As a result of the Russian attacks on the energy infrastructure of Ukraine in March, the increase in electricity tariffs for the population became the subject of active discussions. Will residents really have to spend more as a result of these attacks and could rates increase as early as May?
Ukrainians have heard a range of views on the future level of electricity tariffs over the past two weeks, from claims that they need to be raised to a more cautious approach, saying the government is exploring different options.
There is little to inspire optimism among consumers. In June of last year, after the winter attacks, electricity prices almost doubled, and now the situation has become even more difficult. So far, it has not been possible to finally assess the damages, but they say that they amount to billions of dollars.
Various statements suggest that consumers are not only expected to cover costs, but also to rebuild infrastructure after missile attacks. However, experts note, it would be dishonest to say that Ukrainians will have to compensate for the consequences of Russian attacks at the expense of an increased tariff.
Energy expert of the Ukrainian Institute for the Future Andrian Prokip emphasizes that consumers pay for all costs, regardless of how it happens. If one does not pay, the other will.
On the other hand, the current accounts received by the population do not reflect the full costs of companies. Ukrainian consumers do not pay the real price because of the subsidy. Energoatom, Ukrhydroenergo and electricity exporters are donors of subsidies.
"However, problems arose with the sources of subsidies. It can be predicted that there will be no export in the existing conditions, and therefore this source will disappear. Ukrhydroenergo has lost part of its capacity, which leads to a decrease in production and profit. "Energoatom is still working, but it is planned to shut down the units for maintenance in the summer, and there will not be enough money for subsidies either," notes Prokip.
According to the director of energy programs of the Razumkov Center, Volodymyr Omelchenko, no tariff increase will be able to fully compensate for losses from missile attacks. It is necessary to review the principle of pricing, to ensure a market price to cover all the costs of companies, except for losses from attacks.
The idea is that those who can should pay. For those who cannot, there should be a market price and compensation from the budget in monetary form.
As for the economically reasonable price of electricity, experts consider it a difficult issue. According to Prokip, if the producer is Energoatom, it can be about 1 hryvnia to the current tariff of 2.64 hryvnias per kWh. Other producers can increase this price to UAH 8-9 per kWh, taking into account transmission, distribution and taxes.
"Of course, no one will raise tariffs to such a level. Usually, tariffs are increased only in extreme cases, when the situation becomes critical. This will reduce the burden on donors, simplify the problem of debt in the market, and all participants in the electricity supply chain will have the opportunity to receive more of their funds," the expert adds.
Andrian Prokip believes that it is difficult to predict the government's reaction, but they will probably look for options to avoid the burden on consumers. Perhaps they will again introduce differentiation depending on the real volume of consumption. At the same time, the expert warns that it is worth preparing for the fact that the enemy will intensify the information campaign regarding this problem, and in May it may become even more relevant, since this is a very socially sensitive issue.
Volodymyr Omelchenko believes that the price for non-household consumers can be considered an economically justified price for electricity, which currently hovers around 6 hryvnias per kWh, together with distribution and transmission tariffs.
"Rising tariffs is primarily a political issue, so it will not be decided by officials, but by the political elite," Omelchenko emphasized. "If this issue is not addressed now, the capacity deficit will become very large, and long scheduled outages may become the norm."
Energy expert Yuriy Korolchuk believes that an increase in the electricity tariff is likely in June-July. As for the specific amount, he points out that NKRECP has different ideas, and the average new tariff can be from 3.5 to 4 hryvnias per kWh.
As for the impact on inflation, economists say it will be difficult to track, although it will be there. Oleh Pendzyn notes that electricity prices for non-household consumers affect inflation indirectly, through the impact on the final price of goods or services that electricity consumers produce. Danylo Monin adds that although the increase in the electricity tariff is only a small part of inflation, it can lead to an increase in inflation by 1-2 percentage points when the price of electricity increases by 30%.
