From June 1, electricity prices for businesses in Ukraine will increase. The decision was made at a meeting of the National Commission for State Regulation of Energy and Utilities (NKREKP). According to the new marginal tariffs established on the day-ahead market (DAF) and intraday market (IDA), electricity prices will increase at different time intervals.
From 00:00 to 07:00 and from 11:00 to 17:00 the prices will be 5,600 UAH/MW•h, which is a significant increase compared to the previous 3,000 UAH/MW•h and 5,600 UAH/MW•h, respectively. From 07:00 to 11:00 and from 23:00 to 24:00, the tariff will be UAH 6,900/MWh (previously: UAH 5,600/MWh and UAH 3,000/MWh, respectively).
In the evening hours from 5:00 p.m. to 11:00 p.m., electricity prices will reach 9,000 hryvnias/MWh, compared to the previous 7,500 hryvnias/MWhh. The minimum marginal price remains at the level of UAH 10/MWh.
New limit prices have also been established on the balancing market: from 00:00 to 07:00 — 6,600 UAH/MWh, from 07:00 to 17:00 and from 23:00 to 24:00 — 8,250 UAH/MWh. and from 17:00 to 23:00 — 10,000 UAH/MWh. The minimum marginal price remains unchanged — 0.01 hryvnias/MWh.
The Cabinet of Ministers approved a new tariff for electricity for the population from June 1, 2023. It increased to UAH 2.64/kWh, which is an increase of 1.5-1.8 times compared to the previous one. Previously, from November 1, 2022 to May 31, 2023, the tariff for individual household consumers was UAH 1.44/kWh for consumption up to 250 kWh and UAH 1.68/kWh for consumption exceeding 250 kWh h (this rate has existed since 2017).
This increase was supposed to provide additional revenues to the budget in the amount of UAH 28-30 billion from the population to prepare for the 2023/2024 heating season. However, even the new tariff was not considered profitable. According to the plans, tariff increases for the population were also planned for 2024. Until the end of May 2024, the government did not change the tariff, as promised by Prime Minister Denys Shmyhal. In May 2024, the Cabinet of Ministers allocated UAH 7 billion 168 million for the purchase of equipment to restore the high-voltage network and improve the synchronization of the energy system of Ukraine and the EU, using grant funds from the World Bank.
Whether there will be an increased tariff for the population from June 1, 2024 has not yet been decided. According to the opinions expressed by the auditor Mykhailo Krapyvka, the increase is necessary to ensure the repair of energy facilities. Other experts believe that the increase in the price of electricity will force the population to save energy. However, it is emphasized that outreach can be ineffective, and only financial penalties can change consumer behavior. It is also noted that disconnection from electricity is easier for debtors than from other utilities, so it is usually paid for more disciplined.
Since the beginning of the full scale of the war, public debts for electricity have increased by 40%, amounting to about UAH 15 billion, according to the adviser to the Minister of Energy Yuriy Boyko. This shows that even now not all citizens can pay the current tariffs, which are considered "cheap". The largest number of debtors was found in Kyiv and the region, in Dnipropetrovsk region and Kharkiv region.
Ukraine gets most of its electricity from nuclear power plants, but also uses alternative sources such as solar and wind energy. However, as a result of the Russian attacks, many thermal and hydroelectric power plants were out of order, and some nuclear plants are under repair. This led to a shortage of electricity, which is compensated by turning off industrial and household consumers, as well as by purchasing energy from abroad at high prices.
People's deputy Serhiy Nagornyak called for the appropriateness of the tariff increase. He explained that the state companies "Energoatom" and "Ukrhydroenergo" make a profit between the market price of electricity and the preferential tariff for the population, which leads to significant losses. According to Nagornyak's forecasts, this year the tariff for household consumers may increase from UAH 2.64 to UAH 6/kWh, which will allow to attract funds for the completion of new power units and the development of hydropower.
"It is necessary to tell the truth to people. If we do not take radical decisions, in winter we will have only 12 or 18 hours of light out of 24 hours a day, due to a huge deficit", said Serhiy Nagornyak, People's Deputy from "Servant of the People".
From March 22, 2024, the Russians began mass attacks on Ukrainian power plants again. Energy Minister Herman Galushchenko said that as a result of the latest massive enemy shelling, the Ukrainian energy system lost 8 GW of capacity. He also warned of difficulties with the supply of electricity in summer and winter, as several thermal and hydroelectric power plants were damaged as a result of the attacks. Currently, Ukrainian energy companies are doing everything they can to ensure a stable supply of electricity, but it may be difficult without an increase in tariffs.
According to People's Deputy Inna Sovsun, the state-owned Energoatom and Ukrhydroenergo incurred large costs for preferential tariffs for the population during 2023. The forecasted needs of Ukraine in financing for the restoration of electric power facilities until 2026 amount to UAH 110 billion. At the same time, "Energoatom" has debts in the amount of UAH 18 billion. In other words, to restore the energy infrastructure, it will be necessary to attract funds from abroad, since domestic resources will be insufficient.
Energy expert of the Ukrainian Future Institute, Andrian Prokip, predicts that the situation with emergency and planned power outages may last until September. After that, a normal period is expected, when technical problems at power plants will be fixed and energy consumption will decrease thanks to warmer weather. However, this period may be limited, because after 1.5-2 months the situation may worsen, especially in November.
Whether Ukrainians will face power outages again depends on how quickly it will be possible to raise funds for the repair of energy facilities, as well as the availability of the necessary equipment and protective systems. It is also necessary to ensure an adequate level of power system protection against possible attacks.
In January 2024, expert Yuriy Korolchuk emphasized that the cost of electricity for the population may rise to UAH 3.5-4/kWh, as international partners are pushing to raise tariffs to the market level. However, this may lead to the accumulation of a larger volume of debts for communal services among the population. Expert Gennadiy Ryabtsev believes that a tariff of 4.8 UAH/kWh will be fair to compensate for the costs of repair and renewal of equipment. The director of energy programs of the Razumkov Center, Volodymyr Omelchenko, predicts an increase in the tariff to UAH 3.5/kWh in the summer months. A year ago, the National Energy and Utilities Regulatory Commission (NKREKP) proposed to raise the electricity tariff for the population to 5.5 UAH/kWh.
According to Oleksandr Kharchenko, director of the Energy Research Center, the market tariff for electricity for the population in Ukraine, according to the DiXi Group analytical center, should be from 5.5 to 6.5 UAH/kWh. However, due to the fact that tariffs are not market, the difference in them is compensated by state companies such as "Energoatom" (nuclear plants) and "Ukrhydroenergo" (hydroelectric plants). By the end of 2023, it was predicted that without a tariff increase, the debts of energy companies will amount to UAH 80 billion, of which UAH 46 billion are debts due to Energoatom and Ukrhydroenergo.
Currently, Ukraine has the lowest electricity tariffs for the population in Europe – 6.37 euros per 100 kWh. In Poland – 19.19 euros, in Hungary – 9.52 euros, in Slovakia – 19.72 euros, in Romania – 16.09 euros, in France – 30.57 euros, in Germany – 38.13 euros. However, such a comparison is difficult because salaries and pensions are higher in other countries.
A year ago, People's Deputy Andrii Gerus indicated the need for 40 billion UAH (or 1 billion dollars) to restore the energy system. According to the calculations of the Kyiv School of Economics, replacing the equipment would cost 8.1 billion dollars. The power system was partially restored before the heating season, but then again suffered destruction due to Russian attacks. Deputy Minister of Energy Mykola Kolisnyk said that thanks to the review of electricity tariffs for household consumers, the Ukrainian energy system received (or restored) 3 GW of capacity.
Arguments in favor of increasing the electricity tariff for the public often ignore the role of business in the restoration of power plants. Some of the thermal power plants belong to Rinat Akhmetov's DTEK group, and it is not clear whether the state plans to help restore these facilities by increasing tariffs. According to the company, repairs to the damaged facilities were carried out at their expense or thanks to borrowed loans.
However, Oleg Popenko, head of the Union of Utilities Consumers, believes that there are other motives behind the increase in tariffs. He predicts that from June electricity tariffs will increase from UAH 2.64 to UAH 3.5-4 per kWh, and he links this with the "green tariff".
"It has little to do with the import of electricity. The amount of imports that we attract today is only 1-1.5% of the total amount of electricity that we consume. Therefore, it is not true to say that tariffs are rising due to an increase in imports," Popenko notes.
He believes that the restoration of the energy infrastructure is not necessarily connected with an increase in tariffs. For example, UAH 1.5 billion was allocated from the state budget for the restoration of Centernergo facilities. However, the funds from the tariff increase can be used to protect Ukraine's gas storage facilities, which are under attack by the Russians and are important for the upcoming heating season.
Oleg Popenko emphasizes that the government has huge debts to investors in the field of "green" energy, which currently amount to approximately UAH 25 billion (down from UAH 32 billion at the end of last year). The main part of these debts is due in 2022. According to the expert, the authorities are not doing enough to solve this problem and transfer debts to businesses to the state budget. Popenko notes that the import of electricity from Poland, Slovakia, Hungary and Moldova is cheaper than its cost on the domestic market of Ukraine, so imports are more attractive for closing the energy shortage on the market.
"The government could force all investors of "green" energy to independently enter the electricity market and sell it on the RDN or VDR market. And the state undertook to pay all this to investors from the state budget at twice the cost of electricity. We can take advantage of the war period and influence this issue," Popenko adds.
As of September 2023, the state's debt to green energy producers amounted to UAH 35 billion. However, in recent years, the state settled with them only partially. Volodymyr Kudrytskyi, the head of the board of the Ukrenergo state enterprise, noted that the company's debts amount to approximately UAH 59 billion, and the company itself owes more than UAH 50 billion to other market participants. This situation has led to the fact that some producers of "green" energy refuse the "green" tariff and want to sell electricity at market prices, since the state's debts have been running since 2019, and the calculations are only partially carried out.
Since the beginning of the 2010s, there has been an active interest in "green" energy in Ukraine, which has been supported by high tariffs. At this time, there are huge investments in this sector, which are mainly regulated by the state through the special enterprise "Guaranteed Buyer". However, this situation has led to excessive dependence on "green" energy and excessive use of budget funds to cover the difference between high tariffs and market prices for electricity. Since 2022, as a result of the war, some of the solar and wind power plants have been occupied, and some have been destroyed, which caused a decrease in their electricity production.
In 2024, the "green" tariff for solar power plants in Ukraine amounted to 0.146 euros per kWh of electricity, which was reduced compared to the previous value of 0.164 euros/kWh from 2020. This tariff is valid until 2030. The average tariff for wind power plants was EUR 0.088/kWh. It is important to note that in the case of wind farms, the market price of electricity can sometimes be even higher than the tariff proposed by the government.
This increase in electricity tariffs has several purposes. One of them is the settlement of debts incurred by the state-owned companies Energoatom and Ukrenergo, and the restoration of state-owned power plants and infrastructure for electricity transmission. However, whether this will solve the state's problems and ensure an uninterrupted supply of electricity to people's homes is still unknown. It is clear that blackouts will continue, but may become less frequent as long as the power restoration process continues and the risk of blackouts is minimal.
