov.ua/laws/show/1079-2016-%D1%80/paran146#n146 152 http://www.drs.gov.ua/wp-content/uploads/2018/04/3526-vid-05.04.18_18.pdf 153 https://menr.gov.ua/news/32210.html 145 146
Oil Article 337 of the Association Agreement concerning informing and protection of consumers against unfair pricing and concerning access to petroleum products (in particular, liquefied petroleum gas) by consumers (in particular, the most vulnerable categories of population) On 10 May 2018, the Government curbed the room for abuse by bodies of government oversight (control) by eliminating inconsistencies between the Rules for Retail Sales of Petroleum Products 154 and the law 155. On 24 May 2018, the Antimonopoly Committee of Ukraine held the first meeting hearing the case No 12826.13/102-17, opened on the basis of evidence of coordinated anticompetitive actions in the liquefied petroleum gas market. The Committee believes that actions of a number of businesses led to limitation of competition and overpricing of this commodity in August 2017 156. As of 05 June 2018, the problem of setting the starting price for liquefied gas sold for household needs at specialized auctions remained unresolved. Prior to 01 April 2018, it was determined based on the price of natural gas sold for household needs (adjusted by the difference in calorific value), calculated in accordance with regulations 157. At the government committee’s meeting of 26 April 2018, the Ministry of Energy and Coal Industry proposed to amend paragraph 19 of the procedure 158 to calculate the starting price on the basis of customs value of liquefied petroleum gas imported to Ukraine (including VAT), averaged for 30 days preceding the date for registration of applications for organization of a specialized auction. The Ministry believes that the expected increase of the liquefied gas price (by 41...47%) due to the change of calculation methodology “will not affect the purchasing capacity of consumers” and “will be compensated to low-income categories of population, if necessary, by a cash subsidy issued once a year to purchase this gas”. Unfortunately, the results of reviewing this proposal at the government committee’s meeting haven’t been made public, even though the Ministry of Energy and Coal Industry claimed earlier that specialized auctions cannot be held because of the absence of the starting price for liquefied gas for household needs approved by the auction committee 159. Article 338 of the Association Agreement concerning continuation and intensification of cooperation in the energy sector Pursuant to paragraph (a) of Article 338 concerning implementation of energy strategies and policies and development/elaboration of forecasts and scenarios, the Ministry of Energy and Coal Industry has completed on 29 January 2018 development of a draft action plan for implementation of the first phase of Ukraine’s Energy Strategy for the period until 2035 “Security, Energy Efficiency, Competitiveness” 160, finalized by accommodating proposals and suggestions received during public discussion of this document 161. A draft of the relevant directive, agreed with the government agencies concerned, was submitted to the Cabinet of Ministers of Ukraine in the letter KM/1-15-926 of the Ministry of Energy and Coal Industry of 27 April 2018. However, as of 05 June 2018, this document still hasn’t been slated for review by the Government yet.
http://zakon5.rada.gov.ua/laws/show/1442-97-%D0%BF http://zakon5.rada.gov.ua/laws/show/1982-19 156 http://www.amc.gov.ua/amku/control/main/uk/publish/article/141958 157 http://zakon2.rada.gov.ua/laws/show/187-2017-%D0%BF 158 http://zakon1.rada.gov.ua/laws/show/570-2014-%D0%BF 159 https://vl.104.ua/ua/for-clients/news/id/volinjani-majzhe-tri-misjaci-bez-skraplenogo-gazu-28253 160 http://www.kmu.gov.ua/control/uk/publish/article?art_id=250208523 161 http://www.mev.gov.ua/news/minenergovugillya-zavershylo-rozrobku-proektu-planu-zahodiv-z-realizaciyi-energetychnoyi 154 155
Business Climate The first competition for five vacancies at the NEURC has ended, and the President Poroshenko appointed new commissioners, thus restoring quorum of the NEURC. Still, the second competition for another two vacancies was blocked by a court ruling. In the meantime, the Cabinet of Ministers of Ukraine has adopted a number of important resolutions on development of entrepreneurship and formation of a favorable business climate, which concern delimitation of functions of controlling bodies, optimization of the process of approving investment projects by various agencies, and other matters. For instance, the Action Plan on implementation of the Strategy for Development of Small and Medium-Sized Enterprises in Ukraine for the period until 2020. At the same time, more and more information and explanatory materials for bidders appear in the public procurement sector, making positive effect on competition. However, MPs left out three important draft laws: on transparency in extractive industries, on improvement of public procurement procedures and on development of cogeneration, intended to create favorable operating conditions for companies and bring their reporting into conformity with international standards. Also, despite the praise and inclusion to agenda, the draft law relieving electric motor components from import duty wasn’t considered as well. The adoption of these changes is important in the context of stimulating the mechanical engineering industry, which would produce positive effect on development of Ukraine’s energy and extractive sectors. Article 277 on regulatory authority (provisions of Directives 2009/72/EC and 2009/73/EC concerning regulatory authority) The competition commission for selection of candidates for vacant positions at NEURC received a report on special check of candidates as part of the first competition. The commission finalized the list of 10 winners 162 and on 14 May, submitted it to the President 163. On 29 May, President Poroshenko appointed five new members of NEURC 164, which also meant restoration of quorum and unblocking of the energy market regulator’s operability. According to the transitional provisions of the Law on NEURC and the NEURC membership rotation plan, the term in office of the last two NEURC members from the previous tenure has expired on 26 May. However, the relevant presidential decrees have appeared on the official portal only on 31 May, dated to 26 May 165. The second competition for two vacancies has been blocked by a court ruling 166. On 14 May, based on an administrative compliant filed by A.Gudachenko (case No 826/7309/18), Kyiv District Administrative Court prohibited any actions related to organization of this competition. With regard to another complaint, Dmytro Vovk vs the Competition Commission (case No 826/7309/18), the court hearing scheduled for 17 May was adjourned until 5 June due to no-show of the plaintiff 167. Articles 378 and 379 regarding creation of favorable conditions for doing business The Cabinet of Ministers of Ukraine has approved the Action Plan on implementation of the Strategy for Development of Small and Medium-Sized Enterprises in Ukraine for the period until 2020. The action plan
http://kompek.rada.gov.ua/documents/konkurs_com/zasid_kc/73559.html http://kompek.rada.gov.ua/uploads/documents/30432.pdf 164 http://www.president.gov.ua/documents/1542018-24254 http://www.president.gov.ua/documents/1532018-24250 http://www.president.gov.ua/documents/1522018-24246 http://www.president.gov.ua/documents/1512018-24242 http://www.president.gov.ua/documents/1502018-24238 165 http://www.president.gov.ua/documents/1492018-24234 http://www.president.gov.ua/documents/1482018-24230 166 http://kompek.rada.gov.ua/documents/konkurs_com/povidom_k/73577.html 167 http://kompek.rada.gov.ua/uploads/documents/30442.pdf 162 163
Business Climate envisages improvement of the licensing and authorization systems, simplification of the company dissolution procedure, and other deregulation measures 168. The government has also approved the Procedure of Organizing Electronic Informational Interaction between Public Electronic Information Resources, which can significantly reduce time for approval formalities required to implement energy efficiency and renewable energy projects. 169 This procedure must be implemented within two months and reported on to the Cabinet of Ministers by 12 December. The Cabinet of Ministers has approved, inter alia, two concepts designed to improve business climate in the country in general: Concept of Reforming the Institute of Self-Regulation 170 and Concept for Implementation of the National Policy on Reform of the Public Financial Control System until 2020 171: -
the former document concerns self-regulating organizations 172, and is intended to delegate to these organizations certain functions of public authorities regulating economic and professional activity in various sectors (for example, energy efficiency); the latter document envisages coordination of efforts of the State Audit Service and the Accounting Chamber. These bodies have similar powers in certain areas of control over the management and use of public (local) resources. In particular, the following requires coordination of planning and audit processes: minimization of duplications and amendments to their methodological and regulatory frameworks.
Articles 381 and 382 regarding transparency of extractive industries Verkhovna Rada’s FEC Committee has finished reviewing corrections and comments to the draft law 6229 on transparency in extractive industries, and recommended MPs to approve it in the second reading 173. At the same time, the Main Legal Department has visaed the draft law and also recommended it for approval. The text of the draft law 174 and a comparative table thereto 175 were published. The parliament is expected to hear the draft law in June. Articles 150 and 153 regarding public procurements (concerning implementation of certain provisions of Directives 2014/24/EC, 2014/25/EC, 89/665/EEC and 92/13/EEC) The draft law 8265, designed to enhance the capabilities of small and medium-sized businesses to participate in public procurements (in particular, exclude bidders due to small errors), still hasn’t been included to the agenda, being worked on by the Verkhovna Rada Committee for Economic Policy 176. Detailed information regarding the draft law is available in the monitoring report for April 2018 177. The public procurement monitoring website Dozorro contains instructions and recommendations regarding convenient information search, in particular, regarding identification of errors in annual procurement plans 178 and how to find these plans 179. The website also contains information uncovering unfounded disqualifications of bidders 180.
http://zakon3.rada.gov.ua/laws/show/292-2018-%D1%80 http://zakon3.rada.gov.ua/laws/show/357-2018-%D0%BF 170 http://zakon3.rada.gov.ua/laws/show/308-2018-%D1%80 171 http://zakon2.rada.gov.ua/laws/show/310-2018-%D1%80 172 A self-regulating organization is a noncommercial organization founded on the membership basis for the purpose of selfregulation, bringing together businesses on the premise of unity of a certain manufacturing (service) industry or market of goods (works, services), or bringing together entities based on a certain trade. 173 http://w1.c1.rada.gov.ua/pls/zweb2/webproc34?id=&pf3511=61409&pf35401=454919 174 http://w1.c1.rada.gov.ua/pls/zweb2/webproc34?id=&pf3511=61409&pf35401=457090 175 http://w1.c1.rada.gov.ua/pls/zweb2/webproc34?id=&pf3511=61409&pf35401=457067 176 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=63852 177 http://enref.org/books/monitorynhovyj-zvit-pro-prosuvannya-ukrajiny-u-vykonanni-uhody-pro-asotsiatsiyu-z-evropejskymsoyuzom-u-sferah-enerhetyky-ta-dovkillya-za-kviten-2018-roku/ 178 https://dozorro.org/blog/yak-operativno-viyaviti-pomilki-v-punktah-planu-instrukciya 168 169
Business Climate Articles 337 to 339 regarding cooperation in the energy sector (concerning implementation of certain provisions of Directives 2012/27/EC, 2009/72/EC and 2009/73/EC) A draft law 7465 on development of highly-efficient cogeneration (electricity and heat production) received positive opinion from the Antimonopoly Committee regarding conformity with anticorruption law (Committee decision, minutes of meeting No 119 dated 16 May 2018) 181. Articles 351 and 352 regarding taxation of energy-related and electrical products (concerning implementation of certain provisions of Directives 92/83/EEC, 2008/118/EC and 2011/64/EC) The draft law 8160 182 proposing to relieve, until 31 December 2028, component products for manufacture of electric motor vehicles from import duty received positive opinions for approval in the first reading. MPs have included the said draft law to the agenda, but haven’t considered it yet.
https://dozorro.org/blog/yak-uchasniku-znajti-aktualni-plani-zakupivel-pokrokova-instrukciya https://dozorro.org/blog/vikrittya-bezpidstavnoyi-diskvalifikaciyi-instrukciya-dlya-gromadskih-organizacij 181 http://w1.c1.rada.gov.ua/pls/zweb2/webproc34?id=&pf3511=63282&pf35401=455214 182 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=63678 179 180
Methodology ANNEX 1. List of Articles of the Association Agreement and Acquis Subject to Monitoring The group Electricity and Nuclear Security conducts monitoring and assessment of issues relating to electricity, nuclear energy, coal and elimination of consequences of the Chornobyl accident. Acquis concerned: Article 269, Chapter 11, Title IV, Directive 2009/72/EC (market-related provisions) Article 270, Chapter 11, Title IV, Regulation (EC) 714/2009 Article 271, Chapter 11, Title IV, Regulation (EC) 714/2009 Article 273, Chapter 11, Title IV, Regulation (EC) 714/2009, Directive 2009/72/EC Article 274, Chapter 11, Title IV, Regulation (EC) 714/2009, Directive 2009/72/EC Article 305, Chapter 14, Title IV, Directive 2009/72/EC, Directive 2005/89/EC Article 338, Chapter 1, Title V Article 338, Chapter 1, Title V, Cooperation Agreements with IFIs Article 339, Chapter 1, Title V, coal market Article 342, Chapter 1, Title V, cooperation in the nuclear safety sector, Council Directive 2014/87/Euratom, Council Directive 2013/59/Euratom, Council Directive 2006/117/Euratom Article 342, Chapter 1, Title V, cooperation in the nuclear safety sector The group Gas conducts monitoring and assessment of issues relating to gas, in particular, the implementation of the following acquis: Articles 338, 341, Directive 2009/73/EC (market-related provisions) Articles 338, 341, Regulation (EC) 715/2009 Articles 338, 341, Directive 2004/67/EC + Annex XXVI (Early Warning Mechanism), Articles 275 (Unauthorised taking of energy goods), 276 (Interruption), 309 and 314 (resolution of disputes) of the Association Agreement Chapter 11 Trade-related energy, in particular Articles 269 (Domestic regulated prices), 270 (Prohibition of dual pricing), 271 (Customs duties and quantitative restrictions), 272 (Transit) and 273–274 (Transport, cooperation on infrastructure) Annex XXVII to Chapter 1 Energy cooperation, including nuclear issues — Directive 94/22/EC + Articles 279– 280 (Access to and exercise of the activities of prospecting, exploring for and producing hydrocarbons, and licensing conditions) The group Energy Efficiency and Social Issues conducts monitoring and assessment of the implementation of the following acquis: Directive 2010/30/EU Directive 2010/31/EU Directive 2006/32/EU Directive 2012/27/EU Directive 2009/72/EC (social issues) Articles 338, 341 of the Association Agreement Directive 2009/73/EC (social issues) Articles 338, 341 of the Association Agreement
Methodology The group Environment and Renewable Energy Sources conducts monitoring and assessment of the implementation of the following acquis: Article 363, Directive 2011/92/EU Article 363, Directive 2001/42/EC Article 363, Directive 2003/42/EC Article 363, Directive 2003/35/EC Directives 85/337/EEC and 96/61/EC Article 363, Directive 2008/50/EC Article 363, Directive 1999/32/EC Article 363, Directive 94/63/EC Article 363, Directive 2009/147/EC Article 363, Directive 2010/75/EU Article 338, Directive 2009/28/EC The group Oil conducts monitoring and assessment of the implementation of the following acquis: Directive 2009/119/EC Directive 94/22/EC Directive 98/70/EC Articles 274, Chapter 11 of the Association Agreement (Trade-related energy) Articles 275, Chapter 11 of the Association Agreement (Trade-related energy) Articles 276, Chapter 11 of the Association Agreement (Trade-related energy) Articles 279, Chapter 11 of the Association Agreement (Trade-related energy) Articles 280, Chapter 11 of the Association Agreement (Trade-related energy) Article 337 of the Association Agreement Article 338 of the Association Agreement Article 339 of the Association Agreement The group Business Climate conducts monitoring and assessment of the implementation of the following acquis: Article 27, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 28, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 29, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 88, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 93, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Articles 97-102, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 104, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 105, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 107, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Articles 144-147, Chapter 7 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Chapter 8 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement and the Directive 2014/25/EU Article 255, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 256, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 258, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement
Methodology Article 263, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 267, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 277, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement and Directives 2003/54/EC and 2003/55/EC (as regards the regulatory authority) Articles 355-359, Chapter 5, (Title V ECONOMIC AND SECTOR COOPERATION) of the Association Agreement and Directive 2008/92/EC Article 379, Chapter 10 (Title V ECONOMIC AND SECTOR COOPERATION) of the Association Agreement
Glossary ANNEX 2. Glossary (Short Description) of EU Acquis Subject to Implementation Monitoring
Gas
Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC This Directive establishes common rules for the transmission, distribution, supply and storage of natural gas. The rules established by this Directive apply to natural gas, liquefied natural gas (LNG), biogas and gas from biomass. They aim to achieve a competitive, secure and environmentally sustainable market. This Directive provides for compulsory functional unbinding (supply) of transmission system operators (TSO) in vertically integrated undertakings. EU Member States must ensure that all customers are entitled to freely choose natural gas supplier and can easily change supplier within three weeks. At the same time, Member States may impose on suppliers selling gas to household customers obligations which may relate to security, including security of supply, regularity, quality and price of supplies, and environmental protection, including energy efficiency. Regulation (EU) No. 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No. 1775/2005 This Regulation sets common rules for access to gas transmission systems, LNG terminals and storage facilities taking into account the special characteristics of national and regional markets. The document establishes the procedures of certification of transmission system operators, as well as development, elaboration and implementation of network codes (with the participation of the European Network of Transmission System Operators — ENTSO — for Gas). The key objective of this Regulation is to ensure that all market participants have free and non-discriminatory access to relevant infrastructure and capacities. Directive 2004/67/EC concerning measures to safeguard security of natural gas supply This Directive establishes a common framework within which Member States must define general, transparent and non-discriminatory security of supply policies compatible with the requirements of a competitive market, and clarify the roles and responsibilities of market players (including in case of emergency). The government must specify minimum security of supply standards to be complied with by the market players, prepare and update national emergency measures, identify “vulnerable” customers and ensure adequate security for them, establish cooperation with the European Commission and other stakeholders.
Electricity and Nuclear Security Council Directive 2014/87/Euratom of 8 July 2014 amending Directive 2009/71/Euratom establishing a Community framework for the nuclear safety of nuclear installations The Directive establishes a European framework for maintaining and promoting consistent improvement of nuclear safety and its regulation. It sets an ambitious safety goal across the EU in order to prevent accidents and avoid radioactive waste from nuclear installations. The directive applies to any nuclear installation subject to licensing. Council Directive 2013/59/Euratom laying down basic safety standards for protection against the dangers arising from exposure to ionising radiation The Directive establishes basic safety standards to protect the health of employees, the general public, patients and others from the dangers of exposure to ionising radiation. The Directive applies to any planned, existing or emergency situation which involves a risk to ionising radiation. In particular, it applies to: the manufacture, production, processing, handling, disposal, use, storage, holding, transport, import to and export from the EU of radioactive material; the manufacture and operation of electrical equipment emitting ionising radiation; human activities withnatural radiation sources that could lead to a significant increase in the exposure of employees or the public, such as the exposure of space crew to cosmic
Glossary radiation; domestic exposure to radon gas in indoor air and external exposure to gamma radiation from building materials; managing emergency exposure situations that require measures to protect the public and workers. Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC This Directive establishes common rules for the generation, transmission, distribution and supply of electricity. It also lays down universal service obligations and the rights of electricity consumers and clarifies competition requirements. Open internal market enables all consumers freely to choose their suppliers and all suppliers freely to deliver to their customers (free movement of goods, the freedom of establishment and the freedom to provide services). At the same time, this Directive sets stricter requirements to unbundling of transmission system operators (TSO) in vertically integrated undertakings. It also contains consumer rights provisions, reinforces and clarifies the functions and powers of regulatory authorities. Regulation (EC) No. 714/2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No. 1228/2003 This Regulation establishes the rules for cross-border exchanges of electricity with the view to enhancing competition and achieving harmonization within the internal market in electricity. Comparing to the previous Regulation No. 1228/2003, this Regulation contains additional provisions on certification of transmission system operators (TSO), introduction of network codes and publication of information by system operators. It also clarifies that the European Network of Transmission System Operators for Electricity (the ENTSO for Electricity) is responsible for the management of electricity transmission networks to allow trading and supplying electricity across borders within the EU. Directive 2005/89/EC concerning measures to safeguard security of electricity supply and infrastructure investment This Directive establishes measures aimed at safeguarding security of electricity supply so as to ensure the proper functioning of the internal market for electricity, an appropriate level of interconnection between Member States, an adequate level of generation capacity and an adequate balance between supply and demand. It establishes a framework within which Member States are to define general transparent and non-discriminatory policies on security of electricity supply compatible with the requirements of a competitive market for electricity. They must define and publish roles and responsibilities of competent authorities and all relevant market actors. In implementing these measures, Member States are supposed to guarantee continuity of electricity supplies, explore possibilities for cross-border cooperation in relation to security of electricity supply, reduce the long-term effects of the growth of electricity demand, ensure diversity in electricity generation, encourage energy efficiency and the adoption of new technologies, ensure regular renewal of networks. Council Directive 2006/117/Euratom on the supervision and control of shipments of radioactive waste and spent fuel This Directive authorizes transboundary shipments of spent fuel between Member States for processing, requires prior authorization for transboundary shipments of radioactive waste and spent fuel where such fuel is moved from, through the territory of or to a Member State. This Directive also requires return of radioactive waste to its country of origin.
Energy Efficiency and Social Issues
Directive 2010/30/EU on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products This Directive regulates labelling of energy-related products and provision of information to consumers relating to their consumption of electric energy. It applies to products which have a direct or indirect impact on the consumption of energy and on other resources during use. Suppliers placing products on the market must ensure that such products are labelled with the information about their consumption of
Glossary energy and other resources. Suppliers must also produce technical documentation to include: a general description of the product; the results of design calculations carried out; test reports; the references allowing identification of similar models. The technical documentation must be available for inspection purposes for a period ending five years. Suppliers must provide the labels and product-related information free of charge to dealers, and the latter must display labels properly, in a visible and legible manner. Directive 2010/31/EU on the energy performance of buildings This Directive promotes the improvement of the energy performance of buildings within the Union, taking into account outdoor climatic and local conditions. It lays down minimum requirements, common general framework for a methodology and covers energy used for heating, hot water, cooling, ventilation and lighting. National authorities must establish reasonable minimum requirements to energy efficiency to be reviewed every five years. They also establish a system of certification of the energy efficiency. Such certificates provide information to prospective buyers or tenants on the energy performance of buildings, and advice on enhancing it. Directive 2012/27/EU on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC This Directive establishes a common framework of measures for the promotion of energy efficiency within the Union in order to ensure the achievement of the Union’s 2020 20% headline target on energy efficiency. Such measures include: • annual 1.5% energy savings resulting from implementing energy efficiency measures by distribution network operators and suppliers; • enhancing energy performance of heating systems, installation of double-glazed windows and roof insulation; • purchase of buildings, products and services with high energy-efficiency performance by public bodies; • annual energy modernization of at least 3% of the total floor area of buildings owned and occupied by public bodies; • expanding rights and possibilities of consumers in the area of energy management which includes easy and free access to the metering data on the actual consumption; • national incentives for small and medium-sized enterprises to conduct energy audit that should be mandatory for all large enterprises; • monitoring of the energy performance of new energy generating capacities.
Environment and Renewable Energy Sources
Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment (codification) This Directive introduces an important instrument of the environmental policy — environmental impact assessment. Member States must ensure, first of all, that projects likely to have significant effects on the environment (by virtue, inter alia, of their nature, size or location) are made subject to a requirement for development consent and an assessment with regard to their effects. This Directive contains two lists of projects subject to environmental impact assessment (from nuclear power stations, gas pipelines, etc., to large pig farms). An important element is stricter publicity requirements, including to the public participation in the environmental impact assessment. Directive 2001/42/EC on the assessment of the effects of certain plans and programmes on the environment This Directive introduces an important instrument of environmental policy — strategic environmental assessment. An environmental assessment must be carried out of certain plans and programmes during their preparation. Such assessment includes preparation of the environmental report (that must contain detail information on the likely significant environmental effects and reasonable alternatives) and consultations with the relevant authorities and the public. Where a transboundary effect is possible, an assessment and consultations in a transboundary context must be carried out.
Glossary Directive 2003/4/EC on public access to environmental information and repealing Council Directive 90/313/EEC This Directive implements the provisions of the Aarhus Conventions relating to public access to environmental information. It aims to guarantee public access to environmental information owned by public authorities — both upon request and through active dissemination thereof. Environmental information must be made available to an applicant within one month after the receipt by the public authority of the applicant’s request. A request for environmental information may be refused if the request is manifestly unreasonable, or formulated in too general a manner, concerns an unfinished document or internal communications. Directive 2003/35/EC providing for public participation in respect of the drawing up of certain plans and programmes relating to the environment and amending with regard to public participation and access to justice Council Directives 85/337/EEC and 96/61/EC This Directive addresses the implementation of the Aarhus Convention in respect of public participation and access to justice. It sets the requirements to the introduction of mechanisms of informing the public, holding consultations with the public and taking account of comments and proposals of the public in decision-making. Member States must ensure that the public is given early and effective opportunities to participate in the preparation and modification or review of the plans or programmes required to be drawn up under the provisions listed in Annex I of the Directive. Directive 2008/50/EC on ambient air quality and cleaner air for Europe This Directive establishes ambient air quality and ambient air quality management standards. For this purpose, it establishes upper and lower assessment thresholds, target and threshold values, sets objectives for the reduction of the effect of particulate matters, defines and classifies zones and agglomerations, introduces the systems of informing the public and ambient air quality assessment with respect to various pollutants. Where, in a given zone or agglomeration, there is a risk that the levels of pollutants will exceed the alert thresholds, short-term action plans must be drawn up. Directive 1999/32/ЕС relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC, as amended by the Regulation (EC) No. 1882/2003 and Directive 2005/33/EC The purpose of this Directive is to reduce the emissions of sulphur dioxide resulting from the combustion of certain types of liquid fuels and thereby to reduce the harmful effects of such emissions on man and the environment. It sets the maximum sulphur content in heavy fuel oil, gas oil and marine gas oils. It also specifies methods of sampling and analysis of sulphur content in fuel to check compliance with the requirements. Directive 2009/147/EC on the conservation of wild birds (Article 4.2) This Directive relates to the conservation of all species of naturally occurring birds in the wild state in the European territory of the Member States. The mechanism of conservation of wild birds provides for the protection of their habitats; protection and use of birds; prevention of harm that can be caused by invasive species; research and reporting. According to Article 4.2, special protection areas need to be established based on ornitological criteria. Special measures also need to be taken to protect migratory species naturally occurring in the territory of a particular state, especially in wetlands. Directive 2010/75/EU on industrial emissions (integrated pollution prevention and control) This Directive lays down rules on integrated prevention and control of pollution arising from industrial activities. It requires using the integrated approach to activities referred to in Annex I thereto. All installations covered by this Directive must prevent or reduce pollution due to using best available techniques, efficient energy use, prevention and control of emissions. Transparency of the integrated approach is ensured by the public participation.
Glossary Directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC This Directive provides for setting mandatory national targets for the overall share of energy from renewable sources in the overall energy balance to take account of statistics and potential of each particular country. These targets include the achievement of a 20% share of energy from renewable sources in overall Energy Community energy consumption by 2020 and a 10% target to be achieved for the share of RES in the transport sector. This Directive, among other, establishes rules for joint green energy projects between Member States and third countries and access to the grid-system of electricity produced from renewable energy sources.
Oil
Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products This Directive lays down rules aimed at ensuring a high level of security of oil supply in the Community through reliable and transparent mechanisms based on solidarity amongst Member States. It provides for the adoption of such laws, regulations or administrative provisions as may be appropriate in order to ensure that the total oil stocks maintained at all times within the Community for their benefit correspond, at the very least, to 90 days of average daily net imports or 61 days of average daily inland consumption, whichever of the two quantities is greater. Directive 98/70/EC relating to the quality of petrol and diesel fuels The EU introduced rules prohibiting leaded petrol and limiting the permitted sulphur content in diesel fuel with the view to improving air quality and reducing greenhouse gas emissions. This Directive sets technical specifications applicable to petrol, diesel fuels and biofuels used in vehicles, as well as to gas oils used in non-road mobile machinery. Apart from the prohibition of marketing leaded petrol, Member States must conduct assessment of national consumption of fuel, adopt laws and identify the authorized body (bodies) to introduce the fuel quality monitoring system. Directive 94/63/EC on the control of volatile organic compound (VOC) emissions resulting from the storage of petrol and its distribution from terminals to service stations, as amended by Regulation No. 1882/2003 183 This Directive provides for the registration of all terminals used for storage, loading and unloading of oil products, installation of technical means allowing reduction of VOC emissions from mobile containers with oil products, bringing all stationary tanks, rail, marine and motor vehicle tanks and loading installations in compliance with the established requirements. Directive 94/22/EC on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons This Directive establishes common rules to ensure the non-discriminatory access to and pursuit of activities relating to the prospection, exploration and production of hydrocarbons. These objective and transparent rules reinforce integration of the internal energy market, encourage greater competition and improve security of supply. The document provides for the implementation of measures to ensure: • equal access to all organizations possessing necessary resources for prospecting, exploring for and producing hydrocarbons; • granting authorizations on the basis of objective, published criteria; • communication of all necessary information to all organizations participating in the established procedures.
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The official translation has a lot of mistakes resulting from inaccurate translation
Glossary Business Climate
Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC This Directive aims to ensure market openness, as well as fair procurements, in particular in the energy sector: extraction (production), transmission and distribution of gas, heat, electricity. Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC This Directive provides for the implementation of laws on the electricity market which defines electricity as an energy-related product to be purchased/sold/produced/transmitted/stored. These operations may be carried out by all licensed companies on equal competitive conditions. The state also ensures nondiscriminatory access to the existing infrastructure, creates favourable conditions for electricity producers to invest in new forms of energy (wind, solar, etc.). Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC This Directive provides for the implementation of laws on the gas market which defines gas as an energyrelated product to be purchased/sold/produced/transmitted/stored. These operations may be carried out by all licensed companies on equal competitive conditions. The state also ensures that companies have non-discriminatory access to distribution networks, gas storage facilities and cross-border gas pipelines. Directive 2008/92/Eะก concerning a Community procedure to improve the transparency of gas and electricity prices charged to industrial end-users Pursuant to that Directive, open, generally accessible mechanisms of providing information on the prices of energy resources for customers must be introduced. A particular methodology of collection of respective information about gas and electricity prices is to be drawn up and the respective mechanism to that effect is to be introduced.