This publication was prepared with the support of the European Union and the International Renaissance Foundation. The contents of this publication are the sole responsibility of NGO “DIXI GROUP”, as well as Civil Network “OPORA”, All-Ukrainian NGO “Energy Association of Ukraine”, Resource & Analysis Center “Society and Environment”, Association “European-Ukrainian Energy Agency”, and can under no circumstances be regarded as reflecting the position of the European Union and/or the International Renaissance Foundation.
The 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. www.enref.org
Executive Summary In the gas sector, experts note that September has seen no adopted decisions from either legislative or executive authorities. The government has only published several draft resolutions concerning gas prices for households. Ongoing conflicts remain between Naftogaz and district heating companies over unpaid gas, and between Naftogaz and the Ministry of Energy over the Naftogaz reform. Independent members of the Supervisory Board of Naftogaz have announced their resignation, and the Supervisory Board has thus lost its legal competence. Meanwhile, foreign traders have started using Ukrainian gas storage facilities. In the electricity sector, the Task Force notes that the Coordination Centre for Facilitating the Implementation of a New Electricity Market Model has started its work. Experts also point to such issues as the accumulation of coal reserves for the heating season and the beginning of not only anthracite coal shortages, but also a G-grade coal deficit. In the field of energy efficiency, experts note the publication by the government of the draft Law “On Energy Efficiency” and the draft CMU Resolution on changes in the monetization of subsidies for housing and utility services. At the same time, experts point to the somewhat closed character of the process of drafting documents, in particular of relevant regulations pursuant to the laws adopted in the summer. The progress in the area of environment is, in experts’ opinion, also rather little. The Ministry of Environment is working on regulations subordinate to the Law on Environmental Impact Assessment, while the Verkhovna Rada has failed to adopt the draft Law on Strategic Environmental Assessment in the second reading. At the same time, presentations have been held to introduce the drafts of Basic Principles (Strategy) of State Environmental Policy by 2030 and Low-Carbon Development Strategy by 2050. In the oil and oil products sector, experts raise concerns over the pace and quality of the implementation of Ukraine’s obligations. In particular, their concerns deal with Directive 98/70/EC relating to the quality of petrol and diesel fuels and Directive 94/63/EC on the control of emissions resulting from the storage of petrol. In the field of business climate, experts continue pointing to the delays in the start of the NEURC members’ rotation. According to experts’ estimations, this may lead to the loss of legal competence by the Commission and consequently slow down, among other things, the implementation of laws in the electricity market. In this situation, the process of financial support for independent regulatory authority looks slightly more optimistic. Experts also point to the draft Law on Ensuring Transparency in Extractive Industries being approved by the Verkhovna Rada committees.
Frequently used abbreviations: CcSUP – Complex (Consolidated) Safety Upgrade Programme for Power Units of Ukrainian Nuclear Power Plants CMU – Cabinet of Ministers of Ukraine CSNFSF – Central Spent Nuclear Fuel Storage Facility DHU – district heating utility ENTSO-E - European Network of Transmission System Operators for Electricity FEC Committee - Committee for the Fuel and Energy Complex, Nuclear Policy and Nuclear Safety GTS – gas transportation system KhNPP - Khmelnytskyi Nuclear Power Plant
LNG – liquefied natural gas MECI – Ministry of Energy and Coal Industry of Ukraine Naftogaz – National Joint-Stock Company Naftogaz of Ukraine NEURC – National Energy and Public Utilities Regulatory Commission SNRIU - State Nuclear Regulatory Inspectorate of Ukraine SSTC NRS - State Scientific and Technical Centre for Nuclear and Radiation Safety TPP – thermal power plant TSO – Transmission System Operator UES – United Energy System VRU – Verkhovna Rada of Ukraine
Gas The start of an active phase of the VRU’s work after its August holidays did not bring any changes in the gas reform sector. The MPs did not review any gas-related legislative acts. Meanwhile, the VRU registered several new draft laws, including, in particular, the draft law on the settlement of debts owed by heat supply and heat generating organisations. A similar situation was observed in September in the context of activity of the Cabinet of Ministers: it approved no legislative or regulatory acts relating to the gas sector. The draft government decisions and resolutions published in advance of the beginning of the heating season were mainly directed at solving the problem of setting gas prices for households and heat producers for this period. The reason behind such actions is the ongoing conflict between DHUs and Naftogaz over delays in payment by the DHUs for the gas sold to them. Due to the existence of the yet unrestructured debts owed by DHU enterprises, as of the beginning of October there are still heat producers with which Naftogaz has not signed natural gas supply agreements. The NEURC chairman Dmytro Vovk regards such situation with the provision of thermal power sector entities with gas as critical. In his related appeal to the Prime Minister, he urged all governmental authorities to consolidate their efforts to overcome the threat of disruption of the heating season1. Similarly, there remains an ongoing conflict between the Government and Naftogaz over the Naftogaz reform, particularly in the context of the unbundling of activities associated with gas transportation. Each party accuses the other party of dragging out the process and creating obstacles. For the first time ever, leading international traders have used Ukrainian underground gas storage facilities to store gas: under an order from Trafigura S.a.r.l. (Switzerland), Trafigura Ukraine LLC and MND (Czech Republic), in September Ukrtransgaz pumped about 3 mln cubic metres of natural gas into its gas storage facilities under the “customs warehouse” procedure 2. Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (Articles 338, 341, Annex XXVII of the Association Agreement) pursuant to Article 278 of the Association Agreement In September, the VRU registered four draft laws concerning development of the gas sector. One of the first draft laws registered in September was the Draft Law on Re-allocation of Guaranteed Revenues under Production Sharing Agreements (PSAs) between the state budget and local budgets (No. 70583). The Draft Law envisages amendments to the Budget Code of Ukraine according to which 70% of the share of products produced under PSAs (or its cash equivalent) that remain in state ownership must be allocated for the development of regions. This is supposed to facilitate a substantial increase in domestic gas production due to the local communities’ interest in the successful implementation of gas exploration and production projects. The second Draft Law (No. 70624) is also aimed at intensifying domestic production and also envisages amendments to the Budget Code, but in a different manner. Essentially, it provides for introduction of the so-called “subscription fee for oil and gas subsoil resources”, i.e. a new type of monthly payment for oil and gas bearing subsoil use, depending on the type of licence and the period of time since its issue and regardless of production volumes. This Draft Law is aimed at achieving more efficient use of existing fields (without
1
http://www.epravda.com.ua/news/2017/09/29/629620/ http://utg.ua/utg/media/news/2017/09/first-cubicmeter-into-gas-warehouse.html 3 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=62447 4 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62451 2
Gas stoppage), providing incentives for the development of new oil and gas bearing subsoil areas (drilling of new gas wells in licensed areas) and securing higher tax revenues to the state budget. The third Draft Law in this context (No. 70635) is intended to implement a comprehensive approach to the updated taxation model for the production industry: under this Draft Law, alongside the introduction of the “subscription fee for oil and gas subsoil resources�, provides, without changing the common rate of rental payments, for the introduction of incentive-based royalties (rent) rates for new gas production for a period of up to eight years (12% of the commodity product value for drilling gas wells with a depth of up to 5,000 m and 5% for drilling gas wells with a depth of over 5,000 m). And finally, Draft Law No. 70836 is aimed at resolving a totally different problem, namely at preventing further accumulation of debts owed by heat supply and heat generating organisations to the natural gas supplier. To this end, for the purpose of constraining further increase in penalty charges and preventing seizure of funds held in the debtors’ accounts, it is proposed to change the settlement date set by the law for payment of debts (No. 1730-VIII7) from 1 July 2016 to 1 January 2018. Amid the absence of any novelties in the gas sector, in September the Government neither approved any draft amendments nor even proposed its own draft amendments to the Regulation on Public Service Obligations (PSO) on Entities Operating in the Natural Gas Market to Secure General Public Interests (as approved by Resolution No. 1878), whose drawbacks had become the reason for the initiation of dispute settlement proceedings against Ukraine by the Energy Community Secretariat (Case ECS-2/17) and for multiple complaints from gas market players. According to natural gas market monitoring findings, the Antimonopoly Committee of Ukraine (AMCU) described it as the most urgent problem that Resolution No. 187 continued to apply in its current version and that the gas price for households and DHUs, which, according to the said Resolution had to be re-calculated and made public before 1 July of the current year, remained undetermined. On 11 September, the AMCU submitted proposals to the Government9 to settle this problematic situation in order to prevent the emergence of prerequisites for the formation of monopoly high prices both for natural gas and for thermal power considering that Naftogaz had features of an entity having a monopolistic market position. The AMCU proposed: i) to publish, as soon as possible, official information about the gas price for households and DHUs, effective from 1 October 2017; ii) to urgently consider amending the currently valid regulations to authorize heat producers to freely choose natural gas suppliers (domestic producers and importers) by entering into agreements directly with them (creation of an alternative to Naftogaz); iii) to consider the possibility of revising the methodology for calculating the natural gas price, which was then used by Naftogaz, so that instead of price calculation at the import parity level (with a tie-in to the cost of gas at the German NCG gas hub), the volumes of gas produced in Ukraine would be subject to the methodology for calculating the gas price at the level of its average cost at Ukrainian gas production enterprises without extra transportation costs and the GTS entry tariff. As if in response, Prime Minister Volodymyr Groysman announced that the Government had begun verifying the gas price formula for households10, while the Ministry of Energy and Coal Industry had proposed its own draft amendments to Resolution No. 187, which amendments, as reported by the media,11 had been reviewed
5
http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62452 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=62474 7 http://zakon2.rada.gov.ua/laws/show/1730-19 8 http://www.kmu.gov.ua/control/uk/cardnpd?docid=249865173 9 http://www.amc.gov.ua/amku/control/main/uk/publish/article/137200 10 http://www.pravda.com.ua/news/2017/09/16/7155343/ 11 https://economics.unian.ua/energetics/2132566-tsina-gazu-dlya-naselennya-minenergovugillya-proponue-vnesti-zmini-vpostanovu-kabminu.html 6
Gas and adopted at a meeting of the parliamentary FEC Committee. In fact, this Draft Law changes only the period serving as the basis for calculating the gas price at the import parity level, and not the price calculation methodology itself. According to the Ministry’s Press Service12, should the amendments proposed by the Ministry of Energy and Coal Industry be approved, “the gas price for the period of 1 October 2017 to 1 April 2018 will be calculated at UAH 5,223.0 per thousand cubic metres, exclusive of VAT, which is only 5.6% higher than the current price. The calculated price does not exceed the current price by 10%, so there are no grounds for revising this price for the heating season of 2017-2018”13. It should be noted that the draft amendments to Resolution No. 187, which were proposed by the Ministry of Energy and Coal Industry in September, were not the first ones. On 6 September, the Ministry’s official website published another draft amendment to the PSO Regulation14. It provides for clarification of provisions concerning the range of heat producers subject to requirements of the Regulation on Purchase of Natural Gas from Naftogaz, establishment of proper conditions binding Naftogaz to perform its obligations to this category of consumers, and authorization of Naftogaz to supply gas directly to household consumers and religious organisations15. At the same time, the draft amendment provides for a considerable expansion of the range of consumers at regulated prices, in particular to include heat producers for all consumer categories, and not only households or religious organizations, as well as co-generation entities, which does not really align with the course towards gradual liberalization of the gas market. Meanwhile, the Ministry of Energy and Coal Industry has not yet published information about the new gas price. As stated in the Protocol Decision of the Cabinet of Ministers dated 26 September (a copy of which has been published by the media16), the Government has decided to put off publication of the natural gas price at the import parity level for the period of 1 October 2017 to 31 March 2018 for an indefinite time. Therefore, starting from 1 October 2017 (and, most likely, throughout the entire heating season of 2017-201817), the current gas price (UAH 4,942 per thousand cubic metres) will continue to apply to Ukrainian households and DHU enterprises. However, despite the said decision of the Government and numerous statements made by its senior officials about there being no grounds for a rise in the gas price18, there also exists an alternative opinion. In September, the Ministry of Economic Development published another release of 19 major average forecast economic development indicators based on expert opinions given in the document entitled “Ukraine: Development Prospects. Consensus Forecast” for 2017-202020, according to which gas tariffs may grow by 12
Ibid. The current price of UAH 4,942 per thousand cubic metres (exclusive of VAT), effective under Resolution No. 187 since 1 April 2017, has not been changed. The statement made by the Press Service of the Ministry of Energy and Coal Industry, as quoted by the UNIAN news agency, says that the Ministry’s analysis of the re-calculation of this price on the basis of the currently effective provisions of Resolution No. 187 has demonstrated that as of 1 July 2017 the gas price had to amount to UAH 5,815.49 per thousand cubic metres (exclusive of VAT), which is 17.6% higher than the current price. 14 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245233425&cat_id=167475 15 Naftogaz has already established a new entity named Naftogaz of Ukraine Gas Supply Company LLC whose main line of business will be selling gas to households (http://biz.liga.net/ekonomika/tek/novosti/3711345-naftogaz-budet-prodavat-gaz-naseleniyusmi.htm) 16 https://ukranews.com/ua/news/521941-kabmin-ne-pidvyshhyv-cinu-na-gaz 17 At least this is what Deputy Prime Minister Pavlo Rozenko thinks as he refers to the fact that the State Budget of Ukraine for 2018 provides for the gas price at the level of 2017 (http://www.kmu.gov.ua/control/uk/publish/article?art_id=250315601) 18 Interview given by Prime Minister Volodymyr Groysman to Channel 5 on 24 July 2017 (https://www.youtube.com/watch?v=mGhLgar3qPY); statement made by Deputy Prime Minister Volodymyr Kistion on 15 September 2017 at the first meeting of the Coordination Centre for Facilitating the Implementation of a New Electricity Market (https://www.ukrinform.ua/rubric-economy/2305804-urad-ne-pidnimaitime-cinu-na-gaz-dla-naselenna-popri-zastorogi-mvfkistion.html); comment made by Energy and Coal Industry Minister Ihor Nasalyk on 2 October 2017 (http://www.kmu.gov.ua/control/uk/publish/article?art_id=250313163) 19 http://www.me.gov.ua/Documents/List?lang=uk-UA&tag=Konsensus-prognoz 20 file:///C:/Documents%20and%20Settings/user/%D0%9C%D0%BE%D0%B8%20%D0%B4%D0%BE%D0%BA%D1%83%D0%BC%D0% B5%D0%BD%D1%82%D1%8B/Anna/September/Consensus_2017_September_Ukr.pdf 13
Gas 20% already by the end of 2017, and on top of that, experts predict that they will continue to grow, in particular by 19% in 2018. It should be mentioned in this context that starting from 1 October, Naftogaz has already raised the gas price for industrial and other consumers21 who are not subject to the Regulation on Imposition of Public Service Obligations (PSO) on Entities Operating in the Natural Gas Market – by 3% as compared to the prices effective in September 2017. According to the new price list22, starting from 1 October 2017, the price for gas as a commodity (inclusive of VAT) will be as follows: for monthly gas consumption of up to 50,000 cubic metres inclusive, unregulated monthly consumption, and monthly consumption exceeding 50,000 cubic metres without prepayment – UAH 9,016.8 per thousand cubic metres; for monthly consumption exceeding 50,000 cubic metres with prepayment23 – UAH 8,164.8 per thousand cubic metres (the same price level of UAH 8,164.8 per thousand cubic metres, regardless of monthly consumption, is set for Naftogaz’s subsidiaries wholly-owned by the founding company).
Regulation (EU) No. 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No. 1775/2005 (Articles 338, 341, Annex XXVII of the Association Agreement) in accordance with Article 278 of the Association Agreement, trade-related issues (Articles 269-274 of the Association Agreement) The process of restructuring Naftogaz to unbundle its activities associated with natural gas transportation has come to a standstill. The government’s representatives attribute24 this to “the systemic failure by NJSC Naftogaz of Ukraine to transfer necessary assets, material, technical and other resources to secure effective operations of PJSC Mahistralni Gazoprovody Ukrainy (MGU)”, a newly created TSO. The Ministry of Energy and Coal Industry reports on the implementation of all measures envisaged by this plan developed by the Ministry with the participation of experts from the Energy Community Secretariat, except the following two: clause 5 of the Annex to the plan, which is the responsibility of Naftogaz, and clause 6 of this Annex. Naftogaz’s management and the Cabinet of Ministers disagree over the need to include underground storage facilities in the list of assets to be transferred to the new TSO. According to the Ministry of Energy and Coal Industry, pursuant to clause 5 (“detalization of the list of state-owned and company-owned assets to be transferred, subject to its further approval by MGU”), Naftogaz has submitted a list of assets which is different from the one approved by the Government’s Protocol Decision and which is not approved by the Energy Community Secretariat as required by clause 4 of Resolution No. 496 dated 1 July 2016. For this reason, the Ministry of Energy and Coal Industry cannot approve the list (comply with clause 6). In the government officials’ opinion, such actions of Naftogaz “actually sabotage compliance with Resolution No. 496” 25, and this may result in the disruption of the entire restructuring process. Since the described situation may result in Ukraine’s failure to comply with its obligations to the European community, the Cabinet of Ministers decided to investigate all circumstances of the process and instructed the Ministry of Energy and Coal Industry on 6 September to set up an interdepartmental commission. On the following day, as reported by the Ministry of Energy and Coal Industry, at a meeting of the Government’s Working Group for Naftogaz Reform, the Energy Community backed the Government’s plan for the transfer of assets, namely: gas pipelines, gas storage facilities and maintenance services, and thus
21
http://www.naftogaz.com/www/3/nakweb.nsf/0/3CF932C664A495D7C22581A600485F8D?OpenDocument&year=2017&month =09&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 22 http://www.naftogaz.com/files/Information/Naftogaz-gas-prices-ne-PSO-October-2017.pdf 23 Payment during the calendar month immediately preceding the month of gas supply 24 http://www.kmu.gov.ua/control/uk/publish/article?art_id=250247760&cat_id=244274160 25 Ibid.
Gas backed the complete integration of the GTS into MGU, as evidenced by an official statement made by Energy Community Secretariat Regional Coordinator Maksym Polishchuk26. On the other hand, Naftogaz’s Press Service informed27 that the company had not yet received the list of assets for transfer, and therefore, Naftogaz “was not aware of any approval or disapproval of this list by the Energy Community Secretariat”. Naftogaz’s decision to establish a branch of Ukrtransgaz with the TSO functions may be seen as the company’s prompt response to this chain of events. Ukrtransgaz disclosed the said decision through the information disclosure system of the National Securities and Stock Market Commission28. Tensions between Naftogaz and the Cabinet of Ministers were also fuelled by Naftogaz’s announcement of a tender for banking and investment services in connection with the unbundling and the engagement of a partner for GTS management29. The Ministry of Energy and Coal Industry negatively reacted to this and accused Naftogaz of a breach of the Law “On the Natural Gas Market” and usurpation of functions of the Cabinet of Ministers30. In accordance with Article 21 of the Law, drafting and approving the terms of a tender for engagement of GTS partners is the exclusive prerogative of the Government of Ukraine. A series of resignations by independent members of Naftogaz’s Supervisory Board only added fuel to the conflict situation. Both Charles Proctor, who resigned on 30 September, and the Supervisory Board’s last independent directors Paul Warwick and Marcus Richards, who announced their resignations on 19 September31, described the main reasons behind their resignations as the absence of the Cabinet’s proper support for the company’s corporate governance reform and interference in operations of Ukrtransgaz and Ukrgazvydobuvannya 32. Thus, Naftogaz’s Supervisory Board lost its legal competence from 1 October. According to Naftogaz CEO Andriy Kobolyev, suspension of its work can make it difficult to raise loans to buy gas and finance Naftogaz’s investment projects and may negatively affect the company’s positions at international courts 33. The attempt on 20 September to elect a new independent member of Naftogaz’s Supervisory Board, namely Ihor Mityukov nominated by the Government, failed because of the absence of a quorum34. Meanwhile, according to Janez Kopac, Director of the Energy Community Secretariat, some ill-considered actions of the Cabinet of Ministers jeopardize the future of Ukraine as a gas transit country. Thus, he thinks that fulfilment of the Government’s intention to include PJSC Mahistralni Gazoprovody Ukrainy in the list of state-owned properties not subject to privatization will make it impossible to raise foreign investments to support and develop the gas transportation system of Ukraine. Such was the subject of the letter 35 sent on 12 September by Janez Kopac to Deputy Prime Minister Volodymyr Kistion. Firstly, in this letter the Energy Community Secretariat warns Ukraine against adopting the respective Draft Law (No. 6778 36), the approval 26
http://www.unn.com.ua/uk/news/1686342-enerhetychne-spivtovarystvo-vystupylo-za-tsilisnist-hts-u-skladi-mhu--minenerhovuhillia http://biz.liga.net/ekonomika/tek/novosti/3708003-naftogaz-restrukturizatsiyu-kholdinga-zatyagivaet-minenergo.htm 28 http://www.epravda.com.ua/news/2017/10/2/629705/ 29 http://naftogaz.com/www/3/nakweb.nsf/0/F51CA80F5A47D4B7C2258191004266A1?OpenDocument&Highlight=0,%D1%96%D0 %BD%D0%B2%D0%B5%D1%81%D1%82%D0%B8%D1%86%D1%96%D0%B9%D0%BD%D0%BE%D0%B1%D0%B0%D0%BD%D0%BA%D1%96%D0%B2%D1%81%D1%8C%D0%BA%D0%B8%D1%85 30 https://ru-ru.facebook.com/minenergoua/ 31 http://www.naftogaz.com/www/3/nakweb.nsf/0/1CE95EBF8E257F61C22581A000551B08?OpenDocument&year=2017&month= 09&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 32 http://www.naftogaz.com/www/3/nakweb.nsf/0/AF6087CA9435890EC2258192004C2928?OpenDocument&year=2017&month= 09&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8&; https://www.epravda.com.ua/news/2017/09/20/629288/ 33 http://www.naftogaz.com/www/3/nakweb.nsf/0/4545DE6089F4521AC22581A1005A1603?OpenDocument&year=2017&month =09&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 34 http://www.epravda.com.ua/news/2017/09/20/629304/ 35 https://i.imgur.com/FeVCVRQ.jpg 36 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62363 27
Gas of which by the Government in the summer practically blocked the raising of foreign investments in the GTS. Secondly, this letter contains a warning against the wish “to retain control over transportation and storage assets in breach of Ukraine’s obligations under the Treaty establishing the Energy Community”, as stated in the letter. On 20 September, the 12th Gas Forum was held in Ljubljana under the auspices of the European Commission and the Energy Community37. The Forum underlined that more efforts are required to integrate the gas markets of EU Member States and Contracting Parties to the Treaty establishing the Energy Community. Progress hinges in particular on the swift implementation of EU gas network codes in the Energy Community as well as improving the transparency and harmonisation of gas interconnection tariffs. For the CESEC High Level Group Meeting on 28 September in Bucharest, the Energy Community Secretariat prepared a special report on the state of gas market integration in the Energy Community38, which provided an overview of the current status of implementation of the Third Energy Package. The report was presented at the meeting by Secretariat Director Janez Kopac. While noting the transparency of Ukrtransgaz’s capacity allocation process, the document points to the fact that gas distribution system operators, gas producers, direct consumers and gas storage facility operators do not have the right to re-sell their booked but unused capacities. The Energy Community reminded about the need to implement daily balancing and to solve the problem of reserving an undefined part of the storages for network balancing purposes.
Directive 2004/67/EU concerning measures to safeguard security of natural gas supply (Articles 338, 341, Annex XXVII of the Association Agreement), functioning of an “Early Warning Mechanism” (Annex XXVI to the Association Agreement), responding to emergency situations (Articles 275-276, 309, 314 of the Association Agreement) According to the Energy Community’s report on the progress of gas market integration, Ukraine has adopted the relevant secondary security of supply acts. Ukraine remains a reliable transit country of Russian gas to Europe. Based on the results for the first 9 months of 2017, Ukrtransgaz transited 70.4 bcm to European countries, which is 23.5% higher than the same period last year39. As of today, this is a record transit indicator, the highest for the last nine years. Ukrtransgaz successfully complies with the Government’s instructions concerning preparations for the heating season. According to the company’s most recent data 40, during the period of six months between the heating seasons Ukraine increased its gas reserves stored in underground gas storage facilities almost twofold. Thus, in the period from 22 March, when the lowest gas reserves stored were registered in 2017, to 2 October, 8.5 bcm of gas were injected into underground gas storage facilities, 44% higher than in 2016. As of 2 October, 16.4 bcm of gas41 were accumulated in stirage facilities. According to the Plan of Action for preparing the Fuel and Energy Complex for the autumn and winter season 2017/2018, as approved by the Cabinet of Ministers (Order No. 410-р dated 14 June 201742), Ukraine must accumulate 17 bcm of gas in its gas storage facilities by 1 November 2017.
37
https://www.energy-community.org/news/Energy-Community-News/2017/09/21.html https://www.energy-community.org/news/Energy-Community-News/2017/09/28.html 39 https://www.facebook.com/utg.ua/photos/a.229297467194177.1073741831.228224313968159/580794148711172/?type=3&th eater 40 http://utg.ua/utg/business-info/live.html 41 https://www.facebook.com/utg.ua/photos/a.229297467194177.1073741831.228224313968159/580794148711172/?type=3&theate r 42 http://zakon3.rada.gov.ua/laws/show/410-2017-%D1%80 38
Electricity and Nuclear Safety The Coordination Centre for Facilitating the Implementation of a New Electricity Market Model held its first meeting, where it approved its own procedural regulations, its schedule of meetings, the possibility to establish the Project Office, etc. NEC Ukrenergo received a new charter providing for the formation of its Supervisory Board with the participation of independent members. The NEURC continued publishing draft legislative and regulatory acts for creation of the electricity market, in particular on the licensing of business activities associated with electricity transmission. Accumulation of coal reserves for the heating season was one of the top issues, because in addition to the shortage of anthracite coal, there came a deficit of G-grade coal. On top of that, in late September there was a considerable underachievement of the coal reserves to be accumulated at storage facilities in accordance with the schedule approved by the MECI. Order No. 279 “On Approving the General Safety Regulations for Handling Radioactive Waste Before Their Burial” of August 1, 2017, entered into effect. NNEGC Energoatom and PJSC Turboatom signed documents with Westinghouse Electric Sweden AB for a five-year project to enhance the efficiency and capacity of the currently functioning power units at Ukrainian nuclear power stations. Directive 2009/72/EC of July 13, 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (Articles 269, Chapter 11, Section IV of the EU-Ukraine Association Agreement) On 4 September, the group of parliamentarians who call themselves “Eurooptimists”, led by Oleksiy Riabchyn, registered the Draft Law “On the Energy Ombudsman” (No. 7058). 43 The existence of such institution and the relevant law is envisaged by the Law “On the Electricity Market”. The concept of the Draft Law provides for the creation of an independent institution for protection of the interests of household and small business consumers with the functions of an alternative judicial authority. Review of this Draft Law by the FEC Committee is now pending. On 15 September, the Coordination Centre for Facilitating the Implementation of a New Electricity Market held its first meeting, where the following issues were considered: approval of the Procedural Rules of the Coordination Centre; review of the Consolidated Schedule and Plan of Action for Implementation of the New Market; formation of the Coordination Centre’s standing working group composed of representatives of international and European advisers with experience in energy sector reform (Project Office); and the current progress with measures to be taken by SE NEC Ukrenergo and SE Energorynok to implement the software required for the functioning of the new electricity market. The Schedule of the Coordination Centre’s meetings was also approved.44 The Chairperson of the Coordination Centre for Facilitating the Implementation of a New Electricity Market is Ukrainian Deputy Prime Minister Volodymyr Kistion, and its Co-Chairperson is Oleksandr Dombrovskyi, First Deputy Chairperson of the VRU Committee for the Fuel and Energy Complex, Nuclear Policy and Nuclear Safety.45 Following the creation of the TSO and the corporatization of NEC Ukrenergo, the MECI approved the company’s new charter on 12 September. The new charter provides for the formation of the Supervisory Board composed of seven members to be elected through a competitive procedure, with the election results to be approved by the MECI. Four of such members must meet the independence criteria. The new Supervisory Board will appoint the director of SE NEC Ukrenergo.46 It will also be authorized to approve the company’s financial plans and its strategic development plans.
43
http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=62448 http://www.er.gov.ua/ 45 http://kompek.rada.gov.ua/news/main_news/73227.html 46 https://ua.energy/media/pres-tsentr/pres-relizy/rozpochynayetsya-aktyvna-faza-reformy-korporatyvnogo-upravlinnyaukrenergo/ 44
Electricity and Nuclear Safety Regulation 714/2009/EC of July 13, 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation 1228/2003 (Articles 270, Chapter 11, Section IV of the EU-Ukraine Association Agreement) In September, SE NEC Ukrenergo held meetings and negotiations with State Production Association Belenergo (SPA Belenergo) and Republican Unitary Enterprise “Interregional Dispatching Office” (RUE IDO) (Republic of Belarus), following which the parties entered into agreements for provision of mutual emergency assistance in the mode of parallel operation of the energy systems of Ukraine and the Republic of Belarus.47 The agreements are to be approved by the NEURC.
Directive 2009/72/EC of July 13, 2009 concerning common rules for the internal market of electricity and repealing Directive 2003/54/EC (Articles 273, Chapter 11, Section IV of the EU-Ukraine Association Agreement) Financial discipline The NEURC has stepped up control over timely settlements between suppliers and SE Energorynok. On 14 September, it adopted Resolution No. 1116 amending the Sample Electricity Sale and Purchase Agreement between the wholesale electricity supplier (State Enterprise Energorynok) and a regulated tariff electricity supplier.48 The Draft Resolution was published back on 28 March 2017 and was subsequently discussed several times. Resolution No. 1116 binds SE Energorynok to impose penalty sanctions on entities delaying payments for purchased electricity. On 13 September, the MECI published the Draft Methodology for Calculating Payments for Reactive Power Flow. The Draft Methodology provides for “regulation of the calculation of payments for reactive power flow between an electricity supplier and non-household consumers to secure compensation for reactive power, reduce active power losses and secure necessary voltage levels in electricity networks in accordance with relevant regulatory standards”.49 Licensing terms In compliance with the schedule for drafting legal acts pursuant to the Law “On the Electricity Market”, the NEURC continued publishing draft resolutions defining licensing terms for the electricity market. Thus, on 28 September, the NEURC’s Draft Resolution “On Approving the Licensing Terms for Engagement in Business Activity Associated with Electricity Transmission”50 was published. In accordance with the Terms, a licensee must perform the functions of dispatcher (operational process) control of the UES of Ukraine and organize parallel operation with the energy systems of other countries, as well as perform the functions of the administrator of payments, the administrator of commercial accounting, etc.
Directive 2009/72/EC of July 13, 2009 concerning common rules for the internal market of electricity and repealing Directive 2003/54/EC (Articles 274, Chapter 11, Section IV of the EU-Ukraine Association Agreement) The VRU’s FEC Committee, jointly with the Ministry of Energy and Coal Industry of Ukraine, held a roundtable on: “New Energy Strategy of Ukraine: Investment Opportunities and Challenges”.
47
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Electricity and Nuclear Safety Article 338, Chapter 1, Section V of the EU-Ukraine Association Agreement. Agreements on Cooperation with International Financial Organisations On 6 September, SE NEC Ukrenergo and Kreditanstalt für Wiederaufbau (KfW, Germany) signed a number of financial agreements for grant funding from the Research and Consulting Foundation at the Federal Ministry for Economic Cooperation and Development of Germany (BMZ) to fund consulting services under projects implemented jointly with KfW. The funds will be used for projects intended to upgrade the equipment of substations, secure reliable operations of main electricity networks and energy supplies to consumers, as well as enhanced energy efficiency through reduction of technological losses in networks. In particular, one of the signed agreements provide for the provision of funding for services associated with monitoring the implementation of the project “Reconstruction of Substations in Eastern Ukraine”. 51 On 14 September, the Overseas Private Investment Corporation (OPIC) approved allocating nearly 250 mln dollars to support the development, construction and commissioning of the CSNFSF in Ukraine52.
Article 339, Chapter 1, Section V of the EU–Ukraine Association Agreement, Coal Market The heating season is going to begin very soon so an issue of accumulating a sufficient quantity of coal was high on the list of priorities. All in all, the coal-related situation is quite difficult as Ukraine experiences a deficit of not just the anthracite coal group, but also has a deficit of the gas group extracted in the territory of Ukraine due to changes in the structure of fuel consumption by the generation.53,54 Besides, according to the Ministry of Energy and Coal Industry (MECI), in January – August 2017 the steam and coke coal extraction in Ukraine declined by 9.2% (to 23.606 million tons) year on year. In particular, coal extraction at state-owned mines fell by 20% and amounted to just 3.1 million tons of coal over the eight months.55 Imports was a way to deal with this deficit. On September 13, Ukraine received the first supply (62 thousand tons56) of anthracite coal from the USA for “Tsentrenergo” PJSC TPPs.57 The fourth vessel carrying 75 thousand tons of anthracite arrived on September 1758 and the fifth vessel with 75 thousand tons of anthracite for DTEK TPP arrived from the South Africa on September 18. 59 The Vice Prime Minister V. Kistion stated that 2 – 2.2 million tons of gas grade coal and 1.8 million tons of anthracite must be accumulated at the warehouses by mid-October to successfully go through the heating season60. However, as of September 29 coal accumulation at the warehouses fell far behind the schedule approved by the MECI as of that date. In particular, coal stocks at the TPPs and CHPs warehouses amounted to 1.601 million tons: anthracite coal – 746.7 thousand tons (53.5% of the required level), gas group coal – 854.3 thousand tons (45.8% of the required level)61. Ukrenergo estimates that 14 million tons of steam coal, including 3.3 million tons of the anthracite group, is needed to successfully go through the heating season. This estimated amount of coal exceeds the last-year level by 2 million tons as it takes into account higher
51
https://ua.energy/media/pres-tsentr/pres-relizy/ukrenergo-zaluchyt-ekspertiv-dlya-rekonstruktsiyi-pidstantsij-za-svitovymystandartamy-yakosti/ 52 https://www.opic.gov/press-releases/2017/opic-board-directors-approves-315-million-financing-and-insurance-projectsemerging-markets-0 53 https://www.youtube.com/watch?v=2QGyxnrHzro 54 http://ua.interfax.com.ua/news/general/446524.html 55 https://economics.unian.ua/energetics/2147001-ukrajina-z-pochatku-roku-skorotila-vidobutok-vugillya-mayje-na-10.html 56 https://www.radiosvoboda.org/a/news/28732929.html 57 http://www.kmu.gov.ua/control/uk/publish/article?art_id=250266117&cat_id=244276429 58 https://economics.unian.ua/energetics/2139776-u-portu-yujniy-pochali-rozvantajennya-chetvertogo-balkera-z-vugillyam-zpar.html 59 https://www.ukrinform.ua/rubric-economy/2307980-pidgotovka-energosistemi-do-zimi-dtek-otrimav-patu-partiu-vugilla-zpar.html 60 https://economics.unian.ua/energetics/2024909-zapasi-antratsitovogo-vugillya-na-tes-zrosli-odrazu-na-7.html 61 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245241684&cat_id=245183254
Electricity and Nuclear Safety electricity consumption and planned decline in electricity generation by NPP.62 Therefore, coal supplies needed to go through the heating season is currently quite a serious issue. The “Methods of forming, estimating, and establishing tariffs of electricity and (or) thermal energy generated by combined heat and power plants, thermal power plants, and cogeneration plants” approved by Ordinance No. 991 of the National Energy and Utilities Regulatory Commission (NEURC) dated August 01, 2017 took effect on September 2963; it attaches the indicative price of coal to the average futures quotations defined according to data of the European Energy Exchange AG, the Coal Trader International published by Platts, the Argus Coal Daily International published by Argus Media Ltd., and takes into account its transportation costs. Besides, these methods take into consideration price adjustments according to the calorific capacity and quality characteristics.64
Article 342, Chapter 1, Section V of the EU–Ukraine Association Agreement, Cooperation in the Nuclear Area, Council Directive No. 2014/87/Euratom, Council Directive No. 2013/59/Euratom, Council Directive No. 2006/117/Euratom Order No. 279 of the State Nuclear Regulatory Inspectorate of Ukraine (SNRIU) “On approval of the General regulations on safety of radioactive waste treatment before it is buried” dated August 01, 2017 (registered by the Ministry of Justice on August 22, 2017, No. 1045/30913) took effect on September 12 as part of bringing the laws of Ukraine in line with the EU laws, reference safety levels of the Western European Nuclear Regulators Association (WENRA) and recommendations of the International Atomic Energy Agency (IAEA), and also to improve the laws and rules on nuclear and radioactive safety regulation.65 In order to work out concerted efforts in the process of responding to a national level radiologic event, on September 5 – 7 the representatives of the SNRIU, SAEZM (State Agency on Exclusion Zone Management)66, SES (State Emergency Service), “Energoatom” NNEC, the Secretariat of the Cabinet of Ministers of Ukraine, central and local governmental authorities of Ukraine and state agencies (enterprises), as well as experts of the State Department, the Defense Threat Reduction Agency and the Federal Emergency Management Agency of the USA participated in a joint Ukrainian – American command and control training on response to a national-level emergency involving a radioactive accident in a standalone subdivision “Zaporizhzhia NPP” of “Energoatom” NNEC, where they worked out 3 modules of a response scenario.67 In the course of implementing a pilot project titled the “Energy Bridge “Ukraine – European Union” (CMU Decree No. 671-r dated June 15, 2015) 68, on September 07, the Task Group in charge of the Project implementation (MECI Order No. 660 dated October 17, 2016) approved the draft Conclusions based on the results of analyzing the efficiency of the public and private partnership under the Project and forwarded it for approval to the Ministry of Economic Development69. Westinghouse Electric Sweden AB, Polenergia International S.à.r.l. and EDF Trading Limited are willing to participate in this Project implementation, which implies “Ukraine’s UES (United Energy Systems) integration with the European energy systems ENTSO-E; development of the infrastructure of interstate electrical networks; organization of the power release of power unit No. 2 of the KhNPP for transmitting electricity to the EU members; use of funds generated by exports of electricity produced by unit No. 2 of the KhNPP to the EU members to finance construction of power units No. 3 and No. 4 of the KhNPP.”
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https://economics.unian.ua/energetics/2127904-v-ukrenergo-pidrahuvali-skilki-vugillya-potribno-ukrajini-na-osinno-zimoviyperiod.html 63 http://zakon3.rada.gov.ua/laws/show/v0991874-17/card4#History 64 http://zakon3.rada.gov.ua/laws/show/v0991874-17 65 http://zakon3.rada.gov.ua/laws/show/z1045-17/card4#History 66 http://dazv.gov.ua/?start=9 67 http://www.snrc.gov.ua/nuclear/uk/publish/article/374173 68 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245233774&cat_id=35109 69 http://mpe.kmu.gov.ua/minugol/control/publish/article?art_id=245233966
Electricity and Nuclear Safety Furthermore, in September “Energoatom” NNEC and Westinghouse launched a pilot project aimed at increasing the capacity of the third unit of the YuUNPP. The project is to increase the installed capacity of the power unit by 10% (from 1,000 MW to 1,100 MW) and increase the installed capacity factor by 10% (from 74.5% to 85%). This project is a step forward to the future capacity and efficiency increase for the six units of different plants, which can compensate the capacities of the second power unit of the KhNPP when it becomes able to export electricity as part of implementing the “Energy Bridge “Ukraine – EU” project. 70 On September 11-15, the SSTC NRC (State Scientific and Technical Center for Nuclear and Radiation Safety) conducted a comprehensive inspection of compliance with the nuclear and radioactive security requirements, regulations, rules, and standards in operation of power units at the KhNPP. The inspection showed that nuclear and radioactive safety at the Khmelnytsky NPP (KhNPP) meets the relevtant requirements, regulations, and standards.71 During a month, measures under the CCSP (Complex (Consolidated) Safety Program) and post-Fukushima measures were taken at the Zaporizhzhia NPP (ZNPP). In particular, a permanent seismic monitoring network was created to help study the sources of ground movements, which will make it possible to estimate the earthquake resistance of buildings, facilities, and equipment of the ZNPP.72 Moreover, equipment of the new software and hardware package of the controlling safety system (the SHP of the CSS) produced by the “Impuls” Severodonetsk Research Association, which meets the regulatory requirements of Ukraine and the provisions of the IAEA safety guidelines, began to be adjusted in the fourth power unit. 73 On September 18, “Energoatom” NNEC and Westinghouse Electric Company signed a contract for supplies of an accident and post-accident monitoring system as well as a hydrogen concentration control system for units No. 3, No. 4, No. 5 and No. 6 of the ZNPP.74 At a meeting held on September 18, Minister I. Nasalyk and Thomas Gerassimos, Deputy Director General of the European Commission Energy Department, reached agreement to analyze, along with the European Regulator, possible areas of cooperation as regards stable supplies of nuclear fuel and reliability of the nuclear industrial sector of Ukraine.75 On September 28, “Energoatom” NNEC and “Turboatom” PJSC signed several documents with Westinghouse Electric Sweden AB, giving rise to a five-year project of improving efficiency and production capacities of the operating power units of Ukrainian nuclear power plants76: Participation Program between SC “Energoatom” NNEC and “Turboatom” PJSC for supplies of equipment to Ukraine’s NPP for an amount of about 100 million US dollars; Memorandum of Understanding between Westinghouse Electric Sweden AB and “Turboatom” PJSC for improving the efficiency of equipment operation and the capacity of the operating power units of Ukraine’s NPP for an amount of 100 million US dollars; Agreement between “Donbasenergo” PJSC and “Turboatom” PJSC for supplying turbine K-330-23.5 with a capacity of 330 MW to reconstruct unit 6A of the Sloviansk TPP for an amount of 317 million UAH.
70
https://economics.unian.ua/energetics/2152789-energoatom-i-westinghouse-pochali-realizatsiyu-pilotnogo-proektu-zpidvischennya-potujnosti-tretogo-bloku-yujno-ukrajinskoji-aes.html 71 http://www.energoatom.kiev.ua/ua/press/nngc/52989na_hmelnitckyi_aes_proyishla_nspektcyina_perevrka_dotrimannya_vimog_z_yaderno_ta_radatcyino_bezpeki/ 72 http://www.energoatom.kiev.ua/ua/press/nngc/52993-na_zaporzkyi_aes_stvoreno_postyinu_mereju_seyismomontoringu/ 73 http://www.energoatom.kiev.ua/ua/press/nngc/53005noviyi_programnotehnchniyi_kompleks_snvo_mpuls_pdvischit_bezpeku_chetvertogo_energobloku_zaes/ 74 http://www.energoatom.kiev.ua/ua/press/nngc/52995kompanya_westinghouse_postavit_na_zaporzku_aes_sistemi_vajliv_dlya_bezpeki/ 75 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245236534&cat_id=35109 76 http://www.kmu.gov.ua/control/publish/article?art_id=250305268
Energy Efficiency and Social Issues Important events took place in September in the area of energy efficiency and social security of utility services consumers, in particular, the draft Law “On Energy Efficiency” and the CMU decrees on amendments to the CMU legal acts (as regards monetization of utility services subsidies) were disclosed for public discussion. An analysis of these acts shows that the government goes in the right direction, even though work is just starting in both cases: the draft law will take long to be adopted and the monetization model chosen by the CMU is not full and final, although the government’s officials make it clear that these positive changes are not planned to progress in the near future. Furthermore, the State Agency for Energy Efficiency and Energy Saving continues actively working within its competence to provide informational support to all the interested parties in the area of energy efficiency, and the Reforms Support Office within the Ministry of Regional Development does a significant work to form bylaws for implementing the “energy efficiency package” laws adopted last summer. Unfortunately, this work is done in quite a confidential way and the public can learn about its progress solely from bilateral meetings with the representatives of this new agency. Directive 2012/27/EU on Energy Efficiency On September 18, 2017, the draft Law “On Energy Efficiency” was published on the website of the Ministry of Regional Development77 which was developed by the specialists of the State Agency for Energy Efficiency and Energy Saving and discussed with members of the public. A significant number of changes should be emphasized in the current text as compared to the previous version available for the public (as of March 2017). In particular, some terms are adjusted, the internal logic of the text is improved, obligations and powers of the local self-government bodies in the implementation of the state policy aimed at energy efficiency improvement are regulated. Less clarity and unambiguity as regards obligations to reduce the actual energy consumption level imposed on energy distribution and supply companies is the most important change: previously, a certain reduction level was stated to be a direct obligation binding upon the companies (as required by the relevant Directive), but now this level is just to be established and achieved by using political tools. Furthermore, the text of the relevant article of the draft law did not mention any methodology of monitoring and verifying achievement of the certain economy level, which questions the general efficiency of this approach. At the same time, Directive 2012/27/EU permits the state member to choose an alternative way of performing its obligations, namely the aforementioned political tools, providing that clear ambitious plans to reduce consumption are in place, which was preserved in the current draft as well. Cancellation of the obligatory “state expert evaluation of energy efficiency / energy saving” was another important innovation. The relevant article (article 21, now 23) of the draft document was strongly criticized at the phase of the draft law development and initial discussion because it does not implement any provision of European legislation and, at the same, creates new bureaucratic procedures of questionable usefulness. For this reason, this change must be considered constructive. Furthermore, just as before, the draft law provides for the main principles of the state energy efficiency policy; approaches to form a strategy of thermal insulation of residential and non-residential buildings; principles of thermal insulation of buildings hosting governmental authorities; the main energy efficiency measures in buildings and mechanisms of their financing; specifics of taking into account energy efficiency criteria for procurement of goods and services, acquisition and rental (lease) of buildings by the governmental authorities, local self-government bodies and legal entities, which meet the needs of the state or a territorial community; principles of an energy audit and energy management; requirements for the ecodesign of products associated with energy consumption; specifics of implementing intellectual accounting systems; rating of consumption of fuel and energy resources; popularization and stimulation of the energy efficiency level improvement among consumers; specifics of formation and implementation of the national energy efficiency action plans; energy efficiency stimulation in the area of electricity transmission and distribution, natural gas transportation and distribution; main energy service principles; procedure for 77
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Energy Efficiency and Social Issues conducting a state expert evaluation of energy efficiency; liability for violating energy efficiency laws. It should be noted that as a result of adopting Law of Ukraine No. 2119 “On Commercial Metering of Thermal Energy and Water Supply” this draft includes no metering-related provisions. Energy audits and energy management systems (Article 8) The Government’s decree to implement energy management systems at state-owned institutions has remained just a declaration for 6 months despite all the violations of the Regulations of the Cabinet of Ministers and its version is still unknown. However, providing that the draft decree does not fundamentally differ from the version made available to the public last spring, the progress of considering the energy efficiency draft law is a good signal for the process as well because the draft decree referred to this future law and relied on its provisions. However, on the Energy Efficiency Day held during the 13th Ukrainian Municipal Forum on September 20 in Odesa, the Head of the State Agency for Energy Efficiency and Energy Saving said that the Agency and the local authorities have already chosen almost 12 thousand potential energy service facilities, ESCO-investors can visit those facilities and choose the most promising ones for their work on the Agency’s website. He also called the representatives of the local authorities to implement the energy management system at stateowned institutions. This is a priority step, which will result in 10% - 20% energy consumption savings at the first phase without any additional investments78. In their turn, cities, which were the first to conduct regular energy audits, already report on serious savings of funds – over 1 billion UAH for the last three years.79 Metering (Article 9) The Ministry of Regional Development set up a task group for drafting bylaws aimed at implementing the Law “On Commercial Metering of Thermal Energy and Water Supply”. As a result of meetings of certain subgroups dedicated to the drafting of bylaws, a meeting of experts and representatives of the project office within the Ministry of Regional Development, directly participating in this law-making work, was held in the office of the Reanimation Reform Package. 20 acts in total have been identified so far: they must be developed and approved by different agencies as required by the adopted law. In particular, 5 documents were adopted by the NEURC; the Ministry of Regional Development is responsible for 12 acts; and 3 more acts are to be drafted by other agencies. In late September, all the 5 acts of the NEURC were made public on the Regulator’s website for public discussion; 7 draft methods the Ministry of Regional Development is responsible for will be soon finalized as well. After all the approvals, draft regulations of the relevant ministry will be published on the official website of the Ministry of Regional Development for public discussion, and by October 05, 2017 the NEURC accepts remarks and proposals for the draft acts on removal of funds from the thermal energy tariffs for the installation of devices for commercial metering of thermal energy and water supply according to the regulations, so that, after taking them into account, it could approve the relevant decrees by its decision. As is stated on the Commission’s official website, proposals and remarks are accepted by October 05, 2017. According to the officials of the Reforms Support Office within the Ministry of Regional Development, the general final deadline for this law-making work as set by Vice Premier G. Zubko expires in early February 2018. Besides, the Ministry of Regional Development disclosed the results of monitoring the socio-economic development of regions for January – June 201780. In particular, the document provides statistical data on equipment of apartment blocks with common heat meters, the level of which is 70.5% across Ukraine in general; leaders include Kyiv (95.2%), Mykolaiv Region (92.5%), Dnipropetrovsk Region (89%), Kherson Region (88.4%), Lviv Region (84.3%); the lowest indicators are recorded in the Ternopil Region (10.1%), Luhansk Region (15.8%), and Donetsk Region (38.7%). Promotion of energy efficiency improvement among consumers and other stakeholders (Articles 12, 17) The information policy pursued by the State Agency for Energy Efficiency and Energy Saving aims at promoting the state’s main objectives in implementing energy efficiency of the housing stock and state78
http://saee.gov.ua/uk/news/1972 http://ua-energy.org/uk/posts/kyiv-za-try-roky-dii-enerhomonitorynhu-zaoshchadyv-bilshe-1-mlrd-hryven 80 https://goo.gl/s1EKX2 79
Energy Efficiency and Social Issues owned buildings. Apart from visits to the regions by the top management of the Agency and seminars dedicated to energy management at state-owned institutions, cooperation with the representatives of donor organizations in providing technical support is developed as well. In particular, issues associated with attraction of investments in the implementation of energy service and energy efficiency projects at the municipal and national levels using the public and private partnership mechanism were discussed at a meeting of the officials and the Head of the UN Development Program Project “Elimination of barriers to facilitate investments in energy efficiency of public buildings in small and medium-sized towns of Ukraine by using the ESCO mechanism”81. Furthermore, the State Agency for Energy Efficiency and Energy Saving continues its direct informationrelated activities aimed at creating regular incentives to take energy efficiency measures in the industry, in particular on September 22, Agency’s Head S. Savchuk presented a concept of stimulating energy efficiency at industrial enterprises at a meeting of the Fuel and Energy Committee of the Verkhovna Rada (Supreme Council) of Ukraine82. Energy service market (Article 18) The national information base of potential ESCO facilities formed by the State Agency for Energy Efficiency and Energy Saving currently includes more than 11 thousand facilities and their dynamics considerably increase every month83. Besides, a list of energy service companies currently going through the phases of energy service introduction at the state-owned institutions of Ukraine has been published. The Agency has also developed a standard form with the main information on energy consumption of buildings occupied by state-owned institutions, completion and disclosure of which will make it possible to supply information on state-owned facilities needing energy efficiency measures to energy service providers84. National Energy Efficiency Fund, funding and technical support (Article 20) At the meeting of experts and representatives of the project office of the Ministry of Regional Development in the office of the Reanimation Reform Package, the latter emphasized that draft regulations aimed at implementing the Law “On the Energy Efficiency Fund” are being developed and will be soon presented for public discussion. Among other things, infographics of the algorithm of the Energy Efficiency Fund performance will be published by late September on the official website of the Ministry of Regional Development. According to the representatives of the Reforms Support Office, the most important documents at this phase include the charter of the Fund and regulations on its supervisory board: they have already been finalized and sent for approval to related agencies. Unfortunately, the developed draft regulations are again not available on the ministry’s official website, which is gross breach of the laws on organization of the law-making work of the central executive authorities. The Energy Efficiency Fund is just being created and the sole state financial tool for stimulating the population to take energy efficiency measures does not work due to the Government’s policy inconsistency, as a result of which citizens cannot receive from the state any refund for implementing energy efficiency measures at apartment blocks. The statistics of the State Agency for Energy Efficiency and Energy Saving point out to high demand for “warm loans” as about 1.7 billion UAH of irrecoverable state financial aid have been received by the program participants from the state budget since its launch to finance energy efficiency measures, from which the following was paid: ✓ 1.5 billion UAH: to individuals for thermal insulation of their individual homes; ✓ almost 110 million UAH: to individuals for installation of solid fuel boilers; ✓ 62.7 million UAH: to housing cooperatives for thermal insulation of apartment blocks. However, housing cooperatives and individuals have not been able to obtain consents to crediting at the authorized banks over several months because the state does not refund the costs of energy efficiency 81
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Energy Efficiency and Social Issues materials to co-owners. The planned scope of funding under the program has been used up. However, additional 100 million UAH can be used only by individuals as stipulated by the relevant draft decree, which is being approved by the central executive authorities. This is why the OPORA Civil Network asked government officials and members of parliament to continue the program in 2017 by dividing additional 100 million UAH not among individuals only, but among housing cooperatives as well85, and also asked public officials to prolong the program in the years to come86. In addition, a meeting between experts of different sectors and Ukraine’s Prime Minister V. Groysman was held on September 10, where the Government was asked to revise the scope of expenses for the “hot credit” program, amounting to just 400 million UAH in 201887.
Directive 2010/31/EU on energy efficiency of buildings The situation with the development and publication of draft laws and regulations aimed at implementing the Law “On Energy Efficiency of Buildings” is similar to that with other laws. The Ministry of Regional Development works on draft laws and regulations, but these drafts are not available for the public. The Law implies quite sophisticated technical bylaws, but they are developed behind closed doors, preventing specialists of the sector from participating in their development and giving proposals to their main developer. At a meeting of experts in the office of the Reanimation Package of Reforms, the advisor to G. Zubko, Vice Prime Minister of Ukraine, said that all the acts would be published and the public would have access to the versions of such drafts. Among other things, he said that 15 new laws and regulations were actively developed (or fundamentally remade), including 7 research and technical acts and 8 acts developed by the Ministry of Regional Development itself; they were said to be at different phases of readiness. According to the specialists directly involved in the work, the maximum deadline for readiness of all the acts is set for early February 2018. Unfortunately, draft laws and their conceptual visions have been out of public view for several months.
Social issues The draft Law “On the State Budget of Ukraine for 2018” published on the website of the Verkhovna Rada provides for housing subsidy expenditures of 55 billion UAH and 2.7 billion of benefits and subsidies for acquisition of solid fuel and furnace fuel. This figure is lower as compared to 2017 (61.2 billion UAH). Benefits and subsidies were not refunded throughout 2017 causing discontent among the population and requiring changes in the state budget. For this reason, this amount for the next year, given the current trends, is likely to be prematurely used up. However, an amount of just 800 million UAH is planned for energy efficiency and energy saving in 2018, questioning the government’s declared objectives on its way to energy independence and social security of the population. Experts say that the planned scope of expenditures on subsidies to the population is insufficient for the next year. Although it is best to delay refund to service providers for subsidy receivers for no longer than one month, in 2017 such delay reached up to seven months. In this situation, suppliers were to give all the collected funds to Naftogaz for used heat. The government does not refund providers of utility services for their expenditures on subsidy recipients, but they have to pay to Naftogaz all the same. Most enterprises use gas purchased from the state monopolist to heat water and generate heat. In a situation where subsidyrelated payments are delayed for half a year, all the collected funds are to be spent on gas. There can simply be no funds left for modernization and preparation for the heating season. 88
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Energy Efficiency and Social Issues An important step toward a well-grounded reform of the social security system can be the adoption of the draft decree of the CMU developed by the Ministry of Finance89. The proposed changes imply, first and foremost, monetization of subsidies at the level of providers of utility services. Such companies are supposed to open direct accounts at the State Treasury, to which funds must be transferred within the specified timeframes for services rendered to subsidy recipients. One of the most controversial aspects of the project is that funds not used by the provider for 5 days can be returned and that the Government considers this act adoption as performance of its monetization obligations. In fact, both external partners and nongovernmental expert organizations call and continue to insist that the reform be continued until actual monetary payments are received by end consumers of services in their accounts. This approach will ensure real incentives for reducing consumption and the cash resource for energy efficiency improvement steps.
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Environment and Renewable Energy Sources Implementation of the Association Agreement in September 2017 with respect to aspects subject to monitoring was not publicly carried out. The Ministry of Environment and Natural Resources develops bylaws to implement the recently adopted Law on the environmental impact assessment. The draft Law on strategic environmental assessment adopted in the first reading was put on the agenda of the Verkhovna Rada in September to be adopted in the second reading, but it was never considered. At last, the governmental authorities have started to practically use new approaches necessary for attracting investments in the renewable energy sector. The key ones include RAB tariff formation for thermal heat generation from RES and significant amendments to the Standard contract for purchase and sale of electricity generated from renewable sources. The other objectives of the document developed in cooperation with international financial institutions include considerable improvement of working conditions and better protection of investor rights in the national “green” energy market. Special attention is also paid to more active use of renewable sources of energy by the population, in particular as a result of increasing the “green” tariff, wind and solar power plants with a capacity of no more than 30 kW. The draft versions of the two important strategies were made public in September: if they are adopted, they will directly impact the implementation of Ukraine’s obligations under the Association Agreement. On September 12, the Minister of the Environment Ostap Semerak presented the updated Main Principles (Strategy) of the State Environmental Policy of Ukraine by 2030.90 The goals of the strategy include “development and improvement of environmental legislation and its implementation level, including bringing Ukrainian laws in line with European laws (acquis)”. From the perspective of implementation of environmental directives, it is interesting to know that several target indicators that will also reflect progress in implementation of the relevant directives have been included as well. In particular, the following indicators should be emphasized: number of state and local plans and programs subject to strategic environmental assessment (100% by 2030), the ratio of emissions of pollutants into the air to the 2015 level (less than 22.5% by 2030), total emissions of pollutants into the air from stationary sources conditionally brought to carbon dioxide by taking into account the relative aggression of the main pollutants (less than 15% by 2030), total emissions of pollutants into the air from movable sources conditionally brought to carbon dioxide by taking into account the relative aggression of the main pollutants (less than 30% by 2030), number of Ukrainian cities where average daily concentrations of the main pollutants into the air (nitrogen dioxide, formaldehyde, suspended substances, including PM10, PM2,5, carbon oxide, sulfur dioxide), as determined by random field studies and mathematic modeling methods, exceed the average daily maximum allowed concentrations (number of Ukrainian cities) (15 by 2030), zones and agglomerations with approved air quality improvement plans (100% by 2030).91 On September 26, 2017, the Minister of the Environment Ostap Semerak presented the first version of the draft Low Carbon Development Strategy of Ukraine by 2050. In particular, the Minister said “This document includes a long-term vision of the country’s economy transit to low carbon dioxide development. It implies reduction in emissions and increases in greenhouse gas absorption, introduction of environmentally-friendly production using “green” technology in all the sectors of the economy. A difficult path to the integration of the strategy principles in the national, regional, and local development strategies and systems still lies ahead”. Preliminary forecasts of experts stated in the Strategy show that greenhouse gas emissions can be reduced by 60-75% by 2050 as compared to emissions in 1990. In addition, the share of renewable energy in the electricity generation structure can grow to 35% in 2050. The share of coal TPPs will drop to 25% and the share of NPPs will decline by about 28%. Furthermore, the electrically-powered transport development will contribute to considerable reduction in energy consumption by the transport sector.92
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Environment and Renewable Energy Sources Directive 2009/29/EU on incentives to use energy generated by renewable sources, which amends and subsequently cancels Directives 2001/77/EU and 2003/30/EU (Article 338 of the Association Agreement) By its Decree No. 679 dated September 06, 201793 the government approved a procedure for RAB tariff formation as regards establishment of tariffs for thermal energy generated by renewable sources of energy. This document adoption will contribute to more active use of alternative sources of energy in heat generation to heat state-owned and housing stock facilities, natural gas consumption reduction and, as a result, optimization of the costs of centralized heating and hot water supply services. The new mechanism implies tariff establishment at the level of 90% of the tariff of thermal energy generated by using gas in a specific inhabited area. If this tariff is unavailable – at the level of 90% of the average weighted tariff applicable in the area. The Minister of Energy I. Nasalyk signed a memorandum of understanding for a common approach to the electricity market development, energy efficiency, and renewable energy as part of the Initiative to create a gas transportation network of the CESEC countries94. He said that intentions stated in the document are conformant to the provisions of the recently adopted Energy Strategy of Ukraine by 2035 “Safety, energy efficiency, competitiveness”. In the middle of the month, the NEURC approved amendments to the Standard contract for purchase and sale of electricity from renewable sources (PPA)95. The key changes are as follows: - PPA fixed duration: by September 01, 2030 (before amendments, the model PPA did not provide for its duration and was normally signed for a year and subsequently prolonged every year); - clear definition of force majeure; - possibility of transferring claims to protect creditors’ rights; - more options for investors in settling disputes; - concepts of the preliminary agreement execution (PPA can be entered into before building and commissioning a power plant). It should be noted that the document pursuing its main goal aimed at increasing the number of investors, improving their operation conditions, and borrowing cheaper capital was developed by the NEURC professionals in cooperation with international financial institutions such as the EBRD, the International Financial Corporation (IFC), and the Overseas Private Investment Corporation (OPIC). Against the background of these events, the NEURC chairman D. Vovk complained that this document has not been published by the “Governmental Portal” yet96, which is an obstacle for the development of RES and investments. The Commission’s officials also said that, in compliance with the Law “On the Electricity Market”, 10 out of 118 regulations bear on alternative energy: 3 of them have already been adopted, 1 will be adopted within 9 months, and 6 other regulations – within 12 months. The NEURC plans to publish them for discussion in November. At the same time, the NEURC increased “green” tariffs for private households. Ordinance No. 1186 dated September 29, 201797 significantly raised “green” tariffs of electricity generated by solar and wind installations of private households with a capacity of up to 30 kW. However, the State Agency for Energy Efficiency and Energy Saving developed a draft law on the launch of the bioethanol and biodiesel market98. This document proposes to create the guaranteed bioethanol and biodiesel market by determining the obligatory share of bio-components in the total volume of motor fuels sold in Ukraine. The draft law proposes to set the biodiesel share at a level of at least 2.7% with effect from 93
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Environment and Renewable Energy Sources July 01 next year, and that of bioethanol – at least 3.4% with effect from July 01, 2018 and 4.8% with effect from July 01, 2019. The document will be soon submitted for registration and voting in the parliament.
Oil During the reporting period, several officials expressed their concern that Ukraine falls behind the schedule of the Association Agreement implementation, in particular in the oil field. The pace and depth of transformations the country is going through do not correspond to its international commitments. Acceleration needs HR solutions sometimes. In particular, the Directive 94/22/EU implementation in Ukraine became more active after the new management of the State Service for Geology and Mineral Resources was appointed. Nine draft regulations aimed at improving transparency and simplifying activities associated with exploration and production of hydrocarbons were prepared within just a month. However, the quality of such changes is still low. First and foremost, the developed documents do not correspond to the key principles of the state regulatory policy. For this reason, most draft regulations come back to be improved. Despite the palliative statements of the government officials, independent experts are more and more concerned with delayed implementation in Ukraine of Directive 98/70/EC relating to the quality of petrol and diesel fuels and Directive 94/63/EC on the control of volatile organic compound (VOC) emissions resulting from the storage of petrol. Directive 2009/119/ЄС on committing the EU member states to maintain the minimum stocks of crude oil and/or petroleum products (Article 338 UA) As of October 05, 2017, the State Reserve Agency of Ukraine did not set the date of a round-table meeting where the first achievements of the European and Ukrainian experts under the EU technical support project “Assistance to Ukraine in the process of implementing energy reforms according to the country’s international commitments” 99, pertinent to the implementation of Directive 2009/119/EU, will be presented. The Head of the State Reserve Agency of Ukraine believes that the base for formation of oil reserves in Ukraine must rely on “Naftorezerv” State Enterprise, on “transit to the second and third phase of creation” as stated on April 19, 2017 100. “Huge work” was carried out to “consolidate [the oil] companies and organizations into a single legal entity, which will bring their performance to a new quality level”. The next step of creating “Naftorezerv” SC will be formation of its Supervisory Board, financial, economic, and legal analysis of the companies making part of the State Reserve Agency of Ukraine by Baker Tilly Ukraine. However, despite these intentions, on September 18, 2017, the Ministry of Regional Development asked the State Reserve Agency to “stop creating … oil holdings, supervisory boards, reorganizing enterprises, institutions, and organization of the state reserve system … without approval of the First Vice Prime Minister of Ukraine (Letter No. 2715-10/29122-03). However, the State Reserve Agency drafted an updated plan of implementation of Directive 2009/119/EU to replace the current one101, the deadlines for executing most of tasks of which have already expired. According to this document102, the Cabinet of Ministers is proposed that the State Reserve Agency should be responsible for “organization of works and execution of measures of the plan” instead of the Ministry of Energy and Coal Industry and the following timeframes should be postponed: – adoption of a regulation of the Cabinet of Ministers on the model of minimum reserves of oil and petroleum products – from December 2015 to December 2017; – adoption of the Law “On minimum reserves of oil and petroleum products” – from December 2016 to December 2017; – implementation of all the organizational measures stipulated by the plan – after the Law “On minimum reserves of oil and petroleum products” takes effect. Although the new plan was not approved as of October 05, 2017, the official website of the State Reserve Agency provides that the agency is “the main driver in the implementation of a reform on formation of strategic reserves of oil and petroleum products” 103. Despite this, “the selection of a model of formation of strategic reserves of oil and petroleum products” was made public among “further measures of the Ministry of Energy and Coal Industry” (p. 3104), presented on September 15, 2017. Therefore, the Ministry of Energy
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Oil and Coal Industry keeps on considering it to be responsible for the implementation of Directive 2009/119/EU in Ukraine. Directive 2009/28/EU on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC On September 22, 2017, at a meeting dedicated to processing working initiatives to amend certain laws in the field of production of certain liquid biological fuel types that was held at the VES Committee of the Verkhovna Rada105, the State Agency for Energy Efficiency and Energy Saving presented again the draft law “On amendments to certain laws of Ukraine on the development of production of liquid biological fuel types” previously rejected by the Ministry of Energy and Coal Industry, the Ministry of Regional Development, and the State Regulatory Service106. It provides that petroleum products sold in the customs territory of Ukraine must include bioethanol and biodiesel, and introduces administrative liability for failure to meet this requirement. Officials of the State Agency for Energy Efficiency and Energy Saving state that these steps aim at implementing Directive 2009/28/EU, although consumers in the EU member states are guaranteed to be supplied with traditional petroleum products for non-adapted motor vehicles. In addition, forced addition of bio-components under a threat of punishment discriminates both the market players and 60% of Ukrainian car owners, whose motor vehicles are not adapted to mixture fuel. It should be noted that the requirements of this draft law are in conflict with article 18-3 of the Commercial Code of Ukraine, which does not allow the governmental authorities to “engage in activities eliminating competition or unreasonably helping certain competitors in their business activities” and fall under the effect of article 166-3 of the Administrative Offences Code of Ukraine since they limit “production of certain types of goods so as to limit competition”; limit “rights of entrepreneurs to acquire and sell goods”; “set “bans or limitations with respect to specific entrepreneurs or groups of entrepreneurs”. Despite these remarks, the State Agency for Energy Efficiency and Energy Saving keeps on insisting that this document needs to be adopted as this draft law bearing the same title is included in the Government Priority Action Plan for 2017 (clause 187 of section I107). Directive 99/32/EU on sulfur reduction in certain types of liquid fuel and amendments to Directive 93/12/EU as amended by Regulation (EU) 1882/2003 and Directive 2005/33/EU In order to comply with the requirements of Directive 99/32/EU as regards the competent authority definition, on February 11, 20167 the Ministry of Energy and Coal Industry published the draft Government Decree “On amendments to Decrees of the Cabinet of Ministers of Ukraine No. 573 dated June 01, 2011 and No. 927 dated August 01, 2013” 108. This draft document attributes automotive gasoline, diesel, ship, and boiler fuels to the area of responsibility of the State Service for Food Safety and Consumer Protection as a state market supervision agency. Although this draft decree was rejected by Decision No. 604 of the State Regulatory Service dated December 29, 2016 due to failure to meet the key principles of the state regulatory policy109, it is not reworked as it is discharged. Despite all this, the draft document is deemed “developed in 2017” in the presentation of the Ministry of Energy and Coal Industry made public at the Ukrainian Petroleum Market 2017 conference (p. 2110). Directive 98/70/EC relating to the quality of petrol and diesel fuels and amending Directive 93/12/EU as amended by Directives 2000/71/EC, 2003/17/EC, and 2009/30/EC and Regulation (EU) 1882/2003 (Appendix XXX, articles 360-363, 365, 366 UA) According to the Implementation Plan of the Directive 98/70/EC (articles 7 and 8; clause 1.3), the Ministry of Energy and Coal Industry undertook to provide, starting from December 2015, reports on the system of monitoring the quality and safety of petroleum products in Ukraine111. However, as of September 05, 2017, 105
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Oil no document was made available. Only the draft decree of the Cabinet of Ministers “On amendments to Decrees of the Cabinet of Ministers No. 573 dated June 01, 2011 and No. 927 dated August 01, 2013” was presented112. The document provides that conformity assessing agencies must report, twice a year, to the Ministry of Energy and Coal Industry on assessment of fuel conformity to the requirements of the Technical Regulation. Although the above document was rejected by Decision No. 604 of the State Regulatory Service dated December 29, 2016 due to failure to meet the key principles of the state regulatory policy 113, it is not reworked as it is discharged. However, “introduction of an efficient mechanism of independent control of the motor fuel quality by amending the Technical Regulation” and “introduction of mechanisms for monitoring processes in the market and analyzing them” are included “in further measures of the Ministry of Energy and Coal Industry” in its presentation dated September 15, 2017 (p. 3114). The national standardization program for 2017115 as amended on July 25, 2017 provides that 32 standards aimed at implementing Directive 98/70/EC are to be adopted by late 2017. As of October 05, 2017, three of them were approved, nine were being edited, fifteen were sent back to be reworked, and five began to be developed116. In general, only 13 out of 36 national standards on motor fuels and trial methods necessary to apply the Technical Regulation on the requirements for motor petrol, diesel, marine, and boiler fuels 117, are adopted. The Ministry of Energy and Coal Industry is to develop, by January 01, 2018, the Technical Regulation on the requirements for aviation petrol and fuels for jet engines, meeting the requirements of Directive 98/70/EU (clause 32 of the Technical Regulation Development Plan for 2017 118). However, these goals are unlikely to be achieved in full scope due to funding shortages. 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 (EU) 1882/2003 (Appendix ХХХ, articles 360-363, 365, 366 UA): The deadline for accomplishing tasks stipulated by clauses 1.1.1, 1.1.2 і 1.2.1 of the Directive 94/63/EC implementation plan expired in November 2016119. However, as of October 05, 2017, the Cabinet of Ministers did not approve the decree “On approval of the Technical Regulation on the requirements for storing, transporting, and transshipping fuel, relevant equipment and service stations”, and the Ministry of Environment did not approve recommendations on control over operations of service stations and did not take stock of petroleum storage depots. In order to comply with the requirements of Directive 94/63/EC as regards reduction in losses of petroleum products when they leak into/out of truck tanks and motor vehicles are refueled: – draft Appendix 2 to the national standardization program for 2017 provides for development of the national standard “Check methods. Calibrated truck tanks for petroleum products” (TK 63 120) by late 2017; – the first version of national standard DSTU EN 13617-1 “Service stations. Part 1. Requirements for safety of structures and operational characteristics of dosing pumps, fuel distribution devices, and remote pumping units” (TK 93121) was developed. At the same time, the Ministry of Energy and Coal Industry recognizes that its goal for the near future is to “develop a regulatory act on standards of natural losses of petroleum products as they are received, stored, released, and transported” (p. 3122). Directive 94/22/EC on the conditions and use of authorizations for the exploration, development and production of hydrocarbons (Annex XXVII, Articles 279, 280, 341 of the Association Agreement) 112
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Oil On September 4, 2017, during his speech at the meeting of the Conciliatory Council, O. Dombrovskyi, the First Deputy Chairman of the Verkhovna Rada FEC Committee, expressed his concern over the fact that Ukraine falls behind the schedule of the Association Agreement implementation. According to him, "the pace and depth of the transformations occurring in the country still do not comply with the obligations we have assumed"123. This refers, in particular, to a delay in the adoption of draft laws "On Amending Certain Ukrainian Laws to Simplify Certain Aspects of the Oil and Gas Industry" (No. 3096d 124) and "On Ensuring Transparency in Extractive Industries" (No. 6229 125), as well as "several dozens of bylaws"126. In May 2017, independent experts already drew the attention of the Government to a series of problems related to the implementation in Ukraine of Directive 94/22/EC. Such problems, in particular, are triggered by: – a delay in the adoption of the Subsoil Code of Ukraine; – the poor quality of preparation of draft regulatory acts in the sphere of subsoil use (since the beginning of 2017, the State Regulatory Service has not adopted a single document drafted by the State Service for Geology and Mineral Resources); – a delay in appointing the management of the State Service for Geology and Mineral Resources127 and the numerous scandals related to this, including the taking by force of the office of the agency's head 128; – an increase in the number of unscheduled inspections of extractive industry enterprises129, which inspections are accompanied by suspension of the licenses obtained by such enterprises130; – the councils blocking the issuance of authorizations for oil and gas fields development131; – continuing necessity to agree the works with 16 institutions and obtain 44 documents 132, and absence of approved forms for distributing risks between investors and state-owned enterprises in the course of implementation of joint projects133; – impossibility to conduct auctions for the selling special authorizations for subsoil use under the new rules due to the absence of applications properly reviewed by the State Service for Geology and Mineral Resources (during the year, only two auctions took place, where only one lot was sold that was related to the development of hydrocarbons134). Despite these warnings, the work on the implementation of Directive 94/22/EC was stepped up only after August 7, 2017, when the Minister of Environment Ostap Semerak pointed out that "the State Service for Geology and Mineral Resources requires a serious reform", which reform should not be limited to changes in the management of this body135. In August-September 2017, the State Service for Geology and Mineral Resources published nine draft regulatory acts in this field136. In particular, in order to accelerate the process of approval by local self-government bodies of granting of subsoil areas for use both through their sale at an auction and without the same, the State Service for Geology and Mineral Resources drafted amendments to Articles 26, 43 and 46 of the Law of Ukraine "On Local SelfGovernment in Ukraine", the draft of which was published on September 13, 2017. This document 137 proposes to:
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http://iportal.rada.gov.ua/news/Novyny/147839.html http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61900 125 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=61409 126 http://iportal.rada.gov.ua/news/Novyny/147839.html 127 http://www.geo.gov.ua/novyna/zavtra-vidbudetsya-konkurs-na-posadu-golovy-derzhgeonadr 128 https://www.ukrinform.ua/rubric-economics/2234887-kabinet-golovi-derzgeonadr-zahopili-nevidomi.html 129 http://www.geo.gov.ua/novyna/chornomornaftogaz-zaborguvalo-derzhavi-ponad-23-mln-grn-rentnoyi-platy 130 http://www.geo.gov.ua/novyna/derzhgeonadra-iniciyuvala-zustrich-z-predstavnykamy-profspilky-ukrnafty 131 http://kolo.news/category/situatsiyi/3399 132 http://w1.c1.rada.gov.ua/pls/zweb2/webproc34?id=&pf3511=61900&pf35401=424915 133 https://www.facebook.com/permalink.php?story_fbid=796726450503142&id=100004973836647 134 http://www.geo.gov.ua/novyna/vidbuvsya-aukcion-z-prodazhu-specdozvoliv-na-korystuvannya-nadramy 135 https://www.facebook.com/os.semerak?hc_ref=ARRoOvtdDCEbK6jt57sckggmvVU-6qn6YB9de9fzv3NMX5Z9qi_3eKOaLPtQYTCmUc&fref=nf&pnref=story 136 http://www.geo.gov.ua/proekti-regulyatornih-aktv 137 http://www.geo.gov.ua/sites/default/files/imce/proekt_zakonu.doc 124
Oil – refer to the exclusive competence of the village (settlement, city) council the resolution at its plenary meetings of issues related to the approval of granting for use of subsoil areas that contain mineral resources of local importance; – add to the list of questions to be resolved at the plenary meetings of the regional councils the approval of granting for use of subsoil areas that contain mineral resources of national importance; and, at the plenary meetings of district councils, mineral resources of local importance; – convene a session of the councils on issues related to the approval of granting for use of subsoil at least once a month. In order to eliminate the inconsistencies in the Procedure for granting special permits for subsoil use and the Procedure for holding auctions for selling special permits for subsoil use, based on the practice of their implementation, the State Service for Geology and Mineral Resources has developed amendments to Resolutions No. 594 and No. 615 of the Cabinet of Ministers dated May 30, 2011. This document 138 proposes, in particular, to: – exclude the program of works on subsoil areas from the auction documentation package that is submitted together with the application for obtaining a special subsoil use permit; – to increase the term for making a decision on the acceptance of an applicant for participation in the auctions or rejection of its application from 30 to 40 days from the moment of submission of such application, and the term for making a decision on granting a permit without conducting the auction – from 30 days to 30 business days; – establish the payment of a fee in the event of natural resources volume increase as a difference between the amount of the fee paid for the issuance of a permit and the amount of the fee which is calculated based on the natural resources volume in accordance with the new protocol of the State Commission of Ukraine for Mineral Reserves and according to the Methodology of Determining the Initial Tender Sale Price of a Special Permit for Subsoil Use. In order to ensure that the subsoil users have the possibility to apply the provisions of the UN Framework Classification of Fossil Energy and Mineral Reserves of 2009 (UNFC 2009), it is proposed to supplement the Classification of Mineral Reserves and Resources of the State Subsoil Fund 139 with Clause 28, which provides the possibility for a subsoil user to apply for its needs, based on its application, the international standards UNFC 2009, CRIRSCO, PRMS, etc 140. To bring Clauses 4 and 6 of the Methodology of determining the value of mineral reserves and resources of a field or subsoil area granted for use141 (goal and objectives for 203142) into compliance with UNFC 2009, it is proposed to143: – determine the value of reserves and resources of minerals based on the forecast price of the final (and not the first) commodity obtained from the main, jointly deposited and related minerals and components or products of their processing to be sold; – include calculations of the value of operational expenses in the formula, in particular, depreciation; – change the period of accruing a discount step according to current practices and procedures. In order to simplify economic activities in the area of subsurface use, the State Service for Geology and Mineral Resources proposed a new procedure for holding auctions to sell special permits for subsoil use: electronic auctions. The relevant draft decree of the government was published on September 13, 2017 144. Its authors believe that this document adoption will ensure “a fundamentally new level of quality of providing services to economic entities” as a result of: – guaranteeing accessibility, transparence, public sale of special permits; – reducing time for registration and participation in the auctions; – engaging more participants; – eliminating subjective factors; 138
http://www.geo.gov.ua/sites/default/files/imce/proekt_postanovy_0.doc http://zakon2.rada.gov.ua/laws/show/432-97-%D0%BF 140 http://www.geo.gov.ua/sites/default/files/imce/proekt_pkmu_pro_zminy_do_pkmu_no432_okk.doc 141 http://zakon3.rada.gov.ua/laws/show/1117-2004-%D0%BF 142 http://www.kmu.gov.ua/document/249935381/R0275.doc 143 http://www.geo.gov.ua/sites/default/files/imce/zmpostkmu1117_2017_ok.doc 144 http://www.geo.gov.ua/sites/default/files/imce/postanova_1.docx 139
Oil – minimizing contacts of applicants and officers of the Geology and Mineral Resources Service of Ukraine, which will minimize corruption risks. While the pilot project is implemented, Decree No. 594 of the Cabinet of Ministers of Ukraine “On approval of the Procedure for holding auctions to sell special permits for subsoil use” dated May 30, 2011, is proposed to be suspended. The approach proposed by the State Service for Geology and Mineral Resources was supported by the Ministry of Environment145. However, despite these achievements and a promise of acting head of the State Service for Geology and Mineral Resources to sell 140 “sleeping” licenses revealed as a result of an audit by the State Fiscal Service in 2015-2017146, areas put to auction to be held on December 31 include no lots relevant to exploration of hydrocarbons147. Besides, information from the speech delivered by the Minister of Environment at the meeting of the Task Group dedicated to reforms of relations in subsoil use held on September 17, 2017148, differs from that published on the website of the State Service for Geology and Mineral Resources. In particular, the draft decree of the Government prepared by this Service149 includes no clause that “a permit is issued (delivered) within 15 business days upon full payment of the fee for granting a special permit”, as said the Minister of Environment According to the Directive 94/22/EC Implementation Plan, the new version of the Subsoil Code of Ukraine was supposed to be approved by late 2016150. It is known that it is a task group of the Ministry of Environment that develops amendments151. However, according to the Cabinet of Ministers, as of September 20, 2017 the draft version of the updated Subsoil Code of Ukraine “was being developed by the interesting parties”152, since its submission to the Verkhovna Rada was postponed to Q4 2017 (target I, task 202 153). The preparation status of the Government draft decree on amendments to the Methods of determining the initial selling price of a special permit for subsoil use at auction154 (target І, task 204155) that must introduce a differential approach to assessment according to the intended purpose of works (exploration or extraction), a degree of accuracy of geological materials (resources or deposits) and type of deposits according to the extraction complexity (conventional or unconventional methods), is unknown. In its turn, the Ministry of Social Policy keeps on delaying development of the draft act of the Cabinet of Ministers of Ukraine on amendments to the Regulations on the procedure for allocating mining allotments156 as regards cancellation of a mining allotment for the oil and gas extraction industry (deadline: Q1 2017157). This document development is not planned by the State Labor Service158, which is governed by it in its activities (item 2 of the list159). Prolongation of special permits for subsoil use is not regulated, either. On August 11, 2017, the State Enforcement Service opened proceedings to execute the decision of the District Administrative Court of Ukraine, under which the State Service for Geology and Mineral Resources is to prolong for 20 years and issue to “Ukrnafta” PJSC licenses to the Zavodivske, Korzhivske and Koziivske fields. The company’s lawsuit concerning the Pivdenno-Panasivske, Anastasivske, Artiukhivske, Rybalske, Kachalivske, and Lypovodolynske fields was satisfied by the lower court. However, although “Ukrnafta” PJSC
145
http://www.geo.gov.ua/novyna/minpryrody-budut-spryyaty-derzhgeonadram-u-reformuvanni-galuzi http://www.geo.gov.ua/novyna/minpryrody-budut-spryyaty-derzhgeonadram-u-reformuvanni-galuzi 147 http://www.geo.gov.ua/novyna/derzhgeonadra-gotuyetsya-do-drugogo-aukcionu-2017-roku 148 http://www.geo.gov.ua/novyna/minpryrody-budut-spryyaty-derzhgeonadram-u-reformuvanni-galuzi 149 http://www.geo.gov.ua/sites/default/files/imce/proekt_postanovy_0.doc 150 http://www.kmu.gov.ua/document/248102926/Dir_94_22.pdf 151 https://menr.gov.ua/content/sklad-robochoi-grupi.html 152 http://www.drs.gov.ua/deregulation/plan-deregulyatsiyi-2016-2017-rr/ 153 http://www.kmu.gov.ua/document/249935381/R0275.doc 154 http://zakon0.rada.gov.ua/laws/show/1374-2004-%D0%BF 155 http://www.kmu.gov.ua/document/249935381/R0275.doc 156 http://zakon2.rada.gov.ua/laws/show/59-95-%D0%BF 157 http://zakon2.rada.gov.ua/laws/show/1079-2016-%D1%80/paran146#n146 158 http://dsp.gov.ua/plan-diialnosti-derzhavnoi-sluzhby-ukrainy-z-pytan-pratsi-z-pidhotovky-proektiv-rehuliatornykh-aktiv-na2017-rik-zi-zminamy-2/ 159 http://dsp.gov.ua/postanovy-kabinetu-ministriv-ukrainy/ 146
Oil stopped implementing several projects due to delays in prolongation of licenses 160 and a ruling was issued on September 06 to impose a penalty on the State Service for Geology and Mineral Resources due to failure to comply with the court decision161, on September 12, 2017 managers of the State Service for Geology and Mineral Resources just stated that it “would do its best to ensure the lawful, correct, and timely prolongation of all the necessary special permits to “Ukrnafta” PJSC”162. Article 280 of the AA regarding transparency in licensing hydrocarbon prospecting, exploration, or production The Ministry of Environment and Natural Resources keeps delaying with drafting the government's resolution "On Amendments to the Procedure for Use of Geological Information163 (Objective І, Task 206164), a document that is expected to introduce simplifies digital access to secondary geological information in real time (the deadline is the first quarter of 2017165). It is only known that during the September 17, 2017 meeting of the working group for reforming the relations in the field of subsoil use, the Minister of Environment raised the need to: – inventory the available geological information "scattered across various departments and research institutions"; – abandon the fee for the use of processed geological information; – create a single state register of geological information and ensure free access to it (except for the information with a special status)166. While according to the acting chairman of the State Service for Geology and Mineral Resources, his service has already submitted to the Ministry of Environment a package of proposals on simplifying access to geological information167, the draft of this document is not available on the website of the State Service for Geology and Mineral Resources. In addition, the technical regulations for the placement of geological information on electronic resources are yet to be developed and working groups to process the existing information yet r to be created. Article 338 of the AA regarding continuation and intensification of the cooperation in the energy field – In pursuance of Article 338 (a) on the implementation of energy strategies and policies, development/elaboration of relevant projections and scenarios, the government approved on August 18, 2017 the Energy Strategy of Ukraine until 2035 "Security, Energy Efficiency, Competitiveness."168 However, despite the optimism associated with the adoption of this document, which set development priorities and defined the target state of the oil sector of Ukraine to be achieved by 2035, it remains concerning that as of October 5, 2017 the text of the Energy Strategy was still not published on the government's web portal nor on the official website of the Verkhovna Rada.
160
https://www.ukrnafta.com/ukrnafta-skorotit-investiczijnu-programu-ta-personal https://www.ukrnafta.com/derzhavna-sluzhba-geologii-ta-nadr-prodovzhue-protipravno-ne-vikonuvati-rishennya-sudu 162 http://www.geo.gov.ua/novyna/derzhgeonadra-pracyuvatymut-z-ukrnaftoyu-tilky-za-propysanymy-zakonamy 163 http://zakon0.rada.gov.ua/laws/show/423-95-%D0%BF 164 http://www.kmu.gov.ua/document/249935381/R0275.doc 165 http://zakon2.rada.gov.ua/laws/show/1079-2016-%D1%80/paran146#n146 166 http://www.geo.gov.ua/novyna/minpryrody-budut-spryyaty-derzhgeonadram-u-reformuvanni-galuzi 167 Ibid. 168 http://zakon3.rada.gov.ua/laws/show/605-2017-%D1%80 161
Business climate The NEURC members rotation process has not yet started, and the situation is becoming critical. Due to the selection and approval procedure regulated by the NEURC law, the discharge of the next two members after November 26 will leave the Commission without a quorum, making it unable to pass any decision. According to the opinions of experts of the Business Climate Task Force, the NEURC will be incapacitated for approximately two months, which will slow down the implementation of the Electricity Market Law, where the Commission is among the key implementers, stall the issue of new licenses, approval of investment plans, etc. As compared with the renewal of its composition, the preparation of the NEURC’s budget for 2018 is nearing completion: the draft budget has already been approved by the VRU Budget Committee and this version will be included in the draft State Budget for 2018. The upcoming tasks include amending the Budget Code with regard to replenishment sources of the special budget to finance the NEURC activities and the need for MPs to support the draft State Budget for 2018 in the second reading. An MP has registered a draft law proposing that the concept of "local resources" and all its references be removed from the effective law on state aid to business entities. If the Verkhovna Rada supports the amendments, preconditions will be created for the distribution of state resources by local administrators at their own discretion, without the need to seek approval from the Antimonopoly Committee for state aid mechanisms to establish their admissibility for market competition. This will open up new opportunities for local officials to abuse their offices the regions, which will negatively affect the business climate. During the reporting period, several NEURC resolutions were approved in pursuance of the Law "On the NEURC." Also, some progress was registered in the VRU processing the draft law on ensuring transparency in extractive industries: in particular, the draft received the VRU sectoral committee's opinion on its compliance with the anti-corruption legislation. On the other hand, another draft law on improving the investment climate in Ukraine received a negative opinion from the VRU Main Research and Expert Unit, despite the support it receives from business community. Article 277 of the AA on regulator (provisions of Directives 2009/72/EC and 2009/73/EC regarding the regulatory authority) The competition commission for the selection of candidates for vacant seats in the NEURC has not been created, since neither the VRU nor the CMU nor the Presidential Administration have delegated their candidates. The reasons and consequences of this were discussed during the event titled "Two Months without the NEURC: What Should the Energy Sector Do?" organized by the Business Climate Task Force169. The VRU Budget Committee has approved the NEURC budget for 2018. The revised version of the budget was first considered at a September 7 meeting of the subcommittee on budget expenditures connected with the fuel and energy complex and energy efficiency170, and then approved at a meeting of the VRU Budget Committee on September 20, 2017.171 The draft Law No. 7059 "On the Energy Ombudsman"172 was registered in the Verkhovna Rada upon the government's submission, and eight MPs, five of whom are representatives of the Parliamentary Committee on the Fuel and Energy Complex, are going to make up a new institution whose mission will be out of court settlement of consumer disputes. The draft outlines the key principles of energy sector operation, specifies the limits of cooperation with other authorities and other entities, and defines activity lines.
169
http://ua-energy.org/uk/posts/eksperty-zaklykaiut-rozblokuvaty-reformu-nkrekp https://issuu.com/810136/docs/ab3f66ecf4ed1f 171 http://budget.rada.gov.ua/news/Diyalnist_Komit/Oper_inf_rishen_Komitetu/75274.html 172 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62448 170
Business climate The NEURC Resolution No. 1118 has been approved173, providing amendments to the standard agreement on the purchase and sale of electricity between the state enterprise Energorynok and a business entity producing electricity from alternative energy sources. The amendments set the agreement expiration date at January 1, 2030 and clearly define the concept of force majeure. Also, in order to protect the rights of investors, disputes are proposed to be referred to international arbitration for settlement, and for the protection of the rights of creditors, the document makes it possible to reassign the right of claim. The NEURC Resolution No. 1120 has been approved174, defining the procedure for the NEURC's monitoring of energy and utilities markets. The resolution provides monitoring methods, determines the indicators to be monitored, and separately defines the procedure for preparing the monitoring results and making them public. The monitoring results are required to be included in the NEURC annual report on its activities and published on a quarterly basis as information and analytical materials. The NEURC Resolution No. 1156 has been approved175, a document approving the minimum standards and requirements for the quality of consumer services and natural gas supply by gas distribution network operators and suppliers. Time limits have been set for all types of the services provided to consumers, and the operator or supplier will have to pay compensation for failure to meet them. In case of default, the NEURC may penalize the company, launch an unscheduled audit of its operations or deprive it of its business license. A draft resolution of the NEURC has been released for public discussion, a document determining the procedure for the NEURC's preparation and keeping of a register of the natural monopolies subject to the Commission's regulation176. It is proposed that this register be updated on the Regulator's website every month by the 7th and include such information as the United State Register code, name, and location of the business entity, type of its business and the territory where it is conducted. For the purposes of audit of its activities in 2017, the NEURC has handed over to the Energy Community Secretariat all the necessary materials177. At the same time, the delay in publishing NEURC resolutions remains a burning issue: as of September 26, 29 acts were expected publication, and 21 of them had already been waiting for 26 to 61 days 178. Also, following the requirements of the Law "On the NEURC," the Commission has published a list of companies to be audited and a schedule of on-site inspections for the fourth quarter of 2017. The above is approved by NEURC Resolution No.1145179.
Articles 255-256 on uncompetitive actions and mergers The Antimonopoly Committee of Ukraine released for public discussion to be completed by October 30 its revised draft order "On Approving the Standard Requirements for Vertically Concerted Actions of Economic Entities and Amending the Standard Requirements for Concerted Actions of Business Entities for General Exemption from the Obligation to Seek Prior Permission from the Bodies of the Antimonopoly Committee of Ukraine."180 The amendments are of refining character.
Articles 263-267 on state aid to business entities
173
http://www.nerc.gov.ua/?id=27543 http://www.nerc.gov.ua/?id=27609 175 http://www.nerc.gov.ua/?id=27699 176 http://www.nerc.gov.ua/index.php?news=6428 177 http://www.nerc.gov.ua/?news=6429 178 http://www.nerc.gov.ua/?news=6506 179 http://www.nerc.gov.ua/?id=27735 180 http://www.amc.gov.ua/amku/control/main/uk/publish/article/136711 174
Business climate In the Verkhovna Rada of Ukraine, the MP Y. Murayev registered the draft law No. 7073181 On Amendments to the Law of Ukraine "On State Aid to Business Entities" to Ensure Adherence to the Principles of Local SelfGovernment. The MP proposes to exclude the concept of "local resources" and all its references from the effective Law.
Article 379 regarding creation of favorable business conditions The draft Law No.6229 on Ensuring Transparency in Extractive Industries has received an opinion regarding the compliance with the requirements of anti-corruption legislation.182 According to the document, the draft law is free from any corruption provoking factors and as such, it meets the requirements of anti-corruption legislation. The VRU Main Research and Expert Unit has analyzed the draft Law No. 6540 "On Improving the Investment Climate in Ukraine" (for more details, see the June 2017 Monitoring Report 183) and recommended that the Verkhovna Rada declines it in its first reading184. This decision is substantiated by the fact that the inclusion in the draft various issues from different areas of regulation makes it very complicated for VRU committees to process it, and the name of the document fails to outline the legal regulation boundaries clearly enough. There are also some critical comments regarding the implementation of the laws of trusts. On the other hand, the VRU Committee on Economic Policy has approved the draft law and recommended that the Verkhovna Rada adopt it in the first reading as basic 185. The draft law has also received support from the business community, particularly from the European Business Association186, the American Chamber of Commerce in Ukraine187, the Union of Ukrainian Entrepreneurs188 just to name a few.
181
http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62464 http://w1.c1.rada.gov.ua/pls/zweb2/webproc34?id=&pf3511=61409&pf35401=432753 183 http://dixigroup.org/publications/energetichni-reformi-oglyad-chervnya-2017-roku/ 184 http://w1.c1.rada.gov.ua/pls/zweb2/webproc34?id=&pf3511=61950&pf35401=431938 185 http://komekpol.rada.gov.ua/uploads/documents/32272.pdf 186 https://www.facebook.com/EBA.Ukraine/posts/10155882267065362 187https://www.facebook.com/max.nefyodov/posts/1491824184199019?comment_id=1491847570863347&comment_tracking=% 7B%22tn%22%3A%22R1%22%7D 188https://www.facebook.com/max.nefyodov/posts/1491824184199019?comment_id=1491847570863347&comment_tracking=% 7B%22tn%22%3A%22R1%22%7D 182
Methodology ANNEX 1. List of Articles of the Association Agreement and Acquis Subject to Monitoring The group Electricity and Nuclear Security conducts monitoring and assessment of issues relating to electricity, nuclear energy, coal and elimination of consequences of the Chornobyl accident. Acquis concerned: Article 269, Chapter 11, Title IV, Directive 2009/72/EC (market-related provisions) Article 270, Chapter 11, Title IV, Regulation (EC) 714/2009 Article 271, Chapter 11, Title IV, Regulation (EC) 714/2009 Article 273, Chapter 11, Title IV, Regulation (EC) 714/2009, Directive 2009/72/EC Article 274, Chapter 11, Title IV, Regulation (EC) 714/2009, Directive 2009/72/EC Article 305, Chapter 14, Title IV, Directive 2009/72/EC, Directive 2005/89/EC Article 338, Chapter 1, Title V Article 338, Chapter 1, Title V, Cooperation Agreements with IFIs Article 339, Chapter 1, Title V, coal market Article 342, Chapter 1, Title V, cooperation in the nuclear safety sector, Council Directive 2014/87/Euratom, Council Directive 2013/59/Euratom, Council Directive 2006/117/Euratom Article 342, Chapter 1, Title V, cooperation in the nuclear safety sector The group Gas conducts monitoring and assessment of issues relating to gas, in particular, the implementation of the following acquis: Articles 338, 341, Directive 2009/73/EC (market-related provisions) Articles 338, 341, Regulation (EC) 715/2009 Articles 338, 341, Directive 2004/67/EC + Annex XXVI (Early Warning Mechanism), Articles 275 (Unauthorised taking of energy goods), 276 (Interruption), 309 and 314 (resolution of disputes) of the Association Agreement Chapter 11 Trade-related energy, in particular Articles 269 (Domestic regulated prices), 270 (Prohibition of dual pricing), 271 (Customs duties and quantitative restrictions), 272 (Transit) and 273–274 (Transport, cooperation on infrastructure) Annex XXVII to Chapter 1 Energy cooperation, including nuclear issues — Directive 94/22/EC + Articles 279– 280 (Access to and exercise of the activities of prospecting, exploring for and producing hydrocarbons, and licensing conditions) The group Energy Efficiency and Social Issues conducts monitoring and assessment of the implementation of the following acquis: Directive 2010/30/EU Directive 2010/31/EU Directive 2006/32/EU Directive 2012/27/EU Directive 2009/72/EC (social issues) Articles 338, 341 of the Association Agreement Directive 2009/73/EC (social issues) Articles 338, 341 of the Association Agreement
Methodology The group Environment and Renewable Energy Sources conducts monitoring and assessment of the implementation of the following acquis: Article 363, Directive 2011/92/EU Article 363, Directive 2001/42/EC Article 363, Directive 2003/42/EC Article 363, Directive 2003/35/EC Directives 85/337/EEC and 96/61/EC Article 363, Directive 2008/50/EC Article 363, Directive 1999/32/EC Article 363, Directive 94/63/EC Article 363, Directive 2009/147/EC Article 363, Directive 2010/75/EU Article 338, Directive 2009/28/EC The group Oil conducts monitoring and assessment of the implementation of the following acquis: Directive 2009/119/EC Directive 94/22/EC Directive 98/70/EC Articles 274, Chapter 11 of the Association Agreement (Trade-related energy) Articles 275, Chapter 11 of the Association Agreement (Trade-related energy) Articles 276, Chapter 11 of the Association Agreement (Trade-related energy) Articles 279, Chapter 11 of the Association Agreement (Trade-related energy) Articles 280, Chapter 11 of the Association Agreement (Trade-related energy) Article 337 of the Association Agreement Article 338 of the Association Agreement Article 339 of the Association Agreement The group Business Climate conducts monitoring and assessment of the implementation of the following acquis: Article 27, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 28, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 29, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 88, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 93, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Articles 97-102, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 104, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 105, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 107, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Articles 144-147, Chapter 7 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Chapter 8 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement and the Directive 2014/25/EU Article 255, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 256, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 258, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement
Methodology Article 263, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 267, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement Article 277, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement and Directives 2003/54/EC and 2003/55/EC (as regards the regulatory authority) Articles 355-359, Chapter 5, (Title V ECONOMIC AND SECTOR COOPERATION) of the Association Agreement and Directive 2008/92/EC Article 379, Chapter 10 (Title V ECONOMIC AND SECTOR COOPERATION) of the Association Agreement
Glossary ANNEX 2. Glossary (Short Description) of EU Acquis Subject to Implementation Monitoring
Gas Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC This Directive establishes common rules for the transmission, distribution, supply and storage of natural gas. The rules established by this Directive apply to natural gas, liquefied natural gas (LNG), biogas and gas from biomass. They aim to achieve a competitive, secure and environmentally sustainable market. This Directive provides for compulsory functional unbinding (supply) of transmission system operators (TSO) in vertically integrated undertakings. EU Member States must ensure that all customers are entitled to freely choose natural gas supplier and can easily change supplier within three weeks. At the same time, Member States may impose on suppliers selling gas to household customers obligations which may relate to security, including security of supply, regularity, quality and price of supplies, and environmental protection, including energy efficiency. Regulation (EU) No. 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No. 1775/2005 This Regulation sets common rules for access to gas transmission systems, LNG terminals and storage facilities taking into account the special characteristics of national and regional markets. The document establishes the procedures of certification of transmission system operators, as well as development, elaboration and implementation of network codes (with the participation of the European Network of Transmission System Operators — ENTSO — for Gas). The key objective of this Regulation is to ensure that all market participants have free and non-discriminatory access to relevant infrastructure and capacities. Directive 2004/67/EC concerning measures to safeguard security of natural gas supply This Directive establishes a common framework within which Member States must define general, transparent and non-discriminatory security of supply policies compatible with the requirements of a competitive market, and clarify the roles and responsibilities of market players (including in case of emergency). The government must specify minimum security of supply standards to be complied with by the market players, prepare and update national emergency measures, identify “vulnerable” customers and ensure adequate security for them, establish cooperation with the European Commission and other stakeholders.
Electricity and Nuclear Security Council Directive 2014/87/Euratom of 8 July 2014 amending Directive 2009/71/Euratom establishing a Community framework for the nuclear safety of nuclear installations The Directive establishes a European framework for maintaining and promoting consistent improvement of nuclear safety and its regulation. It sets an ambitious safety goal across the EU in order to prevent accidents and avoid radioactive waste from nuclear installations. The directive applies to any nuclear installation subject to licensing. Council Directive 2013/59/Euratom laying down basic safety standards for protection against the dangers arising from exposure to ionising radiation The Directive establishes basic safety standards to protect the health of employees, the general public, patients and others from the dangers of exposure to ionising radiation. The Directive applies to any planned, existing or emergency situation which involves a risk to ionising radiation. In particular, it applies to: the manufacture, production, processing, handling, disposal, use, storage, holding, transport, import to and export from the EU of radioactive material; the manufacture and operation of electrical equipment emitting ionising radiation; human activities withnatural radiation sources that could lead to a significant increase in the exposure of employees or the public, such as the exposure of space crew to cosmic 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 non-discriminatory policies on security of electricity supply compatible with the requirements of a competitive market for electricity. They must define and publish roles and responsibilities of competent authorities and all relevant market actors. In implementing these measures, Member States are supposed to guarantee continuity of electricity supplies, explore possibilities for cross-border cooperation in relation to security of electricity supply, reduce the long-term effects of the growth of electricity demand, ensure diversity in electricity generation, encourage energy efficiency and the adoption of new technologies, ensure regular renewal of networks. Council Directive 2006/117/Euratom on the supervision and control of shipments of radioactive waste and spent fuel This Directive authorizes transboundary shipments of spent fuel between Member States for processing, requires prior authorization for transboundary shipments of radioactive waste and spent fuel where such fuel is moved from, through the territory of or to a Member State. This Directive also requires return of radioactive waste to its country of origin.
Energy Efficiency and Social Issues Directive 2010/30/EU on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products This Directive regulates labelling of energy-related products and provision of information to consumers relating to their consumption of electric energy. It applies to products which have a direct or indirect impact on the consumption of energy and on other resources during use. Suppliers placing products on the market must ensure that such products are labelled with the information about their consumption of 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 non-road mobile machinery. Apart from the prohibition of marketing leaded petrol, Member States must conduct assessment of national consumption of fuel, adopt laws and identify the authorized body (bodies) to introduce the fuel quality monitoring system. Directive 94/63/EC on the control of volatile organic compound (VOC) emissions resulting from the storage of petrol and its distribution from terminals to service stations, as amended by Regulation No. 1882/2003 189 This Directive provides for the registration of all terminals used for storage, loading and unloading of oil products, installation of technical means allowing reduction of VOC emissions from mobile containers with oil products, bringing all stationary tanks, rail, marine and motor vehicle tanks and loading installations in compliance with the established requirements. Directive 94/22/EC on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons This Directive establishes common rules to ensure the non-discriminatory access to and pursuit of activities relating to the prospection, exploration and production of hydrocarbons. These objective and transparent rules reinforce integration of the internal energy market, encourage greater competition and improve security of supply. The document provides for the implementation of measures to ensure: • equal access to all organizations possessing necessary resources for prospecting, exploring for and producing hydrocarbons; • granting authorizations on the basis of objective, published criteria; • communication of all necessary information to all organizations participating in the established procedures.
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. 189
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Glossary Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC This Directive provides for the implementation of laws on the electricity market which defines electricity as an energy-related product to be purchased/sold/produced/transmitted/stored. These operations may be carried out by all licensed companies on equal competitive conditions. The state also ensures nondiscriminatory access to the existing infrastructure, creates favourable conditions for electricity producers to invest in new forms of energy (wind, solar, etc.). Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC This Directive provides for the implementation of laws on the gas market which defines gas as an energyrelated product to be purchased/sold/produced/transmitted/stored. These operations may be carried out by all licensed companies on equal competitive conditions. The state also ensures that companies have non-discriminatory access to distribution networks, gas storage facilities and cross-border gas pipelines. Directive 2008/92/Eะก concerning a Community procedure to improve the transparency of gas and electricity prices charged to industrial end-users Pursuant to that Directive, open, generally accessible mechanisms of providing information on the prices of energy resources for customers must be introduced. A particular methodology of collection of respective information about gas and electricity prices is to be drawn up and the respective mechanism to that effect is to be introduced.