Power grid connection fees lowered
The National Energy and Utilities Regulation Commission (NEURC) lowered the power grid connection fees for 2020. This news is positive for large players only, though.
The revision of power grid connection fees by the regulator is an expected event. These fees for the following year are approved every year by 1 December of a current year. The calculation formula includes a number of indicators, in particular, construction costs, land plot allocation costs, costs of developing technical specifications, various examination costs and so on. The above information is provided by distribution system operators (oblenergo companies), and NEURC makes calculations based on this information.
Surely, reduction of connection costs for businesses is positive news in any event. But at the same time, one has to understand that only the owners of large generating plants, e.g. those with the capacity of over 1 MW, will feel this change. For power plants like that, the standard connection fee in a rural locality (based on the average fee for all regions of Ukraine) would have been UAH 150 thousand in 2019 and would be only UAH 125 thousand in 2020.
Whether it will actually affect Ukraine’s Doing Business ratings in terms of “Connection to the power supply system” indicator is a different question. The answer is yes, it will, but insignificantly. This indicator contains many elements: procedures, transparency of tariffs, security deposit, reforms, costs and other. To be sure, the lowering of connection fees is only one of the expense components forming the notion of “cost”, which on top of that is calculated as the portion of per capita income. In other words, if per capita income grows while expenses remain the same, the rating based on this indicator automatically improves.