Energy Reforms: December 2018 review by Ukrainian Energy

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”, AllUkrainian 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

www.enref.org/en

Executive Summary Experts from the Gas Task Force noted the decision of the Cabinet of Ministers on the implementation of the first stage of housing subsidies monetization, and of the NEURC – on decrease of gas transmission tariffs. Moreover, the draft government resolution on transition to settlements and balancing on gas market only in energy units was presented. Meanwhile, there is no progress in the TSO unbundling and daily balancing implementation. The Electricity and Nuclear Safety Task Force experts note that the state-owned coal enterprises which have accumulated about 13 bn UAH of debts for electricity, may become the clients of the supplier of last resort, SE Ukrinterenergo, setting the highest electricity price. Considering only limited actions taken to carry on energy efficiency reforms in December, Energy Efficiency and Social Issues Task Force recorded considerable criticism of the government in terms of subsidies monetization, implying the failure of one of the most important areas of the energy sector reform, if not the economy as a whole. In the Environment and Renewable Energy Sources Task Force, experts note that December 18, 2018, marked the first year from the start of environmental impact assessment procedure in practice. The MPs adopted in the first reading the draft law No. 8449-d, envisaging transition from feed-in tariff to "green" auctions. Experts in the Oil and Oil Products Sector welcome the approval of the decisions aimed at further implementation of Directive 94/22/EC in Ukraine. In particular, canceling the possibility to obtain oil extraction permit by other means than by auction and posting in the ProZorro.Sales system of the first 10 oil&gas fields with the total hydrocarbon reserves of 16 mln tons. The intentions on holding open competitions on production sharing agreements for at least 11 oil&gas fields were also highlighted. Meanwhile, experts express concern with regard to under-performance of the government's plans for 2018 regarding the implementation of Directives 99/32/EC, 98/70/EC and 94/63/EC. The Business Climate Task Force experts noted the implementation of the new public procurement procedure – framework agreements, facilitating the work for both suppliers and governmental entities. Among other positive actions: initiating the solutions to a number of problems related to ESCO contracts and gradual liberalization of currency transactions.

Abbreviations: ACMB – Association of co-owners of a multi-story building DHC – district heating company DSO – distribution system operator EBRD – European Bank for Reconstruction and Development ESCO – energy service company GTS – gas transportation system IAEA – International Atomic Energy Safety ISIP – Integrated Safety Improvement Program of NPP power units MECI – Ministry of Energy and Coal Industry NEURC – National Energy and Public Utilities Regulatory Commission NNEGC – National Nuclear Energy Generating Company NPP – nuclear power plant

NSC – New Safe Confinement PSO – public service obligations SAUEZM – State Agency of Ukraine on Exclusion Zone Management; SE– state enterprise SLR – supplier of last resort SSE – state specialized enterprise SUS – supplier of universal services TSO – transmission system operator UES – United Energy System of Ukraine VAT – value-added tax WANO – World Association of Nuclear Operators

Gas The first month of winter witnessed no significant changes to the gas sector reform trends: MPs did not approve new decisions crucial for the sector, instead they added another two legislative initiatives concerning the regulation of gas price for households and the restructuring of debts for its consumption to the initiatives already registered by the Verkhovna Rada of Ukraine. The introduction of the first stage of benefits and subsidies monetization by the Cabinet of Ministers from January 1, 2019 largely the only government action taken so far to modify the payment terms of the natural gas consumed by households after price increase. In addition, in December, the government approved a number of decisions in the field of subsoil use and made borrowing conditions for the Naftogaz group more favorable in order to secure the procurement of sufficient volumes of gas for the 2018/2019 heating season. The Ministry of Energy and Coal Industry prepared a draft government resolution on the transition to the calculations and balancing on the gas market exclusively in energy units from April 1, 2019. The regulator reduced tariffs for natural gas transmission for entry and exit points since January 1, 2019, and set threshold fees for 2019 for connection to distribution networks. The NEURC also prepares extraordinary inspections of a number of DSOs, in connection with the fact that they continue accruing the amounts payable by households due to "non-harmonization" with standard conditions, and pending permission for their implementation from the State Regulatory Service. The preparatory process for the introduction of daily balancing, scheduled to March 1, 2019, is underway â&#x20AC;&#x201C; Ukrtransgaz reports to the regulator on its progress and results weekly and organizes trainings on the use of the information platform. At the same time, there is still no progress in the "unbundling" process, despite the discussion on optimal models and ways of its implementation.

Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (Art. 338, 341, Annex XXVII of the AA) according to Art. 278 of the AA The first gas draft law registered in December (No. 93971) concerns the changes to the procedure of debt restructuring for consumed natural gas and, in general, for housing and utility services provided for by the relevant current law No. 554-IV2 of 01.07.2003. The need for these changes is first and foremost due to the fact that since the adoption of the said law, the legislation has changed3, and now its provisions need to be updated. In addition to harmonization of the title of this law and the terms of the debt restructuring to be indicated in the repayment agreements, the draft law is expected to reduce the total amount of obligatory monthly payments up to 20% of the confirmed income of citizens (from 25%) during the period of repayment. The Verkhovna Rada also registered a draft law (No. 94034) amending the Law "On the Natural Gas Market", in order to standardize the price of gas and prevent surges in natural gas prices and tariffs for domestic consumers and heat producers. The draft law is intended to legislatively approve the mechanism of free gas pricing (part two of Article 12 of the said Law), except for the calculation of prices for the population, religious organizations, district heating companies (DHCs) and state enterprise "Artek". For these categories of consumers, the authors propose adopting a formula for calculating the maximum price, based on domestic extraction rates, in particular the weighted average wholesale price of natural gas extracted in Ukraine, based on actual data for the 12 months preceding April 1 of the year before the one for which the price is calculated.

http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=65124 https://zakon.rada.gov.ua/laws/show/554-15 3 In particular, the Law of Ukraine "On Housing and Utility Services" dated 09.11.2017 No. 2189-VIII was adopted 4 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=65133 2

Gas If the draft law is adopted, it is also stipulated that the Cabinet should recalculate the price, harmonize all the regulatory acts of the Government with the approved mechanism and repeal the Resolution of the Cabinet of Ministers No. 8675 on the approval of the provisions on the public service obligations (PSO). Meanwhile, the government continues the search for perfect mechanisms for determining the price of natural gas. Thus, the Ministry of Economic Development and Trade proposed a solution to the pricing problem of state gas procurements6. The MEDT has developed recommendations for the use of the formulabased pricing (letter 3304-04/54265-06 dated 11.12.2018 "On the calculation of the price of natural gas"7) designed to prevent price dumping, which often occurs during the initial submission of quotations and the subsequent supplies, where the traditional mechanism of changing the contract price is applied. The core of the new MEDT approach to solving this problem is to factor hryvnia-to-currency exchange rate fluctuations and gas prices of European hubs in the price calculation, which should result in a more objective value subject to adjustment. The MEDT recommends that gas consumers indicate the procedure for changing the essential conditions in the draft contract and in the procurement contract using the proposed mechanism. As the developers of the recommendations expect, the application of the new price change procedure would enable the procurement entity to obtain a real price for gas and a transparent price change at the backdrop of market volatility. In accordance with the Resolution (No. 11768) adopted by the Government, since January 1, 2019, a new procedure for granting subsidies to the population, including for payment of natural gas, which provided that in the first stage (before the end of the 2018/2019 heating season) subsidies will be provided in cash to households who first applied for it. The amount of cash earmarked as a subsidy will be paid to the personal account of the recipient in Oschadbank, and the bank will transfer it to the utility services supplier and will inform the subsidy recipient about the amount still outstanding. From May 1, 2019, subsidies in this form will be distributed to households that received them during 2018-2019, provided they file a new application and income statement. In the third stage (from October 1, 2019), payment in the monetary form will cover all recipients of benefits and housing subsidies. The mechanism of "monetization" introduced by the CMU resolution No. 1176 will not encourage subsidizing to real efficient use of utility services (in particular, the volumes of natural gas), since the consumer will not actually re able to really manage the funds subsidized by the state, and will be able to receive a potential "reward" for savings only upon the outcomes of the heating period9. In December, the government also passed a resolution (No. 117010) approving the procedure for determining the cost savings for financing the residential subsidies to the population, including for the payment of natural gas, as a result of the implementation of actions envisaged by the Energy Efficiency Fund programs. The analysis of data obtained using the mechanism adopted by the resolution will serve as the basis for assessing further additional funding of this fund. Meanwhile, the Cabinet of Ministers approved the procedure for the use of funds allocated from the state budget for the development of e-governance in the field of geological prospecting and rational use of subsoil (Decree No. 109911), aimed at the introduction of electronic document management in this area.

https://www.kmu.gov.ua/ua/npas/pro-zatverdzhennya-polozhennya-pro-pokladennya-specialnih-obovyazkiv-na-subyektiv-rinkuprirodnogo-gazu-dlya-zabezpechennya-zagalnosuspilnih-interesiv-u-procesi-funkcionuvannya-rinku-prirodnogo-gazu 6 http://www.me.gov.ua/News/Detail?lang=uk-UA&id=2f928952-95e0-4def-8865d377c4a927b3&title=MinekonomrozvitkuRekomenduVikoristovuvatiFormulneTsinoutvorenniaDliaDerzhavnikhZakupivelPrirodnogoGa zu 7 http://www.me.gov.ua/InfoRez/DocumentsList?lang=uk-UA&id=f2e30594-ba6c-420f-9c242a852415a884&tag=InforezKnowledgeDb 8 https://www.kmu.gov.ua/ua/npas/deyaki-pitannya-nadannya-zhitlovih-subsidij-naselennyu-u-groshovij-formi 9 https://www.epravda.com.ua/publications/2018/12/28/643944/ 10 https://www.kmu.gov.ua/ua/npas/pro-latu-elektroenergiyi-prirodnog 11 https://www.kmu.gov.ua/ua/npas/pro-zau-derzhavnomu-byudzheti-dlya-rozvitku-elektronnogo-uryaduvannya-u-sferigeologichnogo-vivchennya-ta-racionalnogo-vikoristannya-nadr

Gas According to the media12, the Cabinet of Ministers has decided to assign 90% of the rights and obligations of Nadra Yuzivska LLC13 under a product-sharing agreement (PSA) on Yuzivska field in favor of Yuzgaz B.V. (Netherlands) with Slovak company Nafta acting as the operating investor of the project. According to the Minister of Energy and Coal Industry I. Nasalyk14, in general for the 12 PSAs planned to be auctioned, the government expects to attract at least 10 bn UAH of investments in the geological prospecting of mineral resources and at least 50 bn UAH in extraction. At the same time, within the framework of the pilot project on conducting electronic online auctions for the sale of subsoil use licenses, the State Service of Geology and Mineral Resources on December 6 placed the first 10 lots of special permits for oil and gas plots, which will subsequently be sold, in the ProZorro.Sales system15. Under the terms of the project, applications for participation in the auction can be submitted within 90 calendar days, enabling potential buyers to prepare properly for the auction. In its turn, the profile ministry initiated a draft resolution of the CMU on the introduction of calculations and balancing in the natural gas market in energy units16. The project envisages such a transition from April 1, 2019 with the use of kWh as an energy unit. Among the objectives of the document are the fulfillment of Ukraine's obligations under the Treaty establishing the Energy Community and the Association Agreement, in particular Directives 2009/73/EC and 2006/32/EC. According to developers, the transition to energy units will allow the introduction of differentiated gas prices depending on its quality as a commodity, strengthen the integration of gas markets of Ukraine and the EU through common approaches to gas parameters, as well as increase energy efficiency through consumer behavior change. The Ministry of Energy and Coal Industry also issued an updated draft list of works to be carried out during the maintenance of indoor gas supply systems in residential buildings, aimed at implementing the provisions of the Law "On Housing and Utility Services"17. More than 55 resolutions were passed18 by the regulator in the licensing area, of which 5 - on the issuance of new licenses for the supply of natural gas. The total number of licensees of this type of activity as of January 1, 2019 has reached 51719. In the course of its work, the NEURC has adopted a number of resolutions in the field of regulating activities in the gas distribution sector. First, the regulator adopted the amendments to the Gas Distribution Systems Code (Decree No. 191620), which establishes that the presence of the respective costs in the structure of the distribution tariff and/or the gas distribution system development plan for the next 10 years as a compulsory condition for the replacement of the consumer gas meter by the DSO, where a periodic verification found that the meter repair to be unfeasible21. Second, the maximum level of payment for standard accession to gas distribution systems in 2019 according to the regions of Ukraine (Decree No. 191722) has been established. At the same time, the Energy Community Secretariat recommended the NEURC to change the methodology for gas distribution tariffs forming23. According to the recommendations prepared by the EU4Energy project, 12

https://interfax.com.ua/news/economic/554139.html Nadra Yuzivska LLC is owned by the state company NJSC Nadra of Ukraine and holds the license for the development of the Yuzivske shale gas deposit, the largest in Ukraine, located in Kharkiv and Donetsk oblast 14 Ibid. 15 http://www.geo.gov.ua/naftogazovi-loti-vid-derzhgeonadr-zyavilisya-v-sistemi-prozorro-prodazhi/ 16 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245327965&cat_id=35082 17 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245324355&cat_id=35082 18 http://www.nerc.gov.ua/index.php?id=30382&cpage=0 19 http://www.nerc.gov.ua/?id=11957 20 http://www.nerc.gov.ua/index.php?id=37457 21By the way, according to the court press service, the Supreme Court resolved that in cases when the meter installation expenses were included in tariffs, gas distribution organizations must at their own expense install individual gas meters for consumers (https://biz.liga.net/ekonomika/tek/novosti/oblgazy-obyazali-besplatno-ustanovit-schetchiki-vsem-potrebitelyam) 22 http://www.nerc.gov.ua/?id=30382 23 https://glavcom.ua/economics/finances/energospivtovaristvo-rekomenduje-nkrekp-zminiti-tarifnu-politiku-v-gazorozpodili554132.html 13

Gas its experts suggest that the fixed and the variable components be added to the new tariffs for the population. A fixed component of the tariff will reflect the continuous costs associated with supporting the work of the DSO, while the variable is the actual volume of gas consumption. Similarly, it is recommended to transfer the industrial consumers to the two-rate tariffs, with the fixed component to be calculated by the connected capacity. Meanwhile, the regulator also approved the amendments to the Model Agreement on the Transmission of Natural Gas (Decree No. 159824), which limited the possible payment by the DSO of the cost of daily unbalances, at the expense of funds from the state budget, allocated to cover benefits and subsidies to household consumers, to the amount not exceeding the cost of distribution services actually used by these gas consumers. The NEURC regulated, the conditions for the use of funding sources for the GTS, gas storage facilities and the gas distribution system development plans for 2019-2028 (Resolution No. 205225), for Ukrtransgaz, as well as 11 other enterprises26 obliging them to account for investment costs (depreciation and profit on capital investments) on a separate bank account and forbidding spending these funds until the NEURC decides on approving the relevant plan. Whereas, despite the prohibition by the regulator27, the DSOs continued to include additional volumes representing the difference resulting from the adjustment to standard of +20Â°C to the volumes payable by customers, the Government, represented by Prime Minister V. Groysman, officially appealed to the NEURC with a request to inspect all such operators for compliance with legislation28. In order to carry out these inspections without restriction, the regulator needs the regulatory service approval29. As reported by the media, at the moment the NEURC requested the State Regulatory Service to approve extraordinary inspections of 20 DSOs30. The maximum penalty that may be charged is UAH 850 thousand. At the same time, Naftogaz informed in a separate release about the practice of the oblast gas companies and related gas sale companied to obstruct the change of supplier31. Among such practices, "Naftogaz" cites the submission of an excessive list of documents, the accrual of artificial debts, the forced use of the electronic cabinet of gas sales company, etc. According to the results of the natural gas market monitoring, regularly carried out by the regulator, it was reported32 that the maximum price of natural gas for consumers not covered by the PSO (excluding tariffs for transportation and distribution of natural gas services) in November 2018 amounted to UAH 15523,54 for 1,000 cubic meters (including VAT). In December, Naftogaz published its consolidated financial statements for the 9 months of 201833. Net income of the Naftogaz group during this period amounted to UAH 16.7 bln, having decreased by 5.8% compared to the 9 months of 2017. It was noted that the decrease was primarily due to an increase in the provision for doubtful debts in the transportation segment (mainly on the part of the RGC group of companies) and the VAT costs "for compensation according to the ICA decision on the transit of natural gas". In support of Naftogaz's financial and economic activity, the government approved a number of decisions related to the introduction of changes to loan and mortgage agreements concluded by companies of the group with state-owned banks (Order No. 975-p34). In particular, for one year, the loan maturity periods had 24

http://www.nerc.gov.ua/index.php?id=36793 http://www.nerc.gov.ua/?id=37806 26 Including Vinnytsyagaz, Kirovohradgaz, Lubnygaz, Odesagaz, Umangaz, Khmelnytskgaz, Cherkasygaz, Chernivtsigaz 27 See report for November 2018 for details 28 https://twitter.com/VGroysman/status/1076045344356605952 29 https://biz.liga.net/ekonomika/tek/novosti/nkreku-pytaetsya-dobitsya-razresheniya-na-proverki-oblgazov-firtasha 30 https://www.ukrinform.ua/rubric-economy/2613511-20-oblgaziv-perevirat-cerez-zajvi-sumi-v-platizkah.html 31 http://www.naftogaz.com/www/3/nakweb.nsf/0/45EDADCEE96F5E66C225835F00618A1D?OpenDocument&year=2018&month =12&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 32 http://www.nerc.gov.ua/?news=8530 33 http://www.naftogaz.com/files/Zvity/Naftogaz-9m2018fs-Consolidated_UKR.pdf 34 https://www.kmu.gov.ua/ua/npas/deyaki-pitannya-diyalnosti-publichnogo-akcionernogo-tovaristva-nacionalna-akcionernakompaniya-naftogaz-ukra 25

Gas been extended by 1 year, interest rates have been changed in favor of Naftogaz, and certain volumes of natural gas stored in the UGS facilities have been released. Naftogaz also published new price offers for January 201935. Compared to December 2018 prices, in January gas prices for industrial and other non-PSO consumers were reduced by an average of 3%. According to the new price list36, the price of gas as a commodity (VAT included) was established from January 1, 2019, at the following levels: for monthly gas needs up to 50 tcm inclusive - 11833.2 UAH/tcm; in the absence of debt to Naftogaz and monthly consumption of 50 tcm) without prepayment - 11833.2 UAH/tcm, b) subject to prepayment37 - 10822.8 UAH/tcm.

Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 (Art. 338, 341, Annex XXVII of the AA) according to Art. 278 of the AA, trade issues (Art. 269-274 of the AA) Based on the media reports38, according to the results of the unbundling meeting, chaired by Prime Minister V. Groysman on December 11, the Ministry of Energy and Coal Industry together with Mahistralni Gazoprovody Ukrainy (MGU) was officially assigned the task of analyzing the possibility and prospects for the implementation of a new government a plan that provides for the "transfer of corporate rights of the state in MGU for the temporary management of Naftogaz of Ukraine", as well as the appointment of members of the supervisory board of the MGU as members of the Supervisory Board of Ukrtransgaz JSC. According to the media39, this step seems expedient for two reasons: to use Naftogaz as a donor for financing MGU for a certain period and to provide conditions for the transfer of Ukrtransgaz under the control of MGU (preventing the implementation of the intentions to transfer transportation assets to the TSO branch of Ukrtransgaz). Meanwhile, Ukrtransgaz completed one of the intermediate stages of unbundling40 - transferred a number of production units to the newly created "Storage Facilities Operator" branch41 together with the necessary assets and personnel to ensure the sustainable operation of 11 UGSFs. Referring to the representatives of the international consortium of TSOs, Naftogaz said that such an operator was created, since the partners are not interested in the storage facilities as "non-core, non-profitable and toxic asset involving unresolved issues." 42 The EU insists on the early completion of the unbundling process in Ukraine, as indicated in the statement on the outcome of the meeting of the EU-Ukraine Association Council in Brussels on December 1743. According to Prime Minister V. Groysman44, the completion of unbundling is the area of responsibility of Naftogaz. He expects that in January 2019, Naftogaz should submit to the government a detailed step-bystep unbundling action plan by January 1, 2020, "... with the new operator we have created â&#x20AC;&#x201C; MGU". By that time, it must be already certified according to European law." The need to ensure the certification of an independent TSO by the end of 2019 is also advocated by the regulator45.

http://www.naftogaz.com/www/3/nakweb.nsf/0/C29D76AA5C4A5247C225836A0055E7E7?OpenDocument&year=2018&month =12&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 36 http://www.naftogaz.com/files/Information/Naftogaz-gaz-prices-ne-PSO-January-2019.pdf 37 Payments during the calendar month prior to the gas supply month 38 https://www.epravda.com.ua/news/2018/12/18/643710/ 39 Ibid. 40 http://utg.ua/utg/media/news/2018/12/realizovano-nastupnyi-etap-anbandlingu-stvoreno-operatora-gazoskhovischukrainy.html?fbclid=IwAR0CaE9ivRrXaia7zgir2E9UY5crcKYh5AcmC4GKajM3NpByIN85kFv5AYQ 41 Proletarske Operational Division (Kharkivtransgaz), Mrynske Operational Division (Đ&#x161;yivtransgaz), Bohorodchany Operational Division (Prykarpattyatransgaz), Dashava, Opara, Stryi Operational Division and Uherske Operational Division of Repair and Maintenance Services (Lvivtransgaz). 42 http://www.naftogaz.com/www/3/nakweb.nsf/0/31BE457DA6AA33A1C2258370004A15A8?OpenDocument&year=2018&month =12&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 43 http://reform.energy/news/es-prizval-ukrainu-k-skoreyshemu-anbandlingu-na-rynke-gaza-i-elektroenergii-9988 44 https://ua.interfax.com.ua/news/interview/556133.html 45 http://www.nerc.gov.ua/?news=8533

Gas In December, there were also discussion sessions organized by Naftogaz on the promising areas of unbundling, involving Naftogaz Supervisory Board members and MGU, Ukrtransgaz representatives, government, experts and the media46. As discussed in the accompanying presentation47, EY, as a consulting company, has developed 5 possible unbundling schemes that include both the OU (full ownership unbundling) model through the privatization or commercial use of the GTS and the model of an independent system operator (ISO) through leasing or concession of the GTS. The Naftogaz management expects the government to take decisions on amending the CMU resolution No. 49648 concerning the unbundling model, property rights and delegation of powers to the responsible legal entity, and plans to issue a package of agreements on the transfer of shares and property rights in March 2019 for the "conditional certification" of the new TSO49. The position of Naftogaz is that only the ISO model will enable Naftogaz to continue its arbitration lawsuit50 with Gazprom over 11 bn USD compensation for a transit contract for the period 2018-2019. At the same time, regardless of the chosen model, the company in the coming months plans to work on expansion of the TSO branch and preparation for legal unbundling51. In preparation for the introduction of the daily balancing, Ukrtransgaz invited to attend the training on using the Information Platform on December 1452 those DSOs who needed it most, namely: either did not make any successful uploads at all, or made less than one attempt to upload data to platforms per day. In January 2019, Ukrtransgaz received nominations from 222 suppliers53. Due to fulfillment of the NEURC requirement to submit nominations in electronic form through the information platform, all nominations submitted for January were processed on December 22, 2018, 3 days before the deadline. At the same time, in early December, Ukrtransgaz reported on the incident - the submission to the information platform of nominations from "companies affiliated with the RGC group" for about 100 consumers who already had nominations from other suppliers, and further disconnection of consumers without approved nominations54. In the opinion of the TSO, such actions are an attempt of a "large-scale provocation aimed to disrupt the supply of gas to consumers amid the heating period and to "redistribute" gas market"55, so Ukrtransgaz appealed to the NEURC, the AMCU and law enforcement agencies, in particular the Security Service. On December 12, the Council of European Energy Regulators (CEER), the Energy Community Regulatory Board (ECRB) and the Mediterranean Energy Regulators (MEDREG) have joined forces to cooperate and have signed a cooperation agreement56 to extend their influence over the Mediterranean, Southeastern Europe and the Black Sea. The CEOs of all three parties to the agreement emphasized the importance of working out a common set of harmonized legal and regulatory rules for interconnected gas systems of the specified region. The agreement provides the basis for enhanced interaction in such areas as: exchange of best practices in energy markets regulation, capacity-building, joint actions and regulatory trainings, strengthening of bilateral and trilateral cooperation mechanisms and development of joint reports (where possible and useful for everyone).

http://www.naftogaz.com/www/3/nakweb.nsf/0/31BE457DA6AA33A1C2258370004A15A8?OpenDocument&year=2018&month =12&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 47 http://www.naftogaz.com/files/Information/Naftogaz-2018-12-19-Unbundling.pdf 48 https://www.kmu.gov.ua/ua/npas/249240258 49 http://www.naftogaz.com/files/Information/Naftogaz-2018-12-19-Unbundling.pdf 50 http://www.naftogaz.com/www/3/nakweb.nsf/0/31BE457DA6AA33A1C2258370004A15A8?OpenDocument&year=2018&month =12&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 51 http://www.naftogaz.com/files/Information/Operator-GTS-2018-12-19-Unbundling.pdf 52 http://utg.ua/utg/media/news/2018/12/ukrtransgaz-provede-navchalnyi-trening-dlya-operatoriv-grm-14-grudnya.html 53 http://utg.ua/utg/media/news/2018/12/ukrtransgaz-opraciuvav-usi-podani-na-sichen-nomnacii.html 54 http://utg.ua/utg/media/news/2018/12/uktransgaz-zvertaetsya-do-pravoohoronnyh-organiv-cherez-splanovani-nezakonni-diigrupy-rgk-na-gazovomu-rynku.html 55 Ibid. 56 https://energy-community.org/news/Energy-Community-News/2018/12/12.html

Gas Directive 2004/67/EC concerning measures to safeguard security of natural gas supply (Art. 338, 341, Annex XXVII of the AA), Early Prevention Mechanism (Annex XXVI of the AA), actions in emergency situations (Art. 275-276, 309, 314 of the AA) Since January 1, 2019, the regulator has almost halved the tariffs of Ukrtransgaz JSC for cross-border entry and exit points (Decree No. 200157), having applied the temporary tariffs setting mechanism for the first time, thus providing Ukrtransgaz with the opportunity to continue to receive transportation revenues, despite the fact that the TSO did not provide the data necessary for the calculation of the tariff on time58. As the NEURC chairperson O.Kryvenko emphasized59, the established temporary tariff covers all operating costs of the TSO and provides a sufficient level of return on investment. In her opinion, this decision will not only lead to lower tariffs for European consumers to whom the gas is transported through the GTS of Ukraine, but also actually "decrease the imported gas price on the wholesale market by $6"60, and will also positively affect the negotiation of a transit contract after 2019. According to the results of 2018, the volume of natural gas transit by the Ukrainian gas transmission system from Russia to the EU and Moldova amounted to 86.8 bcm61. Compared to the previous year, 2017, transit volumes decreased by 6.7 bcm, or by 7.2%. The volume of gas imports from the EU decreased significantly62 to 10.6 bcm, compared to a last year's record value of 14.1 bcm63 - by 24.8%. In terms of incoming streams, the flow of imports was distributed as follows: 61% - from Slovakia, 32% from Hungary, and 7% from Poland64. During 2018, 9.8 bcm of gas were pumped into gas storage facilities, which is 6.5% higher than the volume pumped during 2017. The volumes of gas in Ukrainian storages decreased in the last week of 2018 by 519.2 mln cubic meters65 and as of January 1, 2019 amounted to 13.8 bcm. This is 6.1% less than on January 1, 2018, however, 15.6% more than the volume of gas that was accumulated in the gas storage facilities of Ukraine as of January 1, 201766. Despite all the difficulties, the Ukrainian gas transportation system worked steadily and reliably throughout the year to carry out the natural gas transportation and storage functions both for domestic and the EU consumers. In December, representatives of the Ministry of Energy and Coal Industry, Naftogaz and Ukrtransgaz, together with experts from the Joint Research Center (JRC) of the European Commission, conducted a training exercise67 on response and interaction of natural gas market participants to the crisis situation. The event was also attended by interested government officials, officials of state administrations, natural gas market players. The training was intended to test the actions of the National Action Plan in practice by modeling the crisis situation, identifying its potential gaps and taking them into account in the process of further improving the legislation regarding the security of natural gas supply. Among other security initiatives of the government, it's worth mentioning the development of the draft law "On critical infrastructure and its protection", which was announced in December by the Ministry of

http://www.nerc.gov.ua/index.php?id=37570 http://www.nerc.gov.ua/?news=8581 59 https://www.facebook.com/Ok.Kryvenko/posts/213822839520856 60 https://biz.censor.net.ua/resonance/3103617/golova_nkrekp_oksana_krivenko_vropeyisk_spojivach_mayut_zamovlyati_nash_p otujnost_domovlyayuchis_z_gazpromom 61 http://utg.ua/utg/media/news/2019/01/gts-results-for-2018.html 62 http://utg.ua/utg/media/news/2019/01/gts-results-for-2018.html 63 http://utg.ua/utg/media/news/2018/01/results-2017.html 64 http://utg.ua/utg/media/news/2019/01/gts-results-for-2018.html 65 http://utg.ua/live 66 http://www.naftogaz.com/www/3/nakweb.nsf/0/F14D568FA832B63FC225837700472768?OpenDocument&year=2019&month= 01&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 67 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245325017&cat_id=35109 58

Gas Economic Development and Trade68. The purpose of the document is to develop a single nationwide system for protecting critical infrastructure and harmonize the powers of the relevant authorities. Co-operation between the Ministry of Energy and Coal Industry within the framework of the "Energy Security" project with the USAID is continuing69. At the meeting on December 17, the partners discussed the achievements in shaping the gas market and the electricity market, as well as the problems of ensuring energy security. USAID representatives presented their own vision of a 6-months' action plan proposed for implementation in cooperation with the Ministry of Energy and Coal Industry and the NEURC.

http://me.gov.ua/Documents/Detail?lang=uk-UA&id=5bea651c-dcfe-4513-afe60453fda32e68&title=ProektZakonuUkrainiproKritichnuInfrastrukturuTaYiiZakhist 69http://mpe.kmu.gov.ua/minugol/control/uk/publish/article;jsessionid=12ED1406E3588E8A1FEF3E1405B834A8.app1?art_id=245 328064&cat_id=35109

Gas Ukraine's progress assessment: 45 out of 100 The Energy Community Secretariat has criticized the changes to the PSO regulation (Resolution No. 867), and therefore the ECS-2/17 dispute settlement procedure continues. The gradual approach of gas prices for households and district heating companies to the market levels is not accompanied by the opening of this market segment to the real possibility of changing the supplier. In the area of transposition of EU legislation, it is worth to highlight the adoption of the law on ensuring transparency in extractive industries, as well as a number of changes to the GTS Code, aimed at harmonization with the relevant EU network codes. In addition, the government has introduced procedures for electronic auctions for the oil and gas fields development and liberalized the use of geological information, which should attract more investors and unblock the procedures of providing new sites for hydrocarbonsâ&#x20AC;&#x2122; exploration. The NEURC activity focused on amending the Gas Storage Facilities Code and Methodology of Tariff Setting for Gas Transmission, as well as the relevant decision on the transportation and storage tariffs. The assessment has also improved due to the absence of gas supply crisis situations and, in general, keen attention of the government to the security of supply. At the same time, there are no significant shifts in the unbundling process. The restructuring, initiated by Naftogaz, with the reallocation of certain gas transmission and storage assets into separate branches can be considered as preparatory actions. At the same time, while discussions on the best model of unbundling did not yield any specific decision and its implementation in terms of assets transfer. The arbitration case with Gazprom is traditionally cited as an excuse to delay the process and change the OU model to the ISO. The process of attracting foreign partners to manage the Ukrainian GTS is still suspended. One of the DSOs, inspected by the NEURC, has violated the requirements of the legislation on unbundling. In particular, the findings included combination of positions in distribution and sales by the same person, as well as the use of intellectual property of affiliated structures. With regard to another operator, the Antimonopoly Committee announced having established the fact of competition law violation. For three DSOs, insignificant violations of unprofitability of other activities, mainly - the sale of liquefied gas, were found. The practice of charging additional gas volumes to be paid by households due to "non-adjustment" to standard conditions, despite explicit prohibition by the NEURC, is yet another evidence of abuses. The market remains largely regulated, with just over 44% of gas being sold on market basis, under competitive conditions. At the same time, the payment discipline on the regulated market segments remains unsatisfactory. By the end of 2018, the debts of utilities and DHCs to Naftogaz remained at the level of almost 30 bn UAH and slightly decreased compared to the mid-year level. The debt of gas supply companies decreased by 15% but continues to be substantial. The reasons for such situation are still the debts of heat suppliers with accrued fines and penalties, untimely settlements of the State Treasury for housing subsidies, as well as the unsettled issue of off-balance gas supply.

Electricity and Nuclear Safety The Cabinet of Ministers has adopted the procedure for conducting tenders for the selection of universal service suppliers and supplier of last resort. It was also decided to appoint the SE Ukrinterenergo as the supplier of last resort for two years. The NEURC has practically completed the formation of legislative framework to launch the retail electricity market from January 1, 2019. The term for completion of the New Safe Confinement project was postponed from December this year to April of the next year.

Directive 2009/72/EC of the European Parliament and of the Council concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (Art. 269, Chapter 11, Section IV of the EU-Ukraine Association Agreement) On December 10, the President of Ukraine signed the Law of Ukraine "On Amendments to the Tax Code of Ukraine and some other legislative acts of Ukraine on improving the administration and revision of the rates of certain taxes and duties", which amended the Law of Ukraine "On the Electricity Market", which will come into force on January 1, 201970. In accordance with the law, the retail electricity market starts operating on January 1, 2019. All consumers (except small-scale consumers and households) can choose a supplier of electric energy, and the supplier of last resort is appointed for two years until January 1, 2021 without competition (by the Cabinet of Ministers). On December 19, a group of MPs registered the draft Law "On amendments to the Law of Ukraine "On the Electricity Market" regarding uninterrupted supply of electricity to certain state and municipally-owned economic entities" (Reg. No. 9418) 71. The draft law proposes that, from January 1, 2019 until December 31, 2020 universal services be provided also to budget-funded institutions, coal-mining state-owned enterprises, facilities, institutions, organizations providing water supply and wastewater management services, heat supply, street lighting, city electric transport irrespective of the contractual capacity. That is, all rights and obligations stipulated by the Law of Ukraine "On the Electricity Market" for small nonhousehold consumers in obtaining universal services temporarily extend to all these companies. On December 12, the Government adopted Resolution No. 1023-Ń&#x20AC;, which defined Ukrenergo as electric power supplier of last resort (SLR) from January 1, 2019 to January 1, 2021, on the territory of Ukraine72. This decision will allow for the continuous supply of electricity to consumers in the event of the liquidation or bankruptcy of their current electricity supplier, or in the event that no supplier has agreed to enter into a contract with the consumer. The decision is based on changes to the Law of Ukraine "On the Electricity Market" of November 23, 2018. On the same day, December 12, the Cabinet of Ministers of Ukraine adopted two further Resolutions allowing the regulation of the activities of the universal services supplier and the supplier of last resort73. By the Resolution of the Cabinet of Ministers of Ukraine dated 12.12.18 No. 1056, the Procedure for holding a contest to choose the supplier of last resort was approved. This procedure will actually start operating from 2021, when the term of the CMU Order No. 1023-r expires, and competitions will be held instead of the administrative appointment of the SLR. Similarly to the procedure of holding a tender for the selection of the supplier of last resort, the Government adopted Resolution No. 1055 "On Approval of the Procedure for conducting a tender for the determination of universal service supplier".74 In the future, with the opening of a full-scale electricity market, the universal services supplier will be selected on a competitive

http://zakon.rada.gov.ua/laws/show/2628-viii

71http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=65241 72

https://www.kmu.gov.ua/ua/npas/pro-viznachennya-derzhavnogo-pidpriyemstva-zovnishnoekonomichnoyi-diyalnostiukrinterenergo-postachalnikom-ostannoyi-nadiyi 73 https://www.kmu.gov.ua/ua/npas/pro-zatverdzhya-postachalnika-ostannoyi-nadiyi 74 https://www.kmu.gov.ua/ua/npas/pro-zatverdzhennya-poryadku-provedennya-konkursu-z-viznachennya-postachalnikauniversalnih-poslug

Electricity and Nuclear Safety basis for the supply of electricity to small-scale consumers and households in the respective territory of Ukraine.

Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (Art.271, Chapter 11, Section IV of the EU-Ukraine Association Agreement) In the implementation of the integration of energy systems of Ukraine and Moldova to ENTSO-E, and according to the Agreement on the Conditions for the Future Interconnection of the power systems of Ukraine and Moldova with the power system of Continental Europe, on December 10 SE NEC "Ukrenergo" and Moldelectrica signed the "Operating Agreement to create a regulation block in energy systems of Ukraine and the Republic of Moldova"75. According to the chief distribution control engineer of NEC Ukrenergo V. Zaychenko, the Agreement adopted all the necessary technological conditions in accordance with European rules and standards to ensure frequency and power control within the power systems of Ukraine and Moldova.

Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (Art. 273, Chapter 11, Section IV of the EU-Ukraine Association Agreement) Electricity sale and purchase on the balancing market and auxiliary services market. Supply systems operator (DSO) and distribution systems operator (DSO). In December, the CMU issued Decree No. 1001-v of November 14, 2018 "On the transfer of the integral property complex of the state enterprise "National Energy Company "Ukrenergo" to the management of the Ministry of Finance"76. For the independence of the DSO and in accordance with Article 1.2.1 of the Article 32 of the Law of Ukraine "On the Electricity Market", a single legal entity does not have the right to simultaneously control the companies for the production and transportation of electricity. Since the largest electricity producer, SE NJSC EC Energoatom, remains subordinated to the MEDT, neither management of the NEC Ukrenergo property was compliant the requirements of Directive 2009/72/EC. On December 11, NEC Ukrenergo started selling electricity on the balancing market and the auxiliary services market in the test mode. The Market Management System test platform (hereinafter referred to as "MMS"), which was placed on the DSO site, was presented to market participants - representatives of power generation companies such as SE "Energoatom", "DTEK Energo", OJSC "Tsentrenergo", PJSC "Ukrhydroenergo" PJSC "Donbassenergo" and others77. In order to improve the functioning of MMS during December, DSO conducted additional testing and took into account the feedback from market participants. All potential participants in the balancing market and ancillary services market received logins and passwords (keys) to access the test platform and continue to test it on their own. Retail energy market With the launch of the retail electricity market since January 1, 2019, the contracting conditions change. In order to prevent the market participants from using unfair competition methods to the consumer, the NEURC warned consumers and the DSO that the latter has no right to send consumers the application on accession to the electricity supply contract with the company affiliated with the DSO together with the application to accede to the electricity distribution agreement as it is a violation of the Law "On the

75https://ua.energy/media/pres-tsentr/pres-relizy/ukrenergo-ta-moldelektryka-pidpysaly-ekspluatatsijnu-ugodu/ 76

https://www.kmu.gov.ua/ua/npas/pro-peredaderzhavnogo-pidpriyemstva-nacionalna-energetichna-kompaniya-ukrenergo-dosferi-upravlinnya-ministerstva-finansiv 77 https://ua.energy/osnovni-podiyi/ukrenergo-rozpochalo-testovi-operatsiyi-z-kupivli-prodazhu-elektroenergiyi-nabalansuyuchomu-rynku-ta-rynku-dopomizhnyh-poslug/

Electricity and Nuclear Safety Electricity Market", in terms of compliance with the requirements for the separation and independence of the distribution system operator78. The explanation was posted on the official page of the NEURC that the time-differentiated tariffs for nonhousehold consumers are no longer valid from January 1, 2019 (NEURC Resolution No. 1241 dated December 20, 2001, expires in accordance with the NEURC Resolution of August 23, 2018 No. 894). Non-household consumers who have used time-differentiated tariffs will be able to enter into an agreement with the electricity supplier applying prices that take into account the daily schedule of electricity consumption, provided they have automated systems of commercial energy metering (ASCUE). For household consumers, time-differentiated tariffs remain applicable in accordance with the Procedure for the application of tariffs for electric energy, approved by the decision of the NEURC dated April 23, 2012 No. 498. 79 Small distribution systems The NEURC provided explanations regarding the specifics of small distribution systems. As a result of monitoring, the Regulator has established that more than 100 major consumers connected to DSO networks have networks that are used for distributing electric power to other consumers (users). Such consumers can be recognized as operators of small distribution systems, subject to the rules of Art. 49 of the Law of Ukraine "On the Electricity Market" and registration of small distribution systems in the NEURC. The regulator set the deadline by April 1, 2019, and provided clarification as to how the consumers should enter into electricity supply contracts by that date. 80 On December 28, the NEURC adopted the Methodological Recommendations on the Regulation of the relations between the Supply System Operator, Distribution System Operators, and Key Consumers, power grids of which are connected to the transmission system or to the power grids of electricity producer, and their sub-consumers. 81 Third party access On December 18, the NEURC adopted the Resolution No. 1965 and approved the Methodology (Procedure) for the formation of the fee for accession the transmission system and distribution system. The method includes: establishing the unit cost of connection of 1 kW of power capacity to all operators of distribution systems at the level of 3.48 thousand UAH/kW (without VAT) as an average indicator of the cost of generating 1 kW of power; determination of the workload factor of the transformer substations solely on the basis of actual electric energy flow; encouraging the connection of high power objects (electrical installations) at a higher voltage level (the fee for non-standard connection at higher voltage levels will be lower, compared with the value of the service at a voltage level of 0.4 kV); differentiation of rates for electrical installations intended for the production of electric energy (reduced rate). 82 Using this technique, on December 28, the NEURC approved the rates for standard and non-standard connection of power capacity and payment rates for the linear segment of the accession for 2019. Rates in cities range from 0.62 to 2.73 thousand UAH/kW, in the countryside - from 0.28 to 3.71 thousand UAH/kW. Baseline rate is 3.48 thousand UAH/kW. 83 Supplier of last resort SE "Ukrinterenergo" posted the following documents on their website: Procedure for accession to the conditions of the power supply contract with the supplier of last resort dated; Contract on power supply by the supplier of last resort; Commercial proposal No. 2 and Prices and pricing of the power supply to the population by the supplier of last resort. This information is necessary to conclude power supply contracts 78http://www.nerc.gov.ua/?news=8399 79

https://www.facebook.com/nerc.gov.ua/posts/990840767791863?__tn__=K-R http://www.nerc.gov.ua/?news=8576 81 http://www.nerc.gov.ua/?id=37805 82 http://www.nerc.gov.ua/?news=8529 83 http://www.nerc.gov.ua/?news=8589 80

Electricity and Nuclear Safety with the supplier of last resort according to the Law of Ukraine "On the Electricity Market" and the Retail Market Rules. As of December 30, 2018, 27 enterprises from different regions of Ukraine have joined the electricity supply contract of the State Enterprise "Ukrinterenergo" as the supplier of last resort. Among such consumers are NJSC "Naftogaz of Ukraine", Ukrtransgaz, district heating companies, and others. There are also a number of consumers who will be transferred to the supply of electrical energy by the supplier of last resort, including the DSOs Vinnytsyaoblenergo, Kirovohradoblenergo, Poltavaoblenergo, Khersonoblenergo, and others. 84 SE "Energorynok" has disclosed information about the concluded agreements between SE "Energorynok" and Suppliers of electric energy to the consumer. As of 30.12.2018, 179 contracts were concluded with suppliers85, 25 universal services suppliers and one supplier of last resort86 and 31 contracts with distribution system operators87. As of December 30, 2018, more than 680 suppliers were registered in the registries of electricity distribution system operators. The NEURC has licensed electricity supply to 226 companies, which means that the same supplier is trying to work in several regions, since it is registered with several DSOs. All DSOs publish a list of electricity suppliers operating in their territory.

Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (Art. 305, Chapter 14, Section IV of the EU-Ukraine Association Agreement) Art.339, Chapter 1, Section V of the EU-Ukraine Association Agreement, Coal market On December 5, the minutes of the meeting on determining the maximum price for coal products were published on the MECI website. In accordance with the protocol for state extractive enterprises, the ceiling price for coal for the needs of thermal power plants and thermal power stations will increase by 10.4% - up to 2,800 UAH/t (excluding VAT and transportation costs). The minutes also states that the forecasted average cost price of 1 ton of energy coal products of state coal-mining enterprises for 10 months of 2018 is 3,217 UAH/t88. The preliminary recommended price was set in April 2018 and amounted to 2,535 UAH/t. In January-November 2018, Ukraine increased its import of coal and anthracite by 11% in the monetary equivalent, amounting to 2.693 bn USD. The main supplier for this period was Russia (61.91%) â&#x20AC;&#x201C;1.67 bn USD. Second largest supplier were the USA (29.94%, or 806.3 mln USD), and the third - Canada (4.78%, or 128.7 mln USD) 89. On December 18, the MECI issued Order No. 646 "On the Reorganization of the State Enterprise "Selydivvuhillya". According to the Order, the State Enterprise "Selydivvuhillya" should be reorganized by joining the State Enterprise "National Coal Company", a commission on the reorganization of SE "Selydivvuhillya" and action plan for reorganization is approved. It should be noted that the SE "National coal company" had to be established in accordance with the CMU Resolution 1019-p dated 06.12.2017, but still does not function due to problems arising in the course of the transfer of coal-mining enterprises to the newly established company. On December 18, the draft law of Ukraine on amendments to some laws of Ukraine on creating conditions for state support in the coal industry was adopted at second reading. The draft law envisages extending the provisions on the temporary suspension of enforcement proceedings and enforcement actions to January 84

https://uie.kiev.ua/diyalnist/napryamky-diyalnosti/postachalnyk-elektrychnoyi-energiyi-ostannoyi-nadiyi/#15461101406388bd9edf4-b027 85 http://er.gov.ua/data/DP_POSTACH.pdf?fbclid=IwAR09Z_92NviiV-dO69pjXz7a4YgaflUL247HSdHWwg3qSnDTaXkMOLcuYsM 86 http://er.gov.ua/data/UNIVERS_LAST.pdf?fbclid=IwAR1IqpgHa3TYtxTBnWRhZMAH3oKbQ6xsUiTvwxaHZ1o0a7zXGcCNUprETew 87 http://er.gov.ua/data/OPERT_ROZPOD.pdf?fbclid=IwAR1uOXzfffcm3QlY4nWN-zuQT-OkAa3emZO76kivnwOLACuBItr-rlQtFHE 88 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245325120&cat_id=193804 89 https://vse.energy/news/pek-news/coal

Electricity and Nuclear Safety 1, 2022, as well as on the prohibition of bankruptcy proceedings against state-owned coal enterprises, except for decisions on payment of wages, allowances, other payments (compensations) payable to the employee in connection with labor relations, etc., and decisions on collection of debt to the compulsory social insurance funds and the Pension Fund of Ukraine. As of December 30, the law was not signed by the President. On December 19, a draft law amending the Law of Ukraine "On the Electricity Market" regarding the uninterrupted supply of electric energy to certain state and municipally-owned entities" was registered. According to the draft law, from January 1, 2019 to December 31, 2020, it provides for the possibility of supplying electricity on the basis of universal services to state-owned coal-mining enterprises as well, regardless of the contractual capacity. It should be noted that in recent years electric power producers have become sources of subsidies to mining enterprises who do not pay for electricity for a few years in a row, but continue to work. Outstanding debts of state coal mines for electric energy is more than UAH 13 bln.

Art.342, Chapter 1, Section V of the Ukraine-EU Association Agreement, Nuclear power cooperation, Directive No. No. 96/29/Euratom, Council Directive No. 2006/117/Euratom, Council Directive No. 2003/122/Euratom On December 6, at the site of the Rivne NPP, functional tests of the HI-TRAC container recently delivered by the Holtec International (USA) to Ukraine, were carried out. The container is intended for re-hauling of spent nuclear fuel from reactor exhaustion pools on a special transport railway platform for further transportation to the Centralized Spent Nuclear Fuel Storage Facility accumulating spent fuel from Ukrainian NPPs90. On December 12-14 the Khmelnytskyi NPP was visited by representatives of the European Bank for Reconstruction and Development and the Integrated Safety Improvement Program (ISIP) Management Group. Experts from the Lender (EBRD), Consultant, as well as experts in ISIP project management, monitor the implementation of security enhancements at the Khmelnytskyi NPP. The director of the Khmelnytskyi NPP noted that there is good cooperation and cooperation between the energy company and the EBRD in view of the extension of the lifetime of the first power unit, and there are a lot of plans to be implemented. During the visit to the Khmelnytskyi NPP, representatives of the Lender, the Consultant and the ISIP team monitored and analyzed the implementation of the contracts, reviewed the main documentation, as well as examined the installed equipment at the power units and the available equipment in the warehouses. The experts were supposed to review the course of work on implementation of actions under the ISIP and to get acquainted with the problems that need to be addressed91. On December 17, 2018, a meeting was held at the Khmelnytskyi NPP with the participation of heads of local government and self-government to discuss the procedure for conducting public hearings on the extension of the lifetime of the first power unit92. On December 19 at the Rivne NPP a constituent pre-launch meeting was held with the participation of the representatives of "NUVIA a.s." (Czech Republic), Westron LLC and leading specialists of the RNPP. The specialists discussed the issues related to the implementation of actions for the modernization of the automatic control system of the backup diesel fuel power plant (ACS BDPP) within the framework of the

http://www.energoatom.kiev.ua/ua/press_centr-19/novini_kompanii20/p/na_rivnenskij_aes_rozpocato_viprobuvanna_obladnanna_holtec-7041 91 http://www.energoatom.kiev.ua/ua/press_centr-19/novini_kompanii20/p/predstavniki_ebrr_proveli_monitoring_vikonanna_zahodiv_z_bezpeki_na_hmelnickij_aes-7114 92 http://www.energoatom.kiev.ua/ua/press_centr-19/novini_kompanii20/p/na_haes_obgovorili_proceduru_provedenna_gromadskih_sluhan_sodo_prodovzenna_terminu_ekspluatacii_energobloka_ no1-7122

Electricity and Nuclear Safety planned repair campaign at Unit 4 of the Rivne NPP, in accordance with the Integrated Safety Improvement Program (ISIP)93. At the end of the year, the ALARA Committee session was traditionally held at Khmelnytskyi NPP. On December 26, the energy company summarized the results of their work on radiation safety and nuclear plant personnel protection in 2018 and outlined the main activities for the next year. The application of the ALARA methodology formulated by the IAEA (ALARA literally translates as "As Low As Reasonably Achievable" level of radiation exposure, as one of the major elements of safety culture). The ALARA Committee, first and foremost, sets targets for the radiation safety level of the KhNPP, controls individual and collective doses of external exposure of personnel, periodically analyzes the implementation of the radiation protection program and develops the actions to increase its performance94. On December 27, during the SE NAEC "Energoatom" Staff Conference, the President of the company noted that the shortage of the electricity dispensing tariff remains one of the most acute issues for the Energoatom, because at this level of tariff its under-revenues will remain very high in 2019. According to the main activity areas, the tariff shortage is 19.5 bn UAH, of which: financing of nuclear fuel - 2. 938 bn UAH; export of spent fuel - 1.157 bn UAH; the cost of labor remuneration with the single social contribution - 2.602 bn UAH; capital investments - 9.4109 bn UAH; operational expenses of the enterprise - 3.3925 bn UAH. In addition, the President of SE NAEC "Energoatom" informed that the decision of the Ministry of Energy and Coal Industry to increase the forecast amount of power generation for nuclear power plants by 2019 by 700 mln kWh is not compliant with the previously submitted production plan of the Company for 2019, which was formed taking into account plans for repairs, actions for the continuation of operation and modernization of power units (which are already reduced below the standards of ongoing repairs duration).95

Art. 342, Chapter 1, Section V of the EU-Ukraine Association Agreement, cooperation in the nuclear power area. The cooperation is aimed at solving the problems which arose as the consequences of Chornobyl disaster, as well as Chornobyl NPP decommissioning The conference "Transformation of the Shelter Object into an Environmentally Safe System: Experience, Problems and Solutions" was completed, organized by the State Agency of Ukraine on the Exclusion Zone Management, the State Specialized Enterprise "Chornobyl Nuclear Power Plant" and the Institute for Nuclear Power Plants Safety Problems. About 100 Ukrainian and international experts took part in the scientific and practical conference focusing on the problems of NPP decommissioning, liquidation of consequences of design accidents, radioactive waste management, nuclear and radiation safety96, who got acquainted with the available developments on this issue (analysis of factors that determine the safe condition of the object, model of the radiation situation of the NSC and the Shelter Object, assessment of the radiation protection efficiency at the industrial site, etc.) and on the basis of available research results they developed a consolidated position on how to implement scientific recommendations in a specific scenario of works on the Shelter Objects and on the steps to transform the Shelter object after the NSC was commissioned97. On December 5, during a working visit to the Delegation of the NATO Support and Procurement Agency (NSPA) in Ukraine, the experts continued their work within the framework of the NATO Trust Fund project 93

http://www.energoatom.kiev.ua/ua/press_centr-19/novini_kompanii20/p/na_rivnenskij_aes_modernizuut_sistemu_avtomaticnogo_upravlinna_rdes-7129 94 http://www.energoatom.kiev.ua/ua/press_centr-19/novini_kompanii20/p/na_hmelnickij_aes_vidbulosa_zasidanna_komitetu_alara-7149 95 http://www.energoatom.kiev.ua/ua/press_centr-19/novini_kompanii20/p/v_energoatomi_ukladeno_novij_kolektivnij_dogovir_na_2019_2020_roki-7154 96 http://sof2018.dazv.gov.ua/ 97 http://dazv.gov.ua/novini-ta-media/vsi-novyny/majzhe-100-ekspertiv-shukayut-efektivni-rishennya-dlya-peretvorennya-obekta-ukrittya-na-ekologichno-bezpechnu-sistemu.html

Electricity and Nuclear Safety on the elimination of the Tsybuleve radioactive waste repository in Kirovohrad oblast. The State Agency of Ukraine on the Exclusion Zone Management together with NSPA held a conference, during which representatives of the NSPA introduced potential implementers to the approved project implementation, the competition terms and the requirements for potential implementers. Participants also discussed the project issues and further steps to implement it. The next step in the project will be the selection of a potential implementer upon an international competition meeting international standards98. The IAEA mission was completed at the Chornobyl Nuclear Power Plant, which was organized as part of the technical cooperation within the project UKR 9038 "Support for the decommissioning of nuclear power units and radioactive waste management at the Chornobyl Nuclear Power Plant and in the Exclusion Zone". During the mission, issues related to decommissioning of buildings and structures, methods of decommissioning, as well as treatment of radioactive contaminated concrete and generated waste, including radioactive ones, were considered. Taking into account the fact that during the reconstruction of the roofs in central halls, dismantling of equipment, dismantling of unstable structures of the Shelter Object, a significant volume of reinforced concrete waste will be formed, the issue of decontamination and handling of such waste in order to minimize their amount will become relevant. The existing decontamination system at ChNPP is not designed to accommodate large-scale decontamination, is incapable to deactivate firmly fixed pollution and produces a large amount of secondary waste. Invited IAEA experts shared their experience of decommissioning radioactive contaminated buildings and facilities in the United States and the United Kingdom and experience in handling radioactive contaminated materials. Upon the outcomes of this work, IAEA will provide an official report with the recommendations to the SSE ChNPP, which will be taken into account when reviewing decommissioning documents and activity planning for future years. 99 In London, the regular work of the Assembly of the Chornobyl Shelter Fund Contributors and the Nuclear Safety Account Donors was completed. Representatives of the Ukrainian side during the speech expressed their appreciation to international partners for their efforts in implementing the safety improvement projects at the Chornobyl NPP industrial site and informed the meeting participants of the fulfillment of the commitments undertaken by Ukraine. It was also emphasized that the funds in State Budget of Ukraine to cover operation of facilities, including the NSC and SNFSF-2 (spent nuclear fuel storage facility), will be provided since 2019. At the same time, Ukraine expressed its concern over the postponement of the completion of the New Safe Confinement project from December this year to next April and the postponement of the completion period for the project on SNFSF-2 (now the "hot test" is scheduled to begin in mid-2019). The fact that the delay in the commissioning of SNFSF-2 requires an extension of the life of the existing SNFSF-1 is the primary concern. 100

http://dazv.gov.ua/novini-ta-media/vsi-novyny/nato-ta-dazv-proveli-konferentsiyu-z-potentsijnimi-vikonavtsyami-proektulikvidatsiji-mogilnika-istorichnikh-rav-na-kirovogradshchini.html 99 https://chnpp.gov.ua/ua/infotsentr/novyny/5191-misiya-magate-znyattya-z-ekspluatatsiji-sporud-ta-povodzhennya-zradioaktivnimi-materialami 100https://chnpp.gov.ua/ua/infotsentr/novyny/5189-asambleji-vkladnikiv-chornobilskogo-fondu-ukrittya-ta-rakhunku-yadernojibezpeki

Electricity and Nuclear Safety Ukraine's progress assessment: 26 out of 100 On November 30, 2018, the Energy Community Ministerial Council adopted a decision on Ukraine's failure to comply with the Energy Community Treaty in the case ECS-08/15 on cross-border trading and set the deadline for the setting the violations by 01.07.2019. The case ECS-1/12 on cross-border trade was closed through the relevant procedure, the case ECS-06/17 on unbundling of DSOs (oblenergos) is still open. In 2018, the NEURC completed a plan for the preparation and adoption of legislative acts for the creation of a new market and the opening of the retail electricity market. E.g., the Transmission Systems Code; Distribution Systems Code; Commercial Metering Code; Market Rules; Day Ahead Market and Intraday Market Rules; Retail Electricity Market Rules; legislative acts on the quality of electricity supply; and appropriate tariff methodologies were adopted. No progress in the area of legislative provision of nuclear safety is observed so far. Draft laws No. 5550 (harmonization with the provisions of Directive 2013/59/Euratom), No. 6089 (harmonization with international safety requirements to the extent of the improvement of the radioactive waste classification system for the purposes of disposal), No. 7471-d (harmonization of state supervision and control over nuclear and radiation safety to the requirements of international treaties and conventions), as well as amendments to the Law "On Protection of People against Ionizing Radiation" were not adopted. Corporatization of SE "NEC" Ukrenergo" was continued, in particular the members of the Supervisory Board were appointed, and the company was transferred under the management of the Ministry of Finance. From the second half of 2018, the process of unbundling oblenergos into the DSOs and electricity suppliers was almost complete. The degree of market openness remains low: based on the SE "Energorynok" data, in 2018, the share of suppliers under the unregulated tariff in the total amount of electricity procured in the WEM amounted to 12.3%. The retail market will start working from January 1, 2019, according to the rules. It is difficult to assess the possibilities to change the supplier, as they lack market conditions, and those transitions that have taken place among the non-household consumers were negligible. Terms of trade, including cross-border trade, are established for export (auctions) but do not work for import. The adjusted Forecasted Electricity Balance for 2018 does not include imports, since demand is covered by domestic generation. No decisions on introducing the state of emergency in the energy industry were taken during the monitoring period.

Energy Efficiency and Social Issues In December, the Ukrainian government generally made no significant efforts to implement EU energy efficiency legislation. The elements of some limited progress include the publication on the website of the Ministry of Regional Development of the updated draft Law "On Energy Efficiency", the work on which was conducted for many years, the legislative proposal for further improvement of the energy service contracts regime, as well as the first meetings of the Supervisory Board of the Energy Efficiency Fund, with the newly appointed management having adopted key decisions to accelerate the institution launch. At the same time, the project of subsidies monetization criticized by consumer associations and the expert groups, which, in general, only imitates monetization and, besides, implies significant corruption risks, might well be considered the greatest failure of December. At the same time, the announcement of such an imperfect solution after many months of delay in reforming the system of state support for the vulnerable energy consumers is already boosting the political rhetoric of populist forces ahead of important elections.

Directive 2012/27/EU on energy efficiency During 2018, no significant progress was made on the adoption of the Law of Ukraine "On Energy Efficiency", on the contrary, the long-term bureaucratic process of the draft law approval became one of the barriers in the implementation of energy efficiency reforms. However, in the last days of 2018, a document detailing the provisions of the draft law101, as well as a complete package of documents accompanying the draft law, appeared on the official website of the Ministry of Regional Development102. It should be noted that drafting a framework law in accordance with the requirements of Directive 2012/27/EC of the European Parliament and of the Council of 25 October 2012 on energy efficiency, which provides for the adoption of national legislation in the relevant field, has lasted for 6 years already. The draft law aims to address energy efficiency issues that have not yet been reflected in other related laws of the "energy efficiency package" in 2017. In particular, the draft Law defines the procedure for the formation of national energy efficiency plans and strategies for energy efficiency of buildings; establishes the exemplary role of public authorities in the implementation of energy efficient technologies, the choice of goods and services, defines the principles of ensuring the rational energy use in the buildings of central executive authorities, as well as the specifics of taking into account the criteria of energy efficiency in the implementation of public procurement. In addition, the document will streamline the state policy on the introduction of energy audit and energy management systems, define policy actions to promote energy efficiency in the area of transmission and distribution of electricity, transmission and distribution of natural gas, as well as to promote energy efficiency in the area of heat supply. Although the energy efficiency experts are not unanimous about the proposed wording (the criticism, in general, boils down to finding its provisions to be less ambitious than they ought to be103), the very fact of the disclosed act, which has long been worked out and coordinated by specialists of the Ministry of Regional Development, is a significant progress, which gives grounds to hope for adoption of the draft law, and thus much more complete implementation of the Directive 2012/27/EC in Ukraine already in the first half of this year. Energy audits and energy management systems (Article 8) Given the fact that in modern conditions the issue of reducing energy resources belongs primarily to the sphere of national security issues, implementation of the energy management and energy resources monitoring system should become a prerequisite of effective implementation of actions to reduce the energy resources consumption level.

101

http://www.minregion.gov.ua/wp-content/uploads/2018/12/Argumentariy-doobgovorennya.pdf?fbclid=IwAR0olPBCPouEBfLBDt29Cfad55NJb5wlf7E5RYAHSdy7P3HPyxtKyniTGP8 102 http://www.minregion.gov.ua/base-law/reg-politics/proekti-regulyatornih-aktiv-dlya-obgovorennya-ta-analizi-regulyatornogovplivu/proekt-zakonu-ukrayini-pro-energetichnu-efektivnist-3/ 103 https://www.facebook.com/eugene.cherviachenko/posts/10216922531669076

Energy Efficiency and Social Issues Lack of legislation obligating the entities to implement measures to optimize the use of energy resources and, accordingly, their monitoring, leads to the fact that the process of energy audit and energy management is implemented in a concise, non-scale and complex manner. At the same time, it is worth noting the participation of the profile Agency, which initiated a series of educational and awareness events, which became the prerequisite for implementation of energy management/energy monitoring in budget-funded institutions by 169 local authorities. For comparison, the number of local authorities increased almost 3 times compared to April 2017 (there were about 60 authorities). The cooperation of the profile agency and local authorities, 40 of which have already signed the corresponding Memoranda of Cooperation so far, allow to expand the scope of energy monitoring coverage of the country's territory. Thus, almost 170 local authorities are already managing energy consumption in budget institutions and save up to 20% without significant investment. As of end-December 2018, the coverage of energy monitoring in Ukraine was 98 cities, 47 districts, 14 regions and 10 ATCs (amalgamated territorial communities). Another group of 81 local authorities is preparing for implementation of energy management, and in general, according to the State Energy Efficiency Outlook, in 2019, it is expected to introduce a system of energy management for 250 local communities104. Metering (Article 9) According to the schedule contained in the Law of Ukraine "On Commercial Metering of Thermal Energy and Water Supply", its implementation to the extent of adoption of bylaws should have been completed half a year ago. However, as of the end of December 2018, the Government has not achieved this goal: the draft Order "On Approval of the Methodology of distribution the volumes of utilities consumed in the building between the residents" (combined with the draft Act on the Approval of the Methodology for determining and calculation of adjustment coefficients for the volume of consumed heat energy between individual consumers (in the corner apartments (premises), apartments (premises) located on the first and last floors of the building, etc.) remain outstanding so far. The delay occurred because the draft document was returned for revision to the Ministry of Regional Development following significant observations by other central executive bodies and high complexity of the technical details of the regulatory act, which depends on the financial relationships of various stakeholders. At the end of December, the prevalence of commercial heat and water metering units for residential and non-residential buildings did not significantly change from the previous reporting period, and is as follows105:

Equipment of residential and non-residential buildings with the commercial heating metering units: 78.6% of residential buildings 77.7% of non-residential buildings Residential buildings Non-residential buildings Highest rates Cherkasy, Mykolayiv, Mykolayiv oblast Khmelnytskyy, Vinnytsya oblasts Lowest rates Luhansk, Ternopil, Kirovohrad Zhytomyr and Kyiv oblasts oblasts Equipment of residential and non-residential buildings with the commercial hot water metering units 15.9% residential buildings 53.5% non-residential buildings Residential buildings Non-residential buildings Highest rates Kyiv, Mykolayiv and Ivano-Frankivsk Kyiv, Khmelnytskyi, oblasts (in Zhytomyr, Zakarpattya, Dnipropetrovsk oblasts (in Kirovohrad, Odesa, Kherson and Zhytomyr, Zakarpattya, Kirovohrad, Odesa, Kherson and 104 105

http://saee.gov.ua/uk/news/2689 http://saee.gov.ua/sites/default/files/20.01.2019%20%281%29.zip

Energy Efficiency and Social Issues Chernivtsi oblasts hot water supply Chernivtsi oblasts hot water services are not provided) supply services are not provided) Lowest rates Other oblasts Kyiv city, Sumy and Luhansk oblasts Equipment of residential and non-residential buildings with the commercial potable water metering units 71.0% residential buildings 93.5% non-residential buildings Residential buildings Non-residential buildings Highest rates Mykolayiv, Ivano-Frankivsk and Dnipropetrovsk, Donetsk and Zakarpattya oblasts Ivano-Frankivsk oblasts Lowest rates Poltava, Zaporizhzhya, Kharkiv, Chernivtsi oblast Energy services market (Article 18) The energy services market shows a positive strengthening trend, with the increasing number of ESCO contracts projects allow us to assess, on a wider scale, the available capacities for further improvement of this system. Therefore, on December 10, 2018, the Verkhovna Rada of Ukraine registered a package of legislative initiatives aimed at further optimizing the process of conclusion and implementation of energy service contracts. The corresponding draft laws were registered in the Verkhovna Rada of Ukraine: the draft law dated 10.12.2018 No. 9386 on amending the Law of Ukraine on large-scale energy modernization106 and the draft law dated 10.12.2018 No. 9387 on amendments to the Budget Code107. The draft law authors expect that due to appropriate changes, it will be possible to further simplify the procedure for approving the essential conditions, by granting this right to those bodies that are more involved in the conclusion of ESCO contracts and not interested in delaying the process, to simplify the procedure for the approval of ESCO relations for budgetary institutions in terms of hierarchical subordination to certain central authorities (for example, this may apply to the energy modernization of the scientific institutions of the National Academy of Sciences of Ukraine). Moreover, lawmakers are proposing to further stimulate the customer's energy modernization due to the possibility of increasing the share of savings in their favor in case of implementation of additional energy efficiency actions during the ESCO-contract, but, in order to achieve the greatest effect, obligate the contracting parties to implement energy monitoring and energy management systems on an ESCO object. It is proposed to protect the interests of energy service companies through the possibility to review the price of the ESCO contract in order to minimize currency and inflationary risks. Other proposals include the new right of the customer to indicate in the tender documentation the minimum level of energy consumption reduction and the rules for using the customer's money saved through ESCO to stimulate the further introduction of energy management systems. A direct consequence of the improvement of the regulatory environment is expected to be the conclusion of a larger number of ESCO-agreements, the attraction of additional investments, the introduction of more comprehensive energy-efficient actions under ESCO contracts108. In early December, it was reported about the launch of ESCO projects on the advanced partnership basis, which, on the one hand, entail financial contribution from the customer, but at the same time offers such customers a significantly greater level of compensation - up to 80% of savings after the project completion. Given the obvious difficulties with using the budget funds in this scheme, the relevant legal environment was

106

http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=65109 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=65110 108 http://saee.gov.ua/uk/news/2704 107

Energy Efficiency and Social Issues specially prepared in 2017. After the first ESCO tender on the advanced partnership terms was announced in the Odesa oblast109, local authorities Chernihiv and Kyiv oblasts followed the lead110. In addition, the SAEE continues to establish bilateral relations for advocacy and promotion of opportunities for energy service of central government buildings. Thus, within the framework of the signed Memorandum on cooperation between the State Agency of Energy Efficiency and the Ministry of Education and Science of Ukraine, specialists of I. Sikorsky National Polytechnic University and the SAEE made a number of preparatory actions for further implementation of ESCOs at the University, including the data for the energy consumption of 56 buildings were collected (of which 20 potential sites spurred the interest of companies that conducted energy audits of selected buildings). This will allow the implementation of necessary energy efficiency actions in the student hostels; reduce utility costs by directing them to other useful projects; ensure warmth and comfort for the students in residential and study facilities111. Moreover, this collaboration resulted in two orders of the Ministry of Education to hold tenders for the procurement of energy service (ESCO) for 13 objects of the Chernivtsi Yu. Fedkovych National University, 11 objects of the National Aviation University (62 buildings in total), 4 objects of the I. Sikorsky National Polytechnic University, as well as 3 objects of Oleksandriya Polytechnic College112. In the international dimension, the specialized Agency continues to explore global experience in the energy service market, primarily to mitigate the risks associated with high interest rates in Ukraine in various ways, including the use of specific financial mechanisms, which, for example, is reflected in the recommendations for Ukraine recently prepared by the Organization for Economic Cooperation and Development113. One example for Ukraine, according to the SAEE specialists, may be the "LABEEF"114 Energy Efficiency Fund established by EBRD in Latvia, which provides ESCO companies with long-term financing for projects in the budget-funded and housing sectors. The specialized Agency considers the possibility of establishing such a Fund in Ukraine in cooperation with international partners, and access to financial resources for integrated and long-term ESCO projects will be expanded115. National energy efficiency fund, financing and technical support (Article 20) As expected, after the formation of the Quorum of the Supervisory Board of the Energy Efficiency Fund of Ukraine, the process of preparation of this institution for the launch accelerated. During the first constituent meeting of the Supervisory Board members on December 17, its Chairman was elected, and Andrzej Rajkiewicz was appointed the Chairman. In addition, other decisions regarding the Energy Efficiency Fund were taken: the Supervisory Board meeting rules, the procedure for the selection of the Management Board members and the head of the internal audit unit were approved. In addition, the work plan of the Fund head office for 2018 and the first quarter of 2019 was approved.116 As the selection of top managers is expected to become the next step before the Fund operations launch, in late December the Supervisory Board of the state institution "Energy Efficiency Fund" announced the selection of the CEO, the CFO, the CTO and the head of the internal audit unit117. The Supervisory Board also approved the composition of the selection committee, which included representatives of the international recruiting company Hudson, the Ministry of Regional Development and international partners involved in the launch of the Fund118. In accordance with the terms of cooperation with the Government of Ukraine, on December 17, the European Commission provided a second instalment of 54 mln EUR in support of the Energy Efficiency Fund. It took 109

http://saee.gov.ua/uk/news/2722 http://saee.gov.ua/uk/news/2688 111 https://kpi.ua/2018-12-14 112 http://saee.gov.ua/uk/news/2691 113 http://saee.gov.ua/sites/default/files/UKRAINE-DRAFT-Monitoring-ESCO-UKR.pdf 114 http://sharex.lv/en/latvian-baltic-energy-efficiency-facility-labeef 115 http://saee.gov.ua/uk/news/2718 116 http://www.minregion.gov.ua/press/news/obrano-golovu-naglyadovoyi-radi-fondu-energoefektivnosti-zubko/ 117 http://www.minregion.gov.ua/napryamki-diyalnosti/fond-energoefektivnosti/ogoloshennya-pro-provedennya-konkursnogovidboru-na-zanyattya-vakantnih-posad-derzhavnoyi-ustanovi-fond-energoefektivnosti/ 118 http://www.minregion.gov.ua/press/news/ogolosheno-konkurs-na-posadi-top-menedzheriv-fondu-energoefektivnosti-zubko/ 110

Energy Efficiency and Social Issues place within the framework of the 5th meeting of the Council on Association between Ukraine and the EU, during which the Vice Prime Minister of Ukraine in the relevant branch Gennadiy Zubko and European Commissioner for European Neighborhood and Enlargement Johannes Hahn signed a relevant financial agreement119. Similar to the first tranche that Ukraine received in June, these funds will be directed to the Multi-Donor Fund managed by the International Finance Corporation (IFC). In spite of the lack of fully formed executive and technical bodies of the Energy Efficiency Fund (EEF), the constituent management of this organization, appointed by the Ministry of Regional Development, is trying to accelerate the actual work of the Fund through the launch of the first test programs targeted at 10 ACMBs that will collaborate with the Energy Efficiency Fund as pilot projects. This program was named "First Swallows" ("the first portents"), and involves step-by-step testing of mechanisms throughout the chain of financial and operational actions of the Fund's client. As it is planned, the results of such a pilot project will test those procedures that were developed within the framework of technical assistance from the World Bank, and a brief summary report will be prepared for the Fund and the Ministry of Regional Development, analyzing the tests carried out, conclusions and recommendations for the development of future permanent procedures of the Energy Efficiency Fund. To implement this initiative, IFC intends to sign a trilateral agreement with the Energy Efficiency Fund and UkrGasBank120.

Directive 2010/31/EC on energy efficiency of buildings One of the main tasks in implementing the provisions of the Law of Ukraine "On Energy Efficiency of Buildings" is the rapid creation of a professional community of energy managers and auditors who should start providing certification services as soon as possible, as required by law. The State Agency for Energy Efficiency in cooperation with 39 higher education institutions, is already working on the formation of a market of highly qualified energy auditors, and, in particular, 29 certification committees have been created, the appropriate curricula were introduced in 21 higher education institutions, etc. As of the end of December, 412 certificates were issued on the results of the curriculum completion by students, of which 246 were for energy auditors, who will carry out certification of the buildings energy efficiency and 166 - for experts in the engineering networks examination. In total, 252 energy auditors were certified and confirmed their qualifications121,122. Among other things, on December 18, 2018, the Cabinet of Ministers of Ukraine approved an updated list of construction works that do not require implementation documents and the commissioning of the object upon completion. From now on, it is not necessary to obtain such permission documents for the construction of integrated heat insulation of residential buildings (walls, roof, attic, technical floor, basement or basement) already put into operation. This applies to individual residential buildings categorized as minor impact objects (СС1), and multi-apartment housing with a height of up to 100 m – moderate impact objects (CC2). Adoption of the Law of Ukraine "On Energy Efficiency of Buildings" and the launch of the Energy Efficiency Fund envisages an increase in the number of construction works for thermal modernization, as well as updated state construction standards for the facade insulation (State Construction Standards В.2.6-33: 2018 "Construction of exterior walls with facade insulation. Design requirements"), which, in particular, include the introduction of European requirements for the thermal modernization of the facades. According to the branch ministry officials, such actions will allow Ukrainians to save up to 15% of heat each year, and for the whole country, this savings can amount to about 3 bn USD, provided that 3% of all buildings undergo thermal modernization annually123.

119

https://www.kmu.gov.ua/ua/news/gennadij-zubko-yec-nadaye-drugij-transh-u-54-mln-yevro-na-pidtrimku-fonduenergoefektivnosti 120 http://www.minregion.gov.ua/press/news/10-osbb-rozpochali-testuvannya-protsedur-fondu-energoefektivnosti/ 121 http://saee.gov.ua/uk/news/2712 122 http://saee.gov.ua/uk/news/2728 123 http://www.minregion.gov.ua/press/news/provoditi-uteplennya-zhitlovih-budinkiv-teper-mozhna-bez-dozvoliv/

Energy Efficiency and Social Issues Directive 2010/30/EU of the European Parliament and of the Council on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products According to the information provided by the State Agency for Energy Efficiency in response to the information request, by the end of 2018, both draft technical regulations on energy labeling, which are lacking to fully implement the Directive, are subject to approval by the relevant Ministry. These are draft Orders of the Ministry of Regional Development "On Approval of the Technical Regulation for the marking of water heaters, battery tanks and a water heater and solar equipment installations", and "On Approval of the Technical Regulations regarding the energy labeling requirements of premises heaters, combined heaters, installations comprising the heater, the temperature regulator and solar installation, and installations comprising a combined heater, a temperature controller and a solar installation". Moreover, in 2019 it is planned to develop and approve 3 technical regulations for the energy marking: â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘

Solid fuel heaters and installations comprising solid fuel heaters, additional heating units, temperature regulators and solar equipment; Local heaters; Residential air fans.

Social issues An extremely long delay in the development of a new model of state subsidy monetization policy turned out to be not only a manifestation of lack of professionalism and ineffectiveness of officials of responsible ministries, but also further increased social tensions around the topic of the continuation of market reforms, in particular in the energy sector. The inability of government officials to effectively develop and implement a system of state support for the vulnerable energy service consumers in 2018 has already significantly increased the rhetoric of populist political forces ahead of important elections next year, which potentially threatens to slow down further energy reforms, if not completely curtail them. Despite the warnings from specialists and representatives of the ACMBs movement regarding the adoption of a Government resolution that does not meet the requirements of law, the Cabinet of Ministers adopted a decision on December 27, 2018, which experts described as "pseudo-monetization"124. The mechanism proposed by the Government does not introduce of subsidy monetization, but rather creates conditions for the introduction of an opaque scheme, which is not only unacceptable, but simply not applicable, because it is contrary to the economic logic underlying the work of ACMBs and the current legislative acts. Despite the public discussions and warnings of ACMBs representatives and industry experts, the officials ignored proposals. The main problems of such a model, as identified by the expert environment, are the monetization of subsidies only for those applying for a new subsidy after January 1, 2019, transferring the risk of timely accrual of funds to the accounts of the Ministry of Social Policy to the recipients, and, most importantly, the lack of opportunities for the recipients to freely dispose of funds provided in the framework of state assistance, which, instead, are deducted from personal accounts of the government-owned Oschadbank automatically on the basis of a single request of service providers under the procedure determined by law. The subsidy recipient may obtain the unused balance of such funds after the end of the heating season, in the best case. Lacking consistent and effective solutions to address this problem, ACMBs will face these issues and will be required to take additional responsibility and incur additional costs without any practical benefit to ACMBs as entities or the co-owners, and the ACMB community information platform explained this in detail and outlined the algorithm of action to prevent possible risks for their activities125.

124 125

https://www.kmu.gov.ua/ua/news/uryad-zaprovadiv-monetizaciyu-pilg-i-subsidij https://proosbb.info/node/380

Energy Efficiency and Social Issues It should be noted that, in addition to the warnings from the community of ACMBs and experts, the Secretariat of the Cabinet proposed to avoid adopting the resolution in this wording. However, officials are sincerely convinced that the decisions made are efficient. For example, Deputy Prime Minister of Ukraine - Minister of Regional Development, Construction and Housing and Utility Services of Ukraine Gennadiy Zubko noted that the energy efficiency activities in multi-story buildings within the framework of the Energy Efficiency Fund will help the government save on the amount of funds allocated as subsidies. The approved Methodology for calculating the amount of subsidies saved as a result of energy efficiency actions within the framework of the Fund's programs will also allow converting subsidies into energy efficiency investments126.

Ukraineâ&#x20AC;&#x2122;s progress assessment: 31 out of 100 In the reporting period, after suspension of the relevant proceeding opened by the Secretariat of the Energy Community against Ukraine for failure to fulfill its obligations in the energy efficiency area, the Task Force did not use any negative indicators. Regarding the transposition, the Task Force noted the absence of any progress in the work on Directive 2010/30/EC, since none of the two pending technical regulations showed signs of progress (score of 80 points). At the same time, specialists have significantly improved the assessment of the transposition of the other two Directives - 2010/31/EC and 2012/27/EC. E.g., a large number of draft regulatory acts developed by the Ministry of Regional Development in compliance with the laws of "energy efficiency package" has been noted. Significance of increase is due to a considerable number of legal acts adopted by responsible state authorities during the reporting period. Out of the 15 required acts for the implementation of Directive 2010/31/EC, only 2 are not adopted yet. The assessment score remains limited to a maximum of 90 points due to incomplete implementation of Directive by the relevant law. As for assessment the real increase of energy efficiency in Ukraine, the Task Force experts upheld a preliminary assessment due to the lack of updated data. The estimation of the state energy efficiency investments and energy efficiency actions was made on the basis of a budget request for "warm loans" financing of 2 bn UAH, with only 400 mln UAH actually provided, which is 20% of the required amount. The budget funding of the newly established Energy Efficiency Fund is fully in line with the level of donor financing, and the score is thus equal to 100%. At the same time, the funds allocated are still not used. Indicators such as the dynamics of the total area of premises, heated and/or cooled public buildings, which were repaired to meet at least the minimum energy efficiency requirements, as well as the dynamics of buildings with almost zero energy consumption, have not been rated positively in connection with the lack of public information. In addition, the indicator was not taken into account regarding the amount of fines imposed for energy efficiency laws violation, due to the absence of such fines, as well as the system of their imposition. Finally, the indicator of heat metering in the housing stock was assessed in accordance with the most upto-date information on the equipment of residential buildings by the metering units received from the Ministry of Regional Development. This figure is 78% nationwide.

126

http://www.minregion.gov.ua/press/news/monetizovani-subsidiyi-mayut-peretvoritis-na-investitsiyi-v-energoefektivnist-zubko/

Environment and Renewable Energy Sources December 2018 has marked one year since the implementation of the Law "On Environmental Impact Assessment" in practice. The Ministry of Environment reports on the registration of 1,749 cases in the Unified State Register of EIA. On December 18, 2018, the Cabinet of Ministers approved the Action Plan for the Implementation of the Open Government Partnership for 2018-2020. The Action Plan provides for the transparency of environmental data, the implementation of the Extractive Industries Transparency Initiative, the creation of an online platform for interaction between executive authorities and civil society institutions, etc. The implementation of such a plan will contribute to the implementation of Directive 2003/4/EC on access to environmental information. In December, consultations with the public on the draft Concept for the implementation of state industrial pollution policy were completed. After lengthy and vehement discussions, the draft law No. 8449-d "On Amendments to Certain Laws of Ukraine on Ensuring Competitive Conditions for the Power Generation from Alternative Energy Sources" was adopted by MPs in the first reading. The draft law received 227 votes.

Directive 2011/92/EU of the European Parliament and of the Council on the assessment of the effects of certain public and private projects on the environment (codification) (Art. 363 of the Association Agreement) December 18, 2018 marks the year since the practical implementation of the Law of Ukraine "On Environmental Impact Assessment". According to the Ministry for Environment, for the 12 months since its enactment, 1,749 cases have been registered in the Unified State Register of Legal Entities127. During the final press conference, Ostap Semerak, Minister of Environment of Ukraine, said: "In general, the law is functioning successfully. About 250 opinions on the environmental impact assessment have already been issued. The number of registered cases in the Unified Register is over 1,700. This is an average indicator of Poland. We set it as an efficiency benchmark, when we launched the EIA procedure in practice a year ago. However, in the first months of the environmental impact assessment law implementation, we felt the real resistance from some Ukrainian enterprises and the intention to disqualify this law". The Minister cited Prydniprovska TPP as the most convincing example of the successful implementation of EIA in practice. The environmental impact assessment covered four power units of this enterprise. According to the EIA opinion, by the end of the year a new electric filter must be installed on the emission pipe of the power unit No. 10 at Prydniprovska TPP. In this case, Ostap Semerak expressed the hope that over time, more Ukrainian enterprises will be guided by the EIA opinions, where the requirements of environmental modernization and reducing the negative impact on the environment are a priority. Nevertheless, at present, the Unified EIA Register128 continues to operate in the test mode and needs further improvement, both in view of the user-friendliness for an ordinary citizen to find the information, and the need to ensure compliance with all provisions of the Law of Ukraine "On Environmental Impact Assessment".

Directive 2003/4/EC on public access to environmental information On December 18, 2018, the Cabinet of Ministers of Ukraine, by its Order No. 1088-r, approved the Action Plan for the Implementation of the Open Government Partnership for 2018-2020129. The Action Plan, inter alia, provides for the opening of environmental data, the implementation of the Extractive Industries Transparency Initiative, the creation of an online platform for interaction between executive authorities and civil society institutions, etc. As for the access to environmental information, the following actions are envisaged:

127

https://menr.gov.ua/news/32983.html http://eia.menr.gov.ua/ 129 https://www.kmu.gov.ua/ua/npas/pro-zatverdzhennya-planu-dij-iz-vprovadzhennya-iniciativi-partnerstvo-vidkritij-uryad-u20182020-rokah 128

Environment and Renewable Energy Sources • • • • • •

Development of legal and regulatory framework for ensuring free access of citizens to environmental information, taking into account European standards and requirements, Development and implementation of the nationwide "Open Environment" automated system in general, and its structural elements, in particular; Modernization/reformation of the state environmental monitoring system, in particular radiation situation; Stock-taking and review of state information registers of natural resources aimed at their digitization, Digitalization of state information registers of natural resources, Opening of state information registers of natural resources for public access as open data.

The first step towards the implementation of the above measures has already been implemented. Let's remind that on November 7, 2018, the Government, by its Decree No. 825-p, supported the Concept for the creation of a nationwide "Open Environment" automated system, which will be freely accessible and consolidate environmental data of various central executive authorities and local governments into the single electronic database. In particular, it is envisaged to digitize environmental information, which is currently paper-based or scattered across different institutions and departments.

Directive 2010/75/EU of the European Parliament and of the Council on industrial emissions (integrated pollution prevention and control) During the month (November 16 - December 16, 2018) representatives of the public and business had the opportunity to submit their comments and proposals to the Concept of the implementation of the state industrial pollution policy to the Ministry of Environment of Ukraine. Meanwhile, on December 20, 2018, a public discussion of the concept took place in the Aarhus Information Center130. The discussion was attended by representatives of NGOs, industry, employees of the Ministry of Environment, the Public Council and the Reform Support Team under the Ministry of Environment. In total the Ministry of Environment received more than 30 proposals and comments to the draft Concept131. We should remind that on November 16, 2018, the Ministry of Environment presented the draft CMU Order "On Approval of the Concept for the Implementation of State Industrial Pollution Policy" for public discussion. The Concept envisages the following fundamental tasks: (1) improving the efficiency of state regulation in the industrial pollution area; (2) strengthening institutional capacity and ensuring the effective interaction of the authorities responsible for issuing environmental permits; (3) improvement of the system of oversight (control) over compliance of economic entities with environmental law requirements. The Concept includes three stages of the actions implementation: (1) 2019-2021 (action plan for the implementation of the Concept, draft law on integrated prevention, reduction and control of industrial pollution, development and maintenance of the register of installations, creation of an electronic information system, development and approval of the required bylaws, streamlining of institutional capacities of the Ministry of Environment); (2) 2022-2024 (development and approval by the Ministry of Environment of conclusions of the best available technologies and methods of management for certain types of activities, analysis and improvement of the regulatory framework in the field of industrial pollution, staff training); (3) 2025-2028 (development and approval of the findings of best available technology and management methods for activities in Annex 1, improvement of the regulatory framework in the field of industrial analysis, implementation of training programs for staff.

Directive 2008/50/EC of the European Parliament and of the Council on ambient air quality and cleaner air for Europe (Art. 363 of the AA) On December 22, 2018, the Ministry of Environment of Ukraine submitted to the Supreme Court a cassation appeal against the decision of the Kyiv District Administrative Court on recognizing the Order No. 639 of the 130 131

https://menr.gov.ua/news/33009.html https://drive.google.com/file/d/1kaL7lgpROw6_PL-IuAAtKpEuqgMq2ilt/view

Environment and Renewable Energy Sources Ministry of Environment of Ukraine dated December 10, 2008 as unlawful and void, and the decision of the Sixth Administrative Court of Appeal, which rejected the appeal of the Ministry of Environment and left the decision of the first instance court unchanged. The repealed Order approved the Methodology for calculating the amount of damages caused to the state through excessive emissions of pollutants into the air. This methodology established uniform rules across Ukraine on determining the amount of compensation and collection of damages caused by excessive emissions of pollutants into the air from stationary sources. Commenting on the situation with the cancellation of the Order, Ostap Semerak, Minister of Environment, noted that "The abolition of this procedure actually disabled the damage calculation. In fact, polluting enterprises enjoy an actual "amnesty" nowadays, which paves the way for an environmental catastrophe in the country. And we will not tolerate such a situation. Cassation appeal is being filed and I believe that the Supreme Court by its decision will uphold the rights of Ukrainians to live in a clean environment and reinstate the rules prohibiting entrepreneurs to misuse the opportunity of excessive emissions in the ambient air".132 In addition, on December 19, a draft law of Ukraine on amendments to Article 34 of the Law of Ukraine "On the Ambient Air Protection" 133 was registered with the Parliament. As stated in the explanatory note to the draft law, it is intended to eliminate the legislative collisions enabling business entities to avoid compensation for damages caused by a violation of the ambient air protection legislation. The draft law proposes to replace the words "the law" with the words "legislation" in Article 34 of the Law of Ukraine "On the Ambient Air Protection". As an effect of such changes, the "legislation" will include the orders of the Minister of Environment as well.

Directive 2009/29/EC amending Directive 2003/87/EC and subsequently repealing Directives 2001/77/EU and 2003/30/EU so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community (Art. 338 of the AA) The adoption in the first reading of the draft law No. 8449-d134, envisaging the implementation of the auction system in the RES industry, became the key achievement not only of the month, but of the whole year. According to the document, auctions are planned to be held twice a year. The draft law has other advantages as well: gradual decrease of the feed-in tariff for solar and wind power plants; an effective method of conducting an auction (submission of closed bids with a specified capacity and a price quotation); all auctions should be held on electronic platforms; validity period limitation for the ToRs for accession which were issued, but not implemented, etc. At the same time, there are concerns that the law does not solve all issues with the existing feed-in tariffs system. For example, there is concern that a reduction without prolonging the feed-in tariff may delay the development of new projects (especially for small and medium generation facilities). DiXi Group welcomes the adoption of the draft law in the first reading, but considers it necessary to finalize certain provisions to reduce the risks for implementing new projects in the industry. In particular, experts suggest to submit a draft law for the examination of the Energy Community Secretariat before the second reading. Thus, it will become clear whether all the provisions of the law are compliant with Directive 2009/29/EC and other requirements of European legislation.

132

https://menr.gov.ua/news/32995.html http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=65246 134 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=65076 133

Environment and Renewable Energy Sources Ukraine's progress assessment: 43 out of 100 At the moment, the Energy Community Secretariat is considering one case relating to environmental issues regarding the sulfur content in certain fuels. Two framework laws exist for the implementation of horizontal directives - the Law "On Environmental Impact Assessment" and the Law "On Strategic Environmental Assessment". The government has amended the Resolution on the establishment of an Interdepartmental Coordination Council on the implementation of the Convention on Environmental Impact Assessment in Ukraine. It is necessary to adopt a number of bylaws to enable the functioning of the SEA Law. At present, the Methodological Recommendations on the implementation of SEA of state planning documents have been published and a draft Procedure for monitoring the consequences of the implementation of the state planning document for the environment, including for public health, has been elaborated. Published in March 2018, the draft Law "On the Emerald Network" is still in the draft status. However, even if adopted, the draft law will not ensure the full-scale implementation of the Birds and the Habitats Directives. The action plan for the implementation of the National Emissions Reduction Plan from Large Combustion Units for 2018, approved by the CMU in early 2018, was virtually not fulfilled. The Ministry of Environment has developed and promulgated a draft Concept for the implementation of state industrial pollution policy, which is the first step towards implementation of integrated permit. No significant steps have been taken to implement the relevant directives regarding ambient air. In the first reading, the Verkhovna Rada approved the draft law No. 8449-d, which implements the system of auctions. The introduction of such a system should reduce the cost of "green" energy for consumers and create conditions for effective competition. At the same time, according to experts, some provisions need to be finalized before the second reading. Meanwhile, both Ukrainian and foreign businesses continue to invest heavily in implementing RES projects. The Unified EIA Register was launched on December 18, 2017. It continues operating in the test mode, and therefore needs to be improved, especially in view of the systematization of information. Several SEA procedures have been launched in accordance with the new legislation. No special protected areas (SPA) have been created for the protection of birds due to the lack of necessary legislation. The government approved the Concept for the creation of the "Open Environment" automated system, the implementation of which will improve access to environmental information. The new version of the data.gov.ua portal contained only 7 datasets, 436 sets will not be transferred from the old version of the website. Data portals on water resources, landfills, and the Unified EIA Register are operational. The total installed capacity of RES facilities commissioned this year has increased 2.8 times compared to 2017. Indicators of the National Renewable Energy Action Plan by 2020 are almost met, but at the expense of the capacity of existing HPPs and PHPPs. Without taking into account these capacities, Ukraine would fulfill the NREAP indicators only by 22% so far.

Oil In December, the government adopted a series of decisions aimed at further implementation of the Directive 94/22/EC in Ukraine. It is planned to conduct open contests on the conclusion of production sharing agreements for at least 11 oil&gas fields. The possibility of obtaining special permits for the extraction of oil and gas condensate other than by auction is cancelled. The first 10 lots of subsoil fields with total stock of liquid hydrocarbons at 16 mln tons are included in the ProZorro.Sales system. Despite these positive news, in 2018 the government failed to fully meet the implementation plans for Directives 99/32/EC, 98/70/EU and 94/63/EC.

Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products (Art. 338 of the Association Agreement) As of January 5, 2019, there is no publicly accessible information on the progress of the processing by the relevant stakeholders of the Draft Law "On Minimum Reserves of Oil and Petroleum Products" (task 129 of the Plan135) developed by the State Reserve Agency and approved by the Energy Community, which was forwarded to the Ministry of Economic Development on November 12, 2018136. We only know that its development is "at the final stage." 137

Directive 2009/28/EC of the European Parliament and of the Council on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC As part of the harmonization of national requirements for liquid fuels with biological components with the European standards, the National Standardization Program for 2018138 envisaged to adopt 19 standards. However, until December 20, 2018, only six were issued. Another two standards were develop din the first edition, one standard is available in the second edition, yet another – in the final edition, nine draft regulatory documents were returned for improvement139. Directive 1999/32/EC140 relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC, as amended and supplemented by the EU Regulations 1882/2003 and Directive 2005/33/EC As of January 5, 2019, the outcomes of the approval by the relevant authorities of the draft resolution141 on amendments to the Technical Regulations concerning requirements for motor petroleum, diesel, ship and boiler fuels142 (task 1702.4 of the plan143) are still unknown. At the same time, the approval of the Technical Regulations on requirements for liquefied gas for motor transport, utility and household consumption and industrial purposes, which had to take place by November 1, 2018144, was postponed until the fourth quarter of 2019 (paragraph 12 of the plan145). The pace of adoption of 52 national standards (including changes146 to the program147) required to harmonize the fuel quality and safety requirements of Ukraine to the EU standards turned out to be unsatisfactory as well. Out of them, until December 20, 2018, only five were issued. For the 35 standards, the first editions

135

http://zakon5.rada.gov.ua/laws/show/497-2018-%D1%80 https://rezerv.gov.ua/novini-mznn/zakonoproekt-pro-stvorennya-ta-zberigannya-minimalnih-zapasi 137 http://46.201.244.20/news/golova-derzhrezervu-pro-pidsumki-2018-roku 138 http://uas.org.ua/ua/messages/dodatok-2-do-programi-robit-z-natsionalnoyi-standartizatsiyi-na-2018-rik/ 139 http://uas.org.ua/wp-content/uploads/2018/12/Zvit_vikon-gruden-20-12-2018_Program-2018.xlsx 140 Directive 99/32/EC (other title – 1999/32/EC) is codified on May 11, 2016 (Directive 2016/802/EC). 141 http://www.drs.gov.ua/wp-content/uploads/2018/05/6795-10.05.18.pdf 142 http://zakon.rada.gov.ua/go/927-2013-п 143 http://zakon.rada.gov.ua/laws/show/1106-2017-%D0%BF 144 http://www.nefterynok.info/uk/novini/uasg-prosit-mnenergo-prodovjiti-stariy-gost-na-skrapleniy-gaz-do-2020-roku145 http://mpe.kmu.gov.ua/minugol/doccatalog/document?id=245328636 146 http://uas.org.ua/ua/messages/zvid-tem-yaki-vilucheno-z-programi-robit-z-natsionalnoyi-standartizatsiyi/ 147 http://uas.org.ua/ua/messages/dodatok-2-do-programi-robit-z-natsionalnoyi-standartizatsiyi-na-2018-rik/ 136

Oil have been developed, for the four - the second editions, for one standard the final edition is available, seven drafts have been returned for improvement148. Although task 119 of the plan149 foresees the implementation of a number of actions, it is still known only about the Government's intention to assign the functions of supervision (control) over petroleum products market to the State Environmental Service, which will be established by the end of 2019 (task 1.2 of the plan150). However, while outlining the tasks and powers of the abovementioned service, the Ministry of Environment has yet to include in this scope, in particular, monitoring and controlling the quality and safety of motor fuels, carrying out inspections of economic entities and imposing sanctions on them in the event of non-compliance with the established requirements (task 37 of the plan151).

Directive 98/70/EC of the European Parliament and of the Council 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 Regulations (EU) 1882/2003 (Annex ХХХ, Art. 360-363, 365, 366 of the AA) As of January 05, 2019, there is no publicly available information on the progress with the development of the following documents by the Ministry of Energy and Coal Industry: •

uniform legal, organizational, financial and economic principles "implementation of quality control of petroleum products in accordance with EU standards and rules" (task 1702 of the plan152);

•

systems for monitoring the quality and safety of petroleum products; interlaboratory comparisons of test results to confirm their quality; collection of in-country data on the quality of motor fuel (tasks 1703.1, 2 and 3 of the plan153).

We know only about the drafting of the first editions of national standards: •

"Automotive fuel. Fuel quality monitoring system. Assessment of the quality of gasoline and diesel fuel "(to replace DSTU EN 14274: 2014);

•

"Automotive fuels. Fuel quality monitoring system. Sampling from fuel nozzles of retail and commercial (wholesale) fuel stations";

•

"Liquid petroleum products. Manual sampling method";

•

"Liquid petroleum products. Automatic sampling method" (all - TC 38) 154.

The implementation of Directive 98/70/EC was considerably complicated by the adoption of a law155 permitting the importation of the used vehicles into Ukraine. There is no sense in using Euro-5 compliant fuel in them, because the harmful effects of exhaust gases on human health and the environment is not reduced in this case.

Directive 94/63/EC of 20 December 1994 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 and added by the Regulations (EU) 1882/2003 (Annex ХХХ, Art. 360-363, 365, 366 of the AA)

148

http://uas.org.ua/wp-content/uploads/2018/12/Zvit_vikon-gruden-20-12-2018_Program-2018.xlsx http://zakon5.rada.gov.ua/laws/show/497-2018-%D1%80 150 https://www.kmu.gov.ua/ua/npas/pro-zatverd 151 https://www.kmu.gov.ua/storage/app/uploads/public/5bc/de8/62a/5bcde862a988c706756328.doc 152 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 153 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 154 http://uas.org.ua/wp-content/uploads/2018/12/Zvit_vikon-gruden-20-12-2018_Program-2018.xlsx 155 http://zakon.rada.gov.ua/laws/show/2611-19 149

Oil As of January 5, 2019, there is no information available in open sources on the status of the fulfillment of task 1695 of the plan156, assigned the following tasks to Ministry of Environment due before October 31, 2018: •

develop a draft technical regulation that establishes requirements for fuel storage, transportation and hauling, appropriate equipment and service stations;

•

conduct an inventory of "gasoline storage and loading terminals";

•

develop recommendations for the control of the operation of petrol stations and "small storage tanks".

So far, we only know about: •

achieving consensus on the draft national standard "Metrology. Verification method. Automotive tanks calibrated for petroleum products";

•

development of the first versions of the verification methods of the fuel dispensing columns for liquid fuel and liquefied gas (all pertaining to TC 63) 157.

Directive 94/22/EC of the European Parliament and of the Council on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons (Annex XXVII, Art. 279, 280, 341 of the AA) On December 4, 2018, the State Regulatory Service received a draft regulation of the government endorsed by the Ministry for Environment "The matters of determining the price of a special subsoil use permit"158, which updates the Methodology for determining the initial sale price at the auction for a special subsoil use permit159 (work plan of the Ministry of Environment160, task 1, Government priorities, task 189 of the plan161, deadline - November 2018). It is proposed to replace the procedure for determining the permit price through discounting cash flows by establishing the initial price depending on the customs value of oil and/or gas condensate provided by the State Fiscal Service and the volumes of their stocks (resources) determined upon geological and economic assessments162. On December 18, 2018, the government changed the previously established provision of the Procedure for the issuance of special subsoil use permits163, by abolishing from January 1, 2019 the possibility of obtaining a special permit for oil and gas extraction if the applicant carried out testing of hydrocarbon reserves at their own expense164. The approved document also allows suspending the special permit in case of absence or failure to comply with the environmental impact assessment opinion and/or the state environmental review of mining and geological exploration of oil and gas minerals, including research and industrial development of deposits, with subsequent extraction of oil and gas. It should be noted that, despite the adoption on October 17, 2018, of the government resolution "On the implementation of the pilot project on introducing auctions for the sale of special subsoil use permits through electronic bidding"165, the work on a number of documents of the so-called "Road Map for conducting international oil and gas auctions166", is actually still underway despite their reported approval on July 26th167.

156

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 157 http://uas.org.ua/wp-content/uploads/2018/12/Zvit_vikon-gruden-20-12-2018_Program-2018.xlsx 158 http://www.drs.gov.ua/wp-content/uploads/2018/12/15900-04.12.2018.pdf 159 http://zakon0.rada.gov.ua/laws/show/1374-2004-%D0%BF 160 https://menr.gov.ua/news/32415.html 161 http://zakon.rada.gov.ua/laws/show/244-2018-%D1%80 162 https://menr.gov.ua/news/32934.html 163 https://zakon.rada.gov.ua/laws/show/615-2011-%D0%BF 164 https://www.kmu.gov.ua/ua/npas/pro-vnesennya-zmin-do-deyakih-postanov-kabinetu-ministriv-ukrayini-75165 https://www.kmu.gov.ua/storage/app/uploads/public/5bc/e01/b98/5bce01b982138521614714.doc 166 http://www.geo.gov.ua/wp-content/uploads/2018/07/roadmap_auct-1.pdf 167 https://www.kmu.gov.ua/ua/news/volodimir-kistion-uryad-vidkrivaye-shlyah-dlya-prihodu-v-ukrayinu-novitnih-svitovihtehnologij-gazovidobutku

Oil In particular, the progress is unknown so far of development of the draft government resolution "On Amendments to the Methodology for determining the value of mineral reserves and resources of mineral resources of the deposit or plot provided for use"168 published by the State Geology and Mineral Resources on July 9, 2018 (the deadline for implementation is postponed to October169 and December 2018170,171), rejected by the State Regulatory Service172 due to the failure of developers to implement the key regulatory policy principles and re-submitted on July 17, 2018. 173 The following issues remain outstanding: •

abolition of mining claim for the oil and gas industry: although on November 14, 2018, the State Regulatory Service has agreed174 a draft Resolution "On Amendments to the Provision on the mining claim allotment procedure175" submitted by the State Labor Service of Ukraine176 (due for implementation in the first quarter of 2017177), the document was not filed for consideration by the Government;

•

approval of subsoil use provision: the draft law on the introduction of appropriate amendments to the Law of Ukraine "On Local Self-Government in Ukraine"178 was elaborated as early as September 2017, but has not yet been agreed and submitted to Parliament (paragraph 36 of the plan179).

The situation around the new edition of the Subsoil Code of Ukraine did not change. According to the plan180 the Ministry of Environment, the State Geology and Mineral Resources, the Ministry of Energy and Coal Industry and the Ministry of Economic Development were assigned the task to "continue work towards the elaboration of a new edition of the Code" (task 99, implementation deadline - fourth quarter of 2018), while the plan181 provides for the approval by the end of 2018 of the "terms of reference for the EU project on development of the new Subsoil Code" (task 9, priorities of the Ministry). Thus, task 1182 of the plan and 64183 plans were canceled without any justification. Instead, by paragraph 5 of the action plan184, contrary to the plans185,186, the Ministry of Environment is assigned to develop and submit for approval the "Draft Subsoil Code of Ukraine (new edition)" by the end of 2018. However, since even the plan itself187 has been finalized almost one month after its official approval on October 24, 2018, it is unlikely that the tasks will be completed within the set time limits. Meanwhile, in addition to the preparation of the mentioned documents, the same plan in 2018 provided for the following: •

168

Drafting and submitting for approval of the draft Government resolution on amending the Regulation on the procedure for conducting state expertise and evaluation of mineral resources188 in order to switch to internationally accepted hydrocarbon reserves assessment (PRMS, JORC, etc.) (responsible - Ministry of Environment);

http://www.geo.gov.ua/wp-content/uploads/2018/05/zmpostkmu1117_2017_ok_0.doc https://menr.gov.ua/news/32415.html 170 https://menr.gov.ua/files/docs/nakazy/nakaz_475.pdf 171 http://geo.gov.ua/sites/default/files/imce/nakaz_no_557.pdf 172 http://www.drs.gov.ua/wp-content/uploads/2018/04/4384-vid-07.05.18.pdf 173 http://www.drs.gov.ua/wp-content/uploads/2018/07/10137_19-18.pdf 174 http://www.drs.gov.ua/wp-content/uploads/2018/11/11023-14.11.18.pdf 175 http://zakon2.rada.gov.ua/laws/show/59-95-%D0%BF 176 http://www.drs.gov.ua/wp-content/uploads/2018/11/10077-25.10.18.pdf 177 http://zakon2.rada.gov.ua/laws/show/1079-2016-%D1%80/paran146#n146 178 http://www.geo.gov.ua/wp-content/uploads/2018/05/proekt_zakonu_0.doc 179 https://www.kmu.gov.ua/storage/app/uploads/public/5bc/de8/62a/5bcde862a988c706756328.doc 180 http://zakon5.rada.gov.ua/laws/show/497-2018-%D1%80 181 https://menr.gov.ua/news/32415.html 182 http://geo.gov.ua/sites/default/files/imce/nakaz_no_557.pdf 183 http://www.drs.gov.ua/deregulation/plan-deregulyatsiyi-2016-2017-rr/ 184 http://zakon.rada.gov.ua/laws/show/842-2018-%D1%80 185 http://zakon5.rada.gov.ua/laws/show/497-2018-%D1%80 186 https://menr.gov.ua/news/32415.html 187 http://zakon.rada.gov.ua/laws/show/842-2018-%D1%80 188 http://zakon.rada.gov.ua/laws/show/865-94-%D0%BF 169

Oil •

Adoption of the Order "On the creation of a software environment for the electronic submission of reporting by the entities of information disclosure in the extractive industries, as well as publication of the received data in the open data format" (responsible - Ministry of Energy and Coal Industry).

Art. 276 of the Association Agreement to the extent of preventing the oil and oil products transit and transportation interruptions Although back on November 2, 2018, the State Regulatory Service agreed189 on the draft Regulations on the Committee for Decommissioning of the Main Oil, Gas, and Oil and Gas Products Pipelines, submitted by the government190 in pursuance of the Article 276-a and the government resolution, the order of the Ministry of Energy and Coal Industry for its approval was not signed191. The relevant document is intended to identify the main tasks of the Committee, its rights, powers of the chairperson of the Committee, the rights and responsibilities of its members, the sequence of actions of the Committee for consideration of documents prepared by the entity, drafting of minutes and preparing of proposals for the decommissioning of the main pipeline or refusal to put the same out of operation, as applicable.

Article 279 of the Association Agreement to the extent of ensuring equal access and carrying out activities on hydrocarbons prospecting, extraction and production In the framework of the pilot project on conducting auctions for the sale of special subsoil use permits via electronic auction on December 6, 2018, the first 10 lots - subsoil sites with total resources of liquid hydrocarbons amounting to 16 mln tons were placed in the ProZorro.Sales system. And although the chairman of the State Geology and Mineral Resources O. Kyrylyuk has already announced the "first oil and gas auction"192, the investors' bids will be opened only on March 06, 2019193. In view of this, paragraphs 2 and 3 of the Plan194, assigning the State Geology and Mineral Resources to implement the below tasks by the end of 2018, can be considered as non-fulfilled: •

an auction for obtaining special subsoil use permits or a competition for the conclusion of productsharing agreements, which will offer at least five sites on the continental shelf and in the exclusive (marine) economic zone for the prospection and production of hydrocarbons;

•

open auctions for the sale of special subsoil use permits by reducing the number of cases of their provision outside the auctions, where at least 50 new sites for hydrocarbons prospection and production will be offered.

On December 18, 2018, the head of the Ministry of Energy and Coal Industry I. Nasalyk informed about the approval of the government resolution to hold public tenders for product-sharing agreements involving at least 11 hydrocarbon sites195. However, the relevant document is not yet on the list of decisions of the Cabinet of Ministers196.

189

http://www.drs.gov.ua/wp-content/uploads/2018/10/10693-vid-02.11.18.pdf http://zakon.rada.gov.ua/laws/show/209-2018-%D0%BF 191 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245306373&cat_id=35082 192 http://www.geo.gov.ua/v-ukra%D1%97ni-startuyut-pershi-elektronni-naftogazovi-aukcioni-2/ 193 http://www.geo.gov.ua/2018-j-rik-nezaperechno%D1%97-peremogi-reform-u-nadrokoristuvanni/ 194 http://zakon.rada.gov.ua/laws/show/842-2018-%D1%80 195 https://interfax.com.ua/news/economic/554139.html 196 https://www.kmu.gov.ua/ua/npasearch 190

Oil Ukraine's progress assessment: 22 out of 100 In the second half of 2018, Ukraine adopted a number of important decisions aimed at fulfilling international obligations in the oil sector. The law simplifying the implementation of oil&gas development was signed. A new Procedure of geological information management has been approved. The launch of electronic auctions for the sale of oil and gas subsoil use permits has taken off. The first 17 lots were placed in the ProZorro.Sales system, these are fields with total resources of liquid hydrocarbons at over 20 mln tons. It is planned to conduct open contests on the conclusion of production sharing agreements on 12 fields. Control over the circulation of aviation fuel is strengthened. Licensing of production and storage of petroleum products, wholesale and retail trade was introduced. Excise tax rates for electric passenger vehicles have been reduced, and their import transactions are VAT exempt. A draft law on the formation of oil reserves has been developed. Despite these positive news, the requirements of directives concerning the quality and safety of petroleum products are still being ignored. For the third year in a row, the deadlines for the development of the new Subsoil Code of Ukraine are being postponed. Changes in the used cars taxation have actually dumped all the achievements of Ukraine to prevent the negative impact of transport on the environment. Not surprisingly, the Implementation Report of the Energy Community Secretariat has recognized the oil industry as the most problematic one. Implementation of EU legislation in this area of government policy is too slow. As of January 1, 2019, only 38 from at least 81 laws, bylaws, regulations, and national standards that had to be adopted for the fulfillment of Ukraine's international obligations were actually approved. The unpredicted extension of timeframes for tasks became common, although resources for implementation of postponed tasks are not allocated in the subsequent periods. In this way, inter alia, the deadlines were prolonged for the adoption of the new Subsoil Code (Directive 94/22/EC), the organization of an efficient quality and safety monitoring system of petroleum products (Directive 99/32/EC), the approval of recommendations for fuel stations operation control (Directive 94/63/EC), etc. Only two draft regulatory acts aimed at meeting the requirements of Directive 2009/119/EC have been prepared. No decision has been made on choosing a model of forming minimum stock of oil and petroleum products, and no mechanisms and conditions for their formation, storage, use and refilling have been developed. Only 43% of the required capacity is ready to store the reserves. Although in the second half of 2018 five normative legal acts were adopted that significantly improved the conditions for the provision and use of special permits for subsoil use, their planned full-scale implementation failed. In particular, 55 new oil and gas fields were not offered at open auctions, five of them offshore. No system for oil and petroleum products quality and safety monitoring harmonized to the European requirements was adopted in Ukraine. Of the 52 national standards required to implement the requirements of Directives 94/63/EC, 98/70/EC and 99/32/EC, only 11 were enacted. Nevertheless, the reporting documents of the Ministry of Energy and Coal Industry state that "the systems of monitoring and retail market fuel quality inspection are functioning and covering all regions of Ukraine and market operators".

Business Climate Assessing the results of government activity in the reporting period, it is necessary to highlight two main events that have or will have a positive impact on the business climate. The "framework agreement" procedure began to operate in the field of public procurement. The ample parliamentary group registered a draft on improving the ESCO contracting procedure. In both cases, changes contribute to increasing business opportunities and, at the same time, simplify communication and/or interaction with authorities. The National Bank of Ukraine promulgated draft resolutions in the framework of the implementation of the law on currency and currency transactions. In summary, the authors consider these changes to be favorable, since they simplify these transactions in a number of cases. Meanwhile, the AMCU disclosed a revised draft of amendments to the Law "On State Aid to Business Entities" and a draft of amendment to the regulations on concentration. Likewise, the National Bank promulgated its draft resolutions.

Articles 150, 153 on public procurements (to the extent of implementation of certain provisions of the Directives 2014/24/EU, 2014/25/EU, 89/665/EEC and 92/13/EEC) A new procurement procedure - framework agreement â&#x20AC;&#x201C; started operating. In case of procuring similar types of certain goods or services, the customer once selects suppliers and concludes contracts with them for 4 years. Once it is necessary to procure a certain amount of goods, the customer again announces a tender, automatically inviting everyone who has signed a framework agreement, while there is no regular collection of qualification documents, but bidding is held immediately. This implies simplifying the procedure for companies and the possibility of establishing long-term cooperation with the state197.

Articles 255, 256 on anticompetitive actions and mergers The Antimonopoly Committee initiated supplementing the concentration provision with a new term "indivisible property complex of a business entity". There are no other changes, except for a few proofreading changes198.

Articles 262-264, 267 on state aid The AMCU unveiled a draft law on amending the Law â&#x20AC;&#x153;On State Aid to Business Entitiesâ&#x20AC;? finalized after public discussions. It is proposed to clarify and supplement the law in terms of terminology, timeframes for elaboration of certain aspects. It also proposes to extend the powers of the Committee, namely to provide the right to request additional information from interested parties, to approve the details and/or procedures of the law implementation, etc., in the form of orders199.

Article 378-379 on creating favorable conditions for businesses Based on the current results of the conclusion of the ESCO contracts, the State Agency for Energy Efficiency together with the MPs of the relevant parliamentary committees registered a draft law on further promotion of investment in this area. It is proposed to simplify the procedure for approving the essential terms of the energy service contract and set its deadline up to 60 working days. This solves the problem when the responsible authorities refuse to approve the essential conditions due to non-compliance with the timeframes. It is also proposed to make changes to the "baseline" definition; other multi-fold additions are suggested. 200

197

https://www.kmu.gov.ua/ua/news/u-prozorro-teper-mozhna-ukladati-zakupivelni-ugodi-terminom-do-4-rokiv http://www.amc.gov.ua/amku/control/main/uk/publish/article/145817 199 http://www.amc.gov.ua/amku/control/main/uk/publish/article/146530 200 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=65109 198

Business Climate The National Bank promulgates a complete package of seven draft resolutions that will lay the foundation for the new currency regulation system provided for in the Law of Ukraine "On Currency and Currency Transactions" starting February 7, 2019. Conditions for conducting foreign exchange operations are improving. For example, the deadlines for exports and imports payments are doubled - up to 365 days. No new restrictive measures are implemented, while the requirement for mandatory sale of 50% of foreign currency revenues of legal entities is maintained. According to the regulator, the ultimate goal is to completely liberalize the currency market â&#x20AC;&#x201C; remove all restrictions on the currency market and the transition to a free capital flow, and this is expected to happen gradually with the improvement of macroeconomic conditions in Ukraine.

Ukraine's progress assessment: 45 out of 100 The progress was made in the implementation of certain directives during the assessment period, the rest remained unchanged. At the same time, the investment dynamics in the area deteriorated, which led to the lower score as compared to the previous one. The system of public procurement has been established both in legislative and technical terms. The work of the structures responsible for reform is focused on improving certain aspects. The system as such is being successfully improved, but there are difficulties with the improvement of the laws. The Verkhovna Rada failed to vote for the draft law which envisaged the introduction of simplified procedures for belowthreshold procurements and a number of other innovations to facilitate business operations. The problem of the data sharing on consumer gas and electricity supply process between the NEURC and the State Statistics Service, which is necessary for the latter to comply with the provisions of Directive 2008/92/EC, has been solved. The State Statistics Service has adopted an order authorizing it to start collecting statistical information on its own. Since the last assessment, no significant changes have been made to the Law "On State Aid to Business Entities", except for harmonization with other legislation. Accordingly, the Energy Community Secretariat maintains its current position that the law does not fully comply with the EU legislation and should be further approximated. It is worth noting that the fundamental legislative framework has already been developed and the AMCU fulfills its responsibilities. Completion of the NEURC reform means completion of forming the NRA composition from among members selected through competition. However, the second competition for 2 vacancies remains blocked by a court decision within the framework of the claims of two applicants not admitted to the competition. Compared to the previous period, the scope of investment in the sector decreased. The extractive industry shows dwindling growth pace of capital investments (+16%, to 25,990.2 mln UAH) and outflow of foreign investments (-4% to 1,726.7 mln USD). The area of coke and petroleum products show the decrease of capital investments (-19%, to 502.9 mln UAH), while foreign ones grew (+7%, to 259.7 mln USD). The fuel supply industry demonstrates equally adverse dynamics of capital investments (-10%, to 15,849.5 mln UAH), and foreign investments (-6%, to 740.1 mln USD).

Methodology ANNEX 1. List of Articles of the Association Agreement and Acquis Subject to Monitoring The group Electricity and Nuclear Safety 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 The group Environment and Renewable Energy Sources conducts monitoring and assessment of the implementation of the following acquis:

Methodology 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 Article 263, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Methodology 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 radiation; domestic

Glossary 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 nondiscriminatory 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 energy and other resources. Suppliers must also produce technical documentation to include: a general description of

Glossary 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. 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

Glossary 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 nonroad 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 201

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: â&#x20AC;˘ equal access to all organizations possessing necessary resources for prospecting, exploring for and producing hydrocarbons; â&#x20AC;˘ granting authorizations on the basis of objective, published criteria; â&#x20AC;˘ communication of all necessary information to all organizations participating in the established procedures.

201

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 nondiscriminatory 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.

Benchmarks ANNEX 3 Key indicators for assessing Ukraine’s progress in implementing the EU-Ukraine Association Agreement in the energy and environment sectors

GAS

Outcomes

Facts of non-compliance with EU acts, lack of implementation actions

Degree of transposition of EU legislation into Ukrainian legislation

Outputs, effects The number of cases concerning the settlement of disputes raised by the Secretariat of the Energy Community Number and level of regulatory legal acts adopted for the implementation of a specific directive/regulation203 Directive 2009/73/EC

Regulation (EC) No. 715/2009 Directive 2004/67/EC

202 203

Assessment (score) -10202

Assessment scale Initiated/none Initiated: -10 from the total points None: no changes 0 to 100 points 0: no regulatory acts have been drafted and approved 1–20: certain regulatory acts have been drafted, none approved, however 21–40: most regulatory acts have been drafted, some of them approved 41–60: all regulatory acts have been drafted, some of them approved 61–80: most regulatory acts have been drafted and approved

1 case is opened (https://energy-community.org/legal/cases/2017/case0217UE.html), another 2 registered Includes laws and by-laws, as well as their action plans, report on supply security, etc.; does not include policy products, i.e. RLA drafting plans, implantation plans, etc.

Specific weight 1

Benchmarks 81–100: all regulatory acts have been drafted and approved

Degree of independence of TSOs/storage facilities

Implementation of the plan for restructuring NJSC Naftogaz of Ukraine with the purpose of separating natural gas transportation and storage (injection, selection) activities

Degree of independence of DSOs 4

204

Number of documented violations by operators, which are discriminatory204

35 Implementation suspended. The solutions on the unbundling model are discussed, but he CMU decision is not published. The respective braches in the Ukrtransgaz structure are created.

70205 Planned inspections: 2 of 11 operators

Total point — average for all directives under this section. 0: no independence in practice, full vertical integration 1–30: preparatory phase completed (p. 1–5, 8 of the plan) 31–50: regulatory acts drafted and approved (p. 6 of the plan) 51–70: assets transferred, TSO certified (p. 7, 9 of the plan) 71–90: gas storage facilities unbundled (p. 10–15 of the plan) 91–100: independence of both operators have been confirmed by a respective certificate and compliance reports to be prepared by the NEURC 0 to 100 points Point = share of violating operators in the total number of checked operators 0: 90–100%

According to the NEURC data on the results of state control measures, in particular data on the facts of granting preferences to any customer or gas supply company when concluding contracts on gas transportation by distribution pipelines, facts of direct or indirect perverting or counteraction to other gas supply enterprises in their natural gas supply activities, and other facts of abuse of a monopoly position. 205 Number of completed planned inspections – 2 DSOs and 2 PSO suppliers (http://www.nerc.gov.ua/?id=30255) prevent from making an objective assessment; likewise, formal reports of the GDN operators on the compliance program implementation do not provide for this assessment (http://www.nerc.gov.ua/?id=32189)

Benchmarks (extraordinary inspections of 6 operators are not taken into account) Degree of the market openness

Market share with unregulated prices or lack of restrictions under public service obligations

Indicators of market concentration in the retail market (number of players, their shares)207

49 (Naftogaz data: total consumed volume for 12 months of 2018. – 32.3 bln m3 (with nonbalance), unregulated – 14.5 bln3 + 1.3 bln m3 nonbalance206 N/A

Availability of distinctly regulated mechanisms of suppliers change 6

206

The real ability to choose between suppliers (a share of households that changed the supplier, per year 209 )

0 Expected data on the dynamics of supplier change, meanwhile, there are reports of considerable hindrances in the

1–20: 75–90% 21–40: 50–75% 41–60: 25–50% 61–80: 10–25% 81–100: 0–10% Score from 0 to 100 1 point = open market share

CR3 indicator assessment208 from 0 to 100 points 0: 95-100% 1-20: 85-95% 21-40: 70-85% 41-60: 60-70% 61-80: 50-60% 81-100: up to 50% Assessment of the so-called switching rate from 0 to 100 points 0: up to 0,5% 1-20: 0,5-1% 21-40: 1-4% 41-60: 4-6% 61-80: 6-8% 81-100: over 8%

http://www.naftogaz.com/www/3/nakweb.nsf/0/00B62B682AA8CA37C22583900050DAF0?OpenDocument&year=2019&month=01&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& NEURC monitoring data (will be available in future). 208 Sum of market shares of three major suppliers 209 NEURC monitoring data (will be available in future). 207

Benchmarks Level of dependence from import of gas and diversification

Shares of import in the structure of general consumption A share of each supplier in the structure of import

household segments210 (50+75)/2 = 82,5 75 (import-depend.: 21%, imported gas volume for 12 months of 2018 – 10.6 bln m3)211 90 (diversification: Min. 4 suppliers from the EU, all of the have the share of <30%)

210 211

Import dependence assessment — 0 to 100 points 0: full dependence (95–100%) 1–20: partial dependence (70–95%) 21–40: partial dependence (55– 70%) 41–60: partial dependence (25– 50%) 61–80: partial dependence (5–25%) 81–100: full independence (0–5%) Diversification assessment — 0 to 100 points 0: dependence on one monopoly supplier 1–20: share of alternative suppliers — below 30% 21–40: share of alternative suppliers (at least two) — 30% to 50% 41–60: share of alternative suppliers (at least three, with one or two of them having a share exceeding 30%) — 50% to 66% 61–80: share of alternative suppliers (at least four, with one or two of them having a share exceeding 30%) — 66% to 75%

http://www.naftogaz.com/www/3/nakweb.nsf/0/45EDADCEE96F5E66C225835F00618A1D?OpenDocument&year=2018&month=12&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& http://utg.ua/utg/media/news/2019/01/gts-results-for-2018.html

Benchmarks 81–100: at least four suppliers, all with a share of less than 30%

Influence of supply disruptions

State of settlements

212

Volume of gas shortage, created in case of supply disruptions, for the period of failures (in % of the total consumption) If available - duration of the emergency period (in days) Dynamics of current calculations of end users (except industrial ones) to supplying companies 212

100

No supply crises

12 (debts to Naftogaz as of 02.01.2019 – UAH 29 bln213), which is by 4% less than as of 03.07.2018 (UAH 30.1 bln214) + gas sale companies' liabilities - UAH 18.5 bln215, which is by 15% less than as of 03.07.2018 (UAH 21.7 bln216) Total score: 45217

Point = average (point for import dependence, point for diversification) 0 to 100 points 0: 65–100% 1–20: 20–65% 21–40: 15–20% 41–60: 10–15% 61–80: 5–10% 81–100: below 5% Trends in current settlements by end consumers (other than industrial) to supplying companies 0: less than 50% 1-20: 50-70% 21-40: 70-85% 41-60: 85-90% 61-80: 90-97% 81-100: 97-100%

Without taking into account the previous periods. http://www.naftogaz.com/www/3/nakweb.nsf/0/3C0009703C11D36BC225837700494062?OpenDocument&year=2019&month=01&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 214 http://www.naftogaz.com/www/3/nakweb.nsf/0/1D4F82ABC9B19F72C22582C0002FE883?OpenDocument&year=2018&month=07&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 215 http://www.naftogaz.com/www/3/nakweb.nsf/0/3C0009703C11D36BC225837700494062?OpenDocument&year=2019&month=01&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 216 http://www.naftogaz.com/www/3/nakweb.nsf/0/1D4F82ABC9B19F72C22582C0002FE883?OpenDocument&year=2018&month=07&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 217 Average, without indicators lacking initial data (N/A), considering weights of individual indicators. 213

Benchmarks - ELECTRICITY AND NUCLEAR SAFETY

Outcomes Facts of non-compliance with EU acts, absence of implementation actions

Outputs, effects The number of cases concerning the settlement of disputes raised by the Secretariat of the Energy Community

Assessment (score) -20

Assessment scale Initiated/none

Initiated: -10 from the total points On February 04, 2018 the EU Council of None: no changes Ministers adopted a decision 2018\02\ MCEnG on Ukraine's defaulting the Energy Community Treaty (Case ECS-I / 12) to the extent of free transboundary trade in electricity. Ukraine must take the necessary actions as promptly as possible Some other cases remain open ECS-8/15 (transboundary trade) in which there is a decision on violation and the time to remedy them to 01.07.2019) , ECS06/17 (unbundling of

Specific weight

Benchmarks the distribution system operator).218 Degree of transposition of EU legislation into Ukrainian legislation

Number and level of regulatory legal acts adopted for the implementation of a specific directive/regulation 219: Directive 2009/72/EC220

218

0 to 100 points 0: no regulatory acts have been drafted and Approved 80 In 2018 the Regulator had fulfilled the regulatory acts drafting and approval plan for the creation of the new market and opening retail electricity market. Thus, the following documents were adopted: Transmission System Code; Distribution System Code; Commercial Electricity Metering Code; Market rules; "Day-ahead" and intra-day market rules;

1–20: certain regulatory acts have been drafted, none approved, however 21–40: most regulatory acts have been drafted, some of them approved 41–60: all regulatory acts have been drafted, some of them approved 61–80: most regulatory acts have been drafted and approved 81–100: all regulatory acts have been drafted and approved Total point — average for all directives under this section.

https://www.energy-community.org/legal/decisions.html Including laws and secondary legislation, as well as action plans, security of supply reports etc.; excludes policy products, i.e. reports on drafting regulatory acts (RA), implementation plans etc. 220 Adoption of the Laws "On the Electricity Market" regarding the peculiarities of debt repayment for electricity generated in the wholesale electricity market. Adoption of the RAs for the creation of infrastructure market actors and the creation of a Coordination Center, the RAs regulating the functioning of the electricity market (Market rules, "Day ahead" market rules, etc.), regarding the definition of categories of vulnerable consumers and their support mechanisms, on the imposition of special obligations, on the regulated price calculation methodology, on the separation of activities for the distribution and supply of electric energy. 219

Benchmarks Retail electricity market rules. regulatory actss on the electricity supply quality, Procedure of taking decisions on the DSO release from obligations on separation and independence, Procedure of development and submission for approval of the distribution system development plans and investment programs of the distribution systems operators â&#x20AC;&#x201C; Procedure for approval of the construction and commissioning of the direct lines, Methodology of calculation tariffs for the services of the universal services supplier and Universal services supplier pricing procedure, Methodology of calculating tariffs for

Benchmarks the services of supplier of the last resort, Procedure of distribution tariffs setting from 2018 ІІІ q. 2018 and ІV q 2018; Methodological requirements on transferring the data of household and small non-household consumers to the USS. Regulations 714/2009/EC221

Directive 2005/89/ЕС

221

80 Procedure for collection and transfer of data on market functioning for disclosure at ENTSO-E transparency platform, Methodology (Procedure) of formation of the fee for accession to the distribution and transmission systems, regulation of the energy distribution

Adding RAs which determine the conditions for access to electricity networks (Electricity network codes), regarding the conditions of electricity export /import (see Rules for conducting electronic auctions on the distribution of the interstate grids transmission capacity).

Benchmarks Directive 2013/59/Euratom222 Directive 96/29/Euratom Directive 2003/122/Euratom

operators during the transitional period.

Directive 2006/117/Euratom223

30 Draft law No.5550-ะด224 dated 21.05.2018 (improved draft law No. 5550225 dated 16.12.2016) was not adopted/harmonization of the legislation to the provisions of Directive2013/59/Eurato m/. Draft law No. 6089226 /harmonization to the extent of RW classification system improvement for burial was not accepted.

222

Adoption of the Law of Ukraine "On Amending Certain Laws of Ukraine in the Field of Nuclear Energy Use", the CMU Resolution "On Amendments to the Regulation on the State Inspection of Nuclear Regulation of Ukraine Concerning the Handling of Materials Containing Radionuclides of Natural Origin, Medical Radiation, Training and Education on Nuclear and Radiation Safety, Calculation of Radiation Doses, etc. 223 Adoption of the resolution of the CMU "On Amendments to the Procedure for the Issue of Permits for the International Transportation of Radioactive Materials", RA on the Approval of Forms for the Harmonization of International Transportation of Radioactive Waste and Spent Nuclear Fuel, Granting or Refusing Approval, etc. 224 225 226

http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=60744 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61158

Benchmarks Draft Law No. 7471-ะด dated 21.05.2018 (improved draft law No. 7471 dated 29.12.2017) was not adopted /compliance to the international treaties and Conventions/. Developed227 draft CMU Resolution "On amendments to the Procedure of issuing permits on international transportations of radioactive materials.

Degree of dependence of the transmission system operator

Implementation of the process of separation of functions of electricity transmission and dispatching activities Change of corporate governance of Ukrenergo

227

http://www.snrc.gov.ua/nuclear/doccatalog/document?id=397222

60 The incorporation process of SE NEC "Ukrenergo" is extended Supervisory Board members are selected (appointed). The draft law is registered No. 8468, regarding the ownership right to the TSO property. Ukrenergo property is transferred to the Ministry of Finance

Score from 0 to 100 points 0: no unbundling 1-20: preparatory phase completed 21-40: regulatory actss were developed and approved 41-60: Unbundling is carried out 61-80: Certification of the operator is carried out 81-100: Independence is confirmed by the relevant NEURC control statements

Benchmarks Degree of distribution system operatorsâ&#x20AC;&#x2122; (oblenergo) independence

The number of documented violations by operators that are discriminatory (in accordance with licensing conditions for distribution and transmission of electric energy)228

Degree of the market openness

228

Market share with unregulated prices or lack of restrictions on under public service obligations

0 Distribution system operators (DSOs) started working separately from energy suppliers in 3-4 quarters of 2018. No separate inspections of DSOs were carried out. In total, 51 check was carried out (practically all oblenergos), and each inspection found the facts of violating the distribution conditions (payment for accession, access to networks, etc) 12 32 regulated tariff suppliers and 94 competitive suppliers. Share of nonregulated tariff suppliers in the total volume of the energy procured at WEM, was 12.3% in 2018229.

0 to 100 points Point = a share of operators committing violations among the total number 0: 90-100% 1-20: 75-90% 21-40: 50-75% 41-60: 25-50% 61-80: 10-25% 81-100: 0-10%

0 to 100 points Point = open market share

According to the NEURC data on the results of state control measures.Monitoring the implementation RLAs to separate the activities of distribution and supply of electricity, the compliance of licensees for electricity distribution and transmission. 229 Own calculations based on Energorynok data (http://er.gov.ua/doc.php?c=5).

Benchmarks

Indicators of market concentration in the retail market (number of players, their shares)230

Retail market will start functioning according to the rules from 01.01.2019 Ń&#x20AC; 85

Availability of clearly regulated mechanisms for the change of suppliers 6

Terms and conditions of trade, including trans-border one

230

NEURC monitoring data (will be available in future). Sum of market shares of 3 major suppliers. 232 NEURC monitoring data (will be available in future). 231

The real ability to choose between suppliers (a share of households that changed the supplier, per year 232 )

N/A

Non-discriminatory terms of import/export of electricity (customs rates, restrictions, auctions, etc.)

75 formally for the export, 0 for import

Decision-making on the procedure for consultations on issues of flow (transit) of electric energy

In the adjusted Forecast balance for 2018 the energy import was not envisaged, as the demand is covered by domestic generation.

CR3231 assessment from 0 to 100 points 0: 95-100% 1-20: 85-95% 21-40: 70-85% 41-60: 60-70% 61-80: 50-60% 81-100: up to 50% Switching rate assessment from 0 to 100 points 0: below 0,5% 1-20: 0,5-1% 21-40: 1-4% 41-60: 4-6% 61-80: 6-8% 81-100: over 8% 0 to 100 points (based on market monitoring)

Benchmarks Supply security

Creating a radiation monitoring and reporting system

233 234

Decision-making on the introduction of a state of emergency in the electricity industry, the UES of Ukraine, etc.

If available - duration of the emergency period (in days)

(<1) no

Adoption and implementation of the 10-year Development Plan of the UES of Ukraine Dynamics of the implementation of the relevant state target program (national action plan for reducing the risks of long-term irradiation by radon products)233

Plans are approved and updated in time 30

0 to 100 points

The amendments to the Law ÂŤOn Protection of People against Ionizing RadiationÂť, National Action Plan (state target program) on reducing risks of longterm radon exposure are not adopted yet. Total score: 26234

Creation of Database of Radon Radiationof Representative Population Groups, State System of Accounting and Control of Doses of Irradiation of Population of Ukraine. Average, without baseline indicators (N/A), with weight of individual indicators.

Benchmarks ENERGY EFFICIENCY AND SOCIAL ISSUES

Outcomes

Facts of non-compliance with EU acts, lack of implementation actions

Degree of transposition of EU legislation into Ukrainian legislation

Assessment (score) -

80 Directive 2010/30/EU235 80 236

Directive 2010/31/EU 2

55 Directive 2012/27/EU

235

Assessment scale

Specific weight

Initiated/none Initiated: -10 from the total points None: no changes 0 to 100 points (for Directive 2012/27/EU average weight =3) 0: no regulatory acts have been drafted and approved 1–20: certain regulatory acts have been drafted, none approved, however 21–40: most regulatory acts have been drafted, some of them approved 41–60: all regulatory acts have been drafted, some of them approved 61–80: most regulatory acts have been drafted and approved 81–100: all regulatory acts have been drafted and approved

Labelling and standard product information of the consumption of energy and other resources by energy-related products Establishing minimum requirements for energy efficiency of houses and their components; a national plan to increase the number of buildings with near-zero energy consumption; the application of minimum requirements for the energy efficiency of new buildings; energy certification; installation of independent certification control systems. 236

Benchmarks Total point â&#x20AC;&#x201D; average for all directives under this section.

The dynamics of increasing the efficiency of using energy at the national level (according to the National Action Plan for Increasing Energy Efficiency)

Percentage of energy saved through the implementation of energy efficiency measures

1 If available - the energy capacity of GDP

The amount of funds invested under energy efficiency increase programs

Amount of funds allocated or attracted to all available energy efficiency increase programs (e.g. â&#x20AC;&#x153;warm loansâ&#x20AC;?, the size of the Energy Efficiency Fund)

The dynamics of buildings with almost zero energy consumption

Number of buildings with almost zero energy consumption

The dynamics of the total area of heated and/or cooled buildings owned by its central government and occupied by them, which were repaired to meet at least the minimum energy efficiency requirements

% of the total area of energy modernized public institutions

The total score is average of all Directives, taking into account the weight of Directive 2012/27/EU Score from 0 to 100 __ according to the percentage of the plan implementation If not available - % of the economy energy consumption compared to the previous year Score from 0 to 100 __ according to the percentage of achievement of financing indicators implementation Calculated as average between the funding of "warm loans" programs and EEF operation (the EEF funds use is considered, if they are not used, that coefficient of 0.5 is applied) Score from 0 to 100 __ according to the percentage of achievement of indicators 0 to 100 points __ 0 for negative trend __ 100 for positive trend

Benchmarks The dynamics of equipping consumers and multi-apartment buildings with individual heat meters

Percentage of consumers equipped with heat meters

The number of cases and the total amount of fines imposed on claims for non-compliance with the implemented provisions on energy efficiency.

78 Equipment with heating energy meters in residential premises is 78.6%, in nonresidential 77.7%, average 78%. N/A

Score from 0 to 100 __ according to the percentage of the plan implementation 1

0 to 100 points __ taking into account % of achieving the expected indicators

Total score: 31237

ENVIRONMENT AND RENEWABLE ENERGY Outcomes

237

Outputs, effects

Facts of non-compliance with EU acts, lack of implementation actions

The number of cases concerning the settlement of disputes raised by the Secretariat of the Energy Community

Degree of transposition of EU legislation into Ukrainian legislation

Number and level of regulatory legal acts adopted for the implementation of a specific directive/regulation 238

Assessment (score)

-10 One case, regarding sulphur content

Assessment scale

Initiated/none Initiated: -10 from the total points None: no changes

0 to 100 points 0: no regulatory acts have been drafted and approved

Average, without baseline indicators (N/A), with weight of individual indicators. Including laws and secondary legislation, as well as action plans, security of supply reports etc.; excludes policy products, i.e. reports on drafting regulatory acts (RA), implementation plans etc. 238

Speci fic weig ht

Benchmarks (1) Directives 2011/92/EU, 2003/4/EU, 2003/35/EU (creation of environmental impact assessment system)

90 - Law of Ukraine “On Environmental Impact Assessment” is approved - three bylaws are adopted - The Government has amended the resolution on the establishment of the Interdepartmental Coordination Council on the implementation in Ukraine of the Convention on Environmental Impact Assessment in a Transboundary Context

(2) Directive 2001/42/EU (establishment of the strategic environmental assessment system)

60 -

The Law "On Strategic Environmental Assessment" was adopted. Draft Resolution of the Cabinet of Ministers of Ukraine "On Approval of the Procedure for Monitoring the Impact of the Implementation of the State Planning Document for the Environment, including for the Public Health"

1–20: certain regulatory acts have been drafted, none approved, however 21–40: most regulatory acts have been drafted, some of them approved 41–60: all regulatory acts have been drafted, some of them approved 61–80: most regulatory acts have been drafted and approved 81–100: all regulatory acts have been drafted and approved Total score — average for all directives under this section

Benchmarks

(3) Directive 2003/4/EU on public access to environmental information

Methodological recommendations for implementation of strategic environmental assessment of state planning documents

Draft Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine regarding Access to Environmental Information", is developed by the Working Group at the Ministry of Environment, but not published The Concept for the creation of the State Automated System "Open Environment" was approved. The Procedure for the implementation of state monitoring of water is approved

(4) Directive 2003/35/EC providing for public participation in respect of the drawing up of certain plans and

60 -

The Law on "Strategic Environmental

Benchmarks programmes relating to the environment

(5) Directive 2009/147/EC on the conservation of wild birds

Assessment" was adopted (taking into account most of the provisions on public engagement in the preparation of plans and programs) Draft Resolution of the Cabinet of Ministers of Ukraine "On Approval of the Procedure for Monitoring the Impact of the Implementation of the State Planning Document for the Environment, including for the Public Health" Methodical recommendations for implementation of strategic environmental assessment of state planning documents

25 -

The draft law "On the Emerald Network Areas" was published A number of normative legal acts in the field of nature protection and nature conservation areas that are not directly related to birds have been

Benchmarks

(6) Directive 2008/50/EC on ambient air quality and cleaner air for Europe

adopted, however, if adopted and properly applied, these will have a positive impact on the protection of birds The Law "On Amendments to Certain Legislative Acts of Ukraine on the Protection of Forests under the Framework Convention for the Protection and Sustainable Development of the Carpathians" was adopted (does not have a direct impact on the protection of birds, but will promote their protection)

15 -

CMU Resolution "Issues of Implementation of the Concept of Reforming the System of State Oversight (Control) in the Field of Environment" Action Plan on Implementation of the Concept for Reforming the System of State Oversight (Control) in the Field of Environment

Benchmarks (7) Directive 2010/75/EU on industrial emissions (integrated pollution prevention and control)

40 – -

(8) Directive 2009/28/EC on the promotion of the use of energy from renewable sources

National plan for emission reductions from large combustion plants Resolution of the Cabinet of Ministers of Ukraine "On Approval of the Action Plan for 2018 on the Implementation of the National Plan for Reducing Emissions from Large Combustion Plants" Draft Order of the CMU "On Approval of the Concept of Implementation of the State Industrial Pollution Policy"

90 -The draft law No. 8449-д, improving the auction system in the RES industry is adopted in the first reading

Application of the system of environmental impact assessment in practice

Availability of an electronic register of conducted EIAs

Score from 0 to 100

- From December 18, 2017 the Unified EIA Register started

0-20 – the Register is created 21-40 – contains minimal information

Benchmarks

operating, but still works in the test mode

41-100 – depending on completion of the provided information

Application of the system of strategic environmental assessment in practice

Conducting SEA at the national and local levels

20 – several SEA procedures are initiated

Score from 0 to 100

Progress in the creation of special protection areas (SPA) to protect birds

Number and sufficiency of SPAs proposed to be created

0 — none is being crated due to lack of special legislation

0 to 100 points depending on the number and sufficiency of SPAs proposed to be created

Access to environmental information in practice

Trends in the scope of the environment information available electronically

60 – the new version of the governmental open data portal data.gov.ua was created

0 to 100 points depending on the completeness of the contained information

Depending of the number and quality of SEAs

The old version of the portal (“Environment” section) contains 436 datasets. The new portal is functioning since August 8, 2018. The "Environment" section contains 7 datasets. The new portal does not entail transferring the information from the old portal.

Data portals on water resources, waste dumping sites, Unified EIA register are operational. 7

Reformed environmental monitoring system compliant with Directive 2008/50/EC on

The dynamics of the volume of environmental monitoring data that is available in electronic format

Not applicable in this period

0 to 100 points depending on the

Benchmarks ambient air quality and cleaner air for Europe Control over emissions from stationary sources, in particular emissions of sulphur dioxide 8

National Emission Reduction Plan for Large Combustion Plants is in place and being executed

Dynamics of emissions of pollutants from stationary sources into atmospheric air

Not applicable in this period, only annual statistics is available

Dynamics of emissions of sulphur dioxide from stationary sources into atmospheric air

Not applicable, statistics for 2018 is not available yet

The dynamics of emissions of pollutants by combustion plants is more than 50 MW

Not applicable in this period

Dynamics of investment volume in the modernization of energy facilities, aimed at reducing harm to them from the environment, in the construction of new facilities

Availability and state of application of accounting and monitoring techniques for the use of RES 10

completeness of the contained information

The dynamics of the amount and capacity of renewable energy facilities, as well as the volume and share of electricity produced by them in the structure of consumption, production and sales of bioethanol, biofuels (according to the National Plan indicators)

84 â&#x20AC;&#x201C; As for the end of year 2018 the capacity of RES facilities (except for big HPPs and HAPPs without taking into account the occupied territory of the AR of Crimea) was 2117.2 MW. In total, in 2018 there were 742.5 of MW of generating capacities, which exceeds the capacities commissioned in 2017 by 2.8

0 to 100 points depending on the trends in reducing emissions of pollutants from stationary sources into the ambient air 0 to 100 points depending on the trends in reducing emissions of sulphur dioxide from stationary sources into the ambient air 0 to 100 points depending on the trends in emissions of pollutants by combustion plants of over 50 MW 0 to 100 points __ taking into account % of achieving the expected financing indicators Total point â&#x20AC;&#x201C; average 0 to 100 points __ taking into account % of achieving the expected indicators set by the National Plan

Benchmarks

Programs and mechanisms for stimulating renewable energy, the amount of funds invested under these programs

Number of RES support schemes, assessment of implementation of the National Action Plan

times. Capacity of big HPPs and HAPPs is 5758 MW. Thus, the total MW capacity of 2018 was 7875.2 MW. According to the National Plan, at the end of 2018 the RES facilities capacity should have reached 9417 MW. 75 â&#x20AC;&#x201C; The reconstruction of the HPPs and HAPPs continues in accordance with the Hydropower Development Program of Ukraine until 2026. Foreign funds and institutions working in the field of renewable energy and energy efficiency provide funding for the industry in Ukraine (at the same time, it is worth noting that these funds are mostly not very extensive and tend to be targeted rather at technical support and training of Ukrainian experts. Domestic businesses, investment funds invest in the implementation of "green" projects in Ukraine, the draft law was adopted envisaging the introduction of a system of auctions and a gradual reduction of the feed-in tariff. Total score: 43239

239

Average, without baseline indicators (N/A), with weight of individual indicators.

0 to 100 points __ taking into account % of achieving the expected financing indicators

Benchmarks OIL

Outcomes

Outputs, effects

Assessmen Assessment scale Specific t (score) weight Facts of non-compliance with EU The number of cases concerning the settlement of disputes raised Initiated/none 1 acts, lack of implementation actions by the Secretariat of the Energy Community Initiated: -10 from the total points 1 None: no changes Degree of transposition of EU Number and level of regulatory legal acts adopted for the legislation into Ukrainian legislation implementation of a specific directive/regulation 240 Score from 0 to 100 points depending on the implementation Directive 2009/119/EC 2 47 1 level (81 regulatory act = 100). Total Direcitve 98/70/EC score - average Directive 98/70/EC Degree of readiness of the Number of regulatory legal acts adopted to implement Directive 3 regulatory legal framework for the 2009/119/EC formation of oil and oil products The degree of readiness of the Availability of technical facilities for the proper storage of oil infrastructure to create the and/or oil products required to comply with Directive 2009/119/EC 4 required supply of oil and/or oil products. Availability of minimum stocks of oil Volumes of oil and oil products reserves and oil products 5 Number of regulatory legal acts adopted pursuant to Transparency of granting subsoil for 6 Directive 94/22/EC, Articles 279 and 280 of the Association use Agreement (planned 21 â&#x20AC;&#x201C; 100 %)

240

N/A

Score from 0 to 100 points depending on the implementation level (7 regulatory acts = 100). Total score - average Score from 0 to 100 points depending on the existing storage capacities (the required fleet is 2.87 mln of cubic meters = 100) Score from 0 to 100 points depending on the ratio of the formed stock to the necessary one (2.0 mln tons = 100) Score from 0 to 100 depending on completion. Total score - average

Includes laws and regulations, as well as action plans, delivery safety reports, etc .; does not include policy products, i.e. plans for the preparation of RLAs, implementation plans, etc..

0,33

Benchmarks

Degree of readiness of regulatory legal base for implementation of 7 the quality and fuel safety assurance system The degree of coverage of the market by the oil products quality 8 and safety monitoring system

Number of oil and gas subsoil plots put up for open auctions according to the new procedure, annually (planned 55 â&#x20AC;&#x201C; 100 %) Number of oil and gas subsoil plots granted for use according to the new procedure, annually (planned 55 â&#x20AC;&#x201C; 100 %) Number of regulatory legal acts adopted pursuant to Directives 94/63/EC, 98/70/EC and 99/32/EC

0,33

0,50 17

Number of national standards adopted pursuant to Directives 94/63/EC, 98/70/EC and 99/32/ EC

Score from 0 to 100 depending on completion. Total score - average

0,50

The share of coverage by the oil products quality and safety monitoring system, which is adapted to European requirements, of oil products in circulation in Ukraine

N/A

Total score241:

Score from 0 to 100. 0: there is no monitoring system 1-100: depending on the share of the oil products market covered by the system

BUSINESS CLIMATE Outcomes Facts of non-compliance with EU acts, lack of implementation actions

241

Degree of transposition of EU legislation into Ukrainian legislation

Outputs, effects The number of cases concerning the settlement of disputes raised by the Secretariat of the Energy Community Number and level of regulatory legal acts adopted for the

Average, without baseline indicators (N/A), with weight of individual indicators.

Assessment (score) -5

Average.: 91,4

Assessment scale Initiated/none Initiated: -10 from the total points None: no changes 0 to 100 points

Specific weight 1

Benchmarks implementation of a specific directive/regulation 242: Directive 2014/25/ЄС

Directive 2009/72/ЄС and 2009/73/ЄС (in terms of requirements for the Regulator)

Directive 2008/92/EC

100

State aid to business entities

Competitive legislation Investment attractiveness of energy markets (dynamics)

Capital investmentsї243: A) mining industry (mining of stones and brown coal, crude oil and natural gas, metal ores and other minerals) B) production of coke and refined products C) electricity, gas, steam and air conditioning supply Direct foreign investments (share capital) in Ukraine: A) mining industry (mining of stones and brown coal, crude oil and natural gas, metal ores and other minerals)

242 243

100 Average: 3 А) 35 (117%) B) 0 (81%) C) 0 (90%)

А) 0 (96%) B) 9 (107%) C) 0 (94%) Average: 3

0: no RA have been drafted and approved 1–20: certain RA have been drafted, none approved, however 21–40: most RA have been drafted, some of them approved 41–60: all RA have been drafted, some of them approved 61–80: most RA have been drafted and approved 81–100: all RA have been drafted and approved Total point — average for all directives under this section. 0 to 100 points 0: <100% as compared to the previous period<100% 1-20: 100-110% 21-40: 110-120% 41-60: 120-130% 61-80: 130-150% 81-100: >151% Total point — average. 0 to 100 points 0: <100% as compared to the previous period<100%1-20: 100125% 21-40: 126-150% 41-60: 151-175%

Includes laws and regulations, as well as action plans, supply security reports, etc.; does not include policy products, i.e. plans for the preparation of RLAs, implementation plans, etc.. According to the State Statistics Service for January-September 2016

Benchmarks

Degree of overregulation

B) production of coke and refined products C) electricity, gas, steam and air conditioning supply The number and time for processing the necessary permits (in comparison with European legislation) for licensing or certification: A) activity in the electricity market B) activities in the gas market C) oil/gas extraction (the volume of the package of documents for obtaining a specific permit) The number and time for the processing of the required documents (in comparison with European legislation) for: A) Connection to gas networks (main and distributive) B) Connection to electric networks (main and distributive)

61-80: 176-200% 81-100: >200%

A) 5* 1 = 5 B) 6 * 1 = 6 Average: 5,5

Product of two parameters: • Difference in the number of procedures 1-2: more than by >6 3-4: more than by 4-5 5-6: more than by 2-3 7-8: more than by 1 9-10: the same as in Germany

Availability of publicly available information on procedures and requirements for licensing and connection 100 244

Share of published online procedures of applying for permits/licensing of the total number

Total point – average. 1 to 100 points, where 1 point — absolutely not over regulated environment largely compliant with the European standards, 100 — opposite.

• Difference in time necessary for connection (calendar days) 1-2: >45 days 3-4: <45 days 5-6: <21 days 7-8: <14 days 9-10: <7 days 0 to 100 points 1-20: <20% of the necessary information is available244 21-40: <40% is available 41-60: <60% is available 61-80: <80% is available

Benchmarks 81-100: <100% is available

Compliance with competitive rules

Operation of the AMCU in accordance with the EU regulations in cases of violations of the legislation on the protection of economic competition

n/a

The state aid system is brought into compliance 6

Functioning of the electronic register of state aid mechanisms in the energy markets (and related ones)

Total score: 45245

245

Average, excluding indicators without input data (N/A), including the specific weight of particular indicators.

0 to 100 points 0: The AMCU is not functional 1â&#x20AC;&#x201C;100: depending on the progress in implementing and enforcing the competitive legislation (taking into account the position in the Global Competitiveness Index in the category Effectiveness of antimonopoly policy, particular cases and precedents in the AMCUâ&#x20AC;&#x2122;s practice and investigation data) 0 to 100 points 0: the register has not been created 1â&#x20AC;&#x201C;100: the register has been created, the assessment depends on the completeness of information, update frequency, timeliness of updates