The "unbundling law" concerns not only the gas transmission system but also power grids and gas storages

A comprehensive approach to reforms of the electricity and gas markets can only be welcomed. It’s a pity it took so long for changes to materialize, though.

Recently, Ukraine took another resolute step toward unbundling of the gas transmission system operator (G-TSO). The law amending certain legislative acts of Ukraine due to separation of the natural gas transmission activity entered into force on 17 November, two weeks after the Verkhovna Rada passed it. It also took about that much time to prepare and vote on editorial clarifications – in fact, for hearing in "third reading".

The amendments did not change the already existing legislative requirements prohibiting privatization or alienation of the gas transmission system as the state-owned property. In the essence, they accommodate specifics of the legal structure of a new G-TSO, which beginning from 1 January 2020 (i.e., after unbundling) will be owned by another state enterprise, Trunk Gas Pipelines of Ukraine PJSC.

By the same token, the "third reading" did not breach the key aspects of unbundling which must take place according to European rules. Among these aspects, the following three are the most important:

  • operator’s independence in making decisions regarding the infrastructure "under its charge",
  • the right to compensate regulator-approved investments via tariffs,
  • independence of the public authority overseeing the operator from the government’s decisions (managing gas production and supply assets).

At the same time, the amendments include provisions concerning not only the G-TSO but also operators of gas storage facilities and of the electricity transmission system. In other words, this document became a general law on unbundling in the energy sector.

It will allow in the future to expedite the separation of gas storage operator as required by the Law on the Natural Gas Market without the need to involve the Verkhovna Rada again. To be sure, these amendments will also simplify the final certification of Ukrenergo as an independent operator.

In addition, they addressed most managerial aspects concerning future gas transmission system and gas storage operators, as well as the TSO Ukrenergo. That concerns the management of state-owned assets, approval of financial plans, and the regulatory agency’s powers to resolve disputes between operators and the government agency overseeing them (in the case of G-TSO and Ukrenergo, this is the Finance Ministry).

Such a comprehensive approach to reforms of the electricity and gas markets can only be welcomed. It’s a pity it took so long for changes to materialize, though, and therefore, they had to be implemented in the infamous “overdrive” tempo.

Roman NitsovychResearch Director
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