Starting 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 (NCRECU). According to the new cap rates set on the day-ahead market (DAM) and the intraday market (IDM), 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 5600 UAH/MWh, which is a significant increase compared to the previous 3000 UAH/MWh and 5600 UAH/MWh, respectively. From 07:00 to 11:00 and from 23:00 to 24:00, the tariff will be 6900 UAH/MWh (previously — 5600 UAH/MWh and 3000 UAH/MWh, respectively).
In the evening hours from 5:00 PM to 11:00 PM, electricity prices will reach 9,000 UAH/MWh, compared to the previous 7,500 UAH/MWh. The minimum limit price remains at 10 UAH/MWh.
New limit prices have also been set on the balancing market: from 00:00 to 07:00 — 6600 UAH/MWh, from 07:00 to 17:00 and from 23:00 to 24:00 — 8250 UAH/MWh, and from 17:00 to 23:00 — 10,000 UAH/MWh. The minimum limit price remains unchanged — 0.01 UAH/MWh.
The Cabinet of Ministers approved a new electricity tariff for the population from June 1, 2023. It has 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 if consumption exceeded 250 kWh (this tariff 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, an increase in tariffs for the population was also planned for 2024. By the end of May 2024, the government had not changed 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 power systems of Ukraine and the EU, using grant funds from the World Bank.
It has not yet been decided whether the tariff for the population will be increased from June 1, 2024. According to the opinions expressed by auditor Mykhailo Krapyvko, 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 explanatory work may 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 they usually pay for it more disciplinedly.
Since the start of the full-scale war, the population’s debts for electricity have increased by 40%, amounting to about UAH 15 billion, according to Yuriy Boyko, an advisor to the Minister of Energy. This indicates 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 the Dnipropetrovsk and Kharkiv regions.
Ukraine gets most of its electricity from nuclear power plants, but also uses alternative sources such as solar and wind power. However, as a result of Russian attacks, many thermal and hydroelectric power plants have been out of service, and some nuclear plants are under repair. This has led to electricity shortages, which are being compensated by turning off industrial and residential consumers, as well as purchasing energy from abroad at high prices.
MP Serhiy Nagornyak called for an increase in tariffs. He explained that the state-owned companies Energoatom and Ukrhydroenergo are making 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 2.64 to 6 UAH/kWh, which will allow raising funds for the construction of new power units and the development of hydropower.
“We need to tell the truth to people. If we don’t make radical decisions, then 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, a member of parliament from the Servant of the People party.
Since March 22, 2024, the Russians have again begun massive attacks on Ukrainian power plants. Energy Minister Herman Galushchenko reported that as a result of the latest massive enemy shelling, the Ukrainian power system has lost 8 GW of capacity. He also warned of difficulties with electricity supply 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 possible to ensure a stable supply of electricity, but without increasing tariffs, this may be difficult.
According to MP Inna Sovsun, the state-owned Energoatom and Ukrhydroenergo incurred large expenses on preferential tariffs for the population during 2023. Ukraine's projected financing needs for the restoration of power facilities by 2026 are UAH 110 billion. At the same time, Energoatom has debts 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.
Andrian Prokip, an energy expert at the Ukrainian Institute for the Future, 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 due to warm weather. However, this period may be limited, because after 1.5-2 months the situation may worsen, especially in November.
Whether Ukrainians will face another power outage depends on how quickly funds can be raised to repair power facilities, as well as the availability of the necessary equipment and protective systems. It is also necessary to ensure an adequate level of protection of the power system from possible attacks.
In January 2024, expert Yuriy Korolchuk emphasized that the cost of electricity for the population could increase to 3.5-4 UAH/kWh, as international partners are pressuring to increase tariffs to the market level. However, this may cause the accumulation of a larger amount of debts for utility services among the population. Expert Gennady Ryabtsev believes that a tariff of 4.8 UAH/kWh would be fair to compensate for the costs of repairs and equipment renewal. The Director of Energy Programs at the Razumkov Center, Volodymyr Omelchenko, predicts an increase in the tariff to 3.5 UAH/kWh in the summer months. The National Commission for Regulation in Energy and Communal Services (NKREKS) proposed to increase the tariff for the population for electricity to 5.5 UAH/kWh a year ago.
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 the tariffs are not market-based, the difference in them is compensated by state-owned companies such as Energoatom (nuclear power plants) and Ukrhydroenergo (hydroelectric power plants). By the end of 2023, it was assumed that without an increase in tariffs, the debts of energy companies would amount to 80 billion UAH, of which 46 billion UAH 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, since salaries and pensions are higher in other countries.
A year ago, MP Andriy Gerus indicated that UAH 40 billion (or $1 billion) would be needed to restore the power system. According to calculations by the Kyiv School of Economics, replacing the equipment would cost $8.1 billion. The power system was partially restored before the heating season, but then it was again damaged by Russian attacks. Deputy Energy Minister Mykola Kolisnyk said that thanks to the revision of electricity tariffs for household consumers, the Ukrainian power system has received (or restored) 3 GW of capacity.
Arguments in favor of raising electricity tariffs for the population 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 unclear whether the state plans to help restore these facilities by raising tariffs. According to the company, repairs to damaged facilities were carried out at its own expense or thanks to loans.
However, the head of the Union of Consumers of Public Utilities, Oleg Popenko, believes that there are other motives behind the tariff increase. He predicts that starting in June, electricity tariffs will increase from 2.64 to 3.5-4 UAH per kWh, which he attributes to the “green tariff.”.
"This has little to do with electricity imports. The volume of imports that we attract today is only 1-1.5% of the total amount of electricity that we consume. Therefore, to say that tariffs are increasing due to increased imports is untrue," Popenko notes.
He believes that the restoration of energy infrastructure is not necessarily associated with an increase in tariffs. For example, UAH 1.5 billion has been allocated from the state budget for the restoration of Centerenergo 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 bulk of these debts are due in 2022. According to the expert, the authorities are not doing enough to solve this problem and are transferring debts to business to the state budget. Popenko notes that electricity imports from Poland, Slovakia, Hungary and Moldova are cheaper than its cost on the domestic market of Ukraine, so imports are more attractive for closing the energy shortage in the market.
"The government could force all investors in "green" energy to independently enter the electricity market and sell it on the RDN or VDR market. And the state has undertaken 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," adds Popenko.
As of September 2023, the state's debt to producers of "green" energy amounted to UAH 35 billion. However, in recent years, the state has only partially settled with them. Volodymyr Kudrytsky, Chairman of the Board of the State Enterprise "Ukrenergo", noted that debts to this company amount to approximately UAH 59 billion, and the company itself owes other market participants more than UAH 50 billion. 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 dragging on since 2019, and settlements are made only partially.
Since the early 2010s, Ukraine has seen a surge in interest in “green” energy, supported by high tariffs. Currently, there are huge investments in this sector, mainly regulated by the state through a special enterprise “Guaranteed Buyer”. However, this situation has led to an over-reliance 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 solar and wind power plants have been occupied, and some have been destroyed, which has led to a decrease in their electricity production.
In 2024, the “green” tariff for solar power plants in Ukraine was 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 0.088 euros/kWh. It is important to note that in the case of wind power plants, the market price of electricity can sometimes be even higher than the tariff proposed by the state.
This increase in electricity tariffs has several goals. One of them is to settle debts incurred by the state-owned companies Energoatom and Ukrenergo, and to restore state-owned power plants and electricity transmission infrastructure. However, it is still unknown whether this will solve the state's problems and ensure uninterrupted electricity supply to households. It is clear that power outages will continue, but may become less frequent as the energy restoration process continues, and the risk of blackouts is minimal.
