Address To The Goverment Of Ukraine

14 April 2016

Your Excellency Prime Minister,


Your Excellencies Ministers,


In 2014-2015, Ukraine has completedshort but rather complicated part of its reform path in energy sector. Gas supply to Ukraine has been diversified – today, Russia is not only deprived of its monopoly, but disappeared from the list of gas suppliers to Ukraine at all. The Gas Market Law was adopted, starting liberalization and opening of energy markets. These achievements are too little for the full-scale victory, but no less important for maintaining energy security and further development.


New government has to keep the policy of increasing energy security and competition, including strengthening of sectoral industries’ transparency. Only in this case the international and Ukrainian experts, politicians and the Ukrainian society will take the side of ministries. Neither corruption schemes, nor political manipulations could be acceptable today, when the country remains in the situation of external aggression and economic challenges.


We would like to draw your attention to the reforms that have to remain on the government agenda in the energy sector. The international partners of Ukraine and politicians, experts, and participants of energy markets have jointly elaborated these changes. It is important that the dynamics of their implementation is high and the process remains transparent and open for all stakeholders.


Reform of the regulator.The new law on regulatory authority in energy and public utilities’ sectorwas adopted in the first reading by the Ukrainian parliament.After its final adoption, it is nevertheless important that all the provisions beimplemented in full and in good quality. For this purpose,legislative and executive powers have to cooperate and coordinate their efforts, but also establish effective communication within the government.


Electricity market reform.Adoption and implementation of the Electricity Market Law will require great efforts and coordination from the government side. Preparation of secondary legislation is already underway, it shall however continue with the new Cabinet of Ministers. Both Ukrainian consumers and the international donors and investors are interested tohave new market introduced as soon as possible – under the new European rules, – and this commitment has to remain a priority. If necessary, the respective draft law should be re-submitted for consideration of the Verkhovna Rada in shortest terms.


Adoption of the updated Energy Strategy and Energy Diplomacy Strategy. Realistic andeffective Energy Strategy of Ukraine has to be developed, so that it becomes– for the first time – not a document-in-itself, but a reflection and basis for the state energy policy. Ukraine needs understanding of trends on both global energy resource markets andregional energy markets, and identification of challenges and opportunities to find its place on these markets. The government has to continue the development of the Energy Diplomacy Strategy, also through consultations with diplomats and experts, to create respective policy scenarios and positioning on various regions in energy sector.


Unbundling of Naftogaz.Restructuring of Naftogaz has to be carried out as soon as possible, in compliance with the Directive 2009/73/EC and the Gas Market Law. This should include unbundling of gas transportationassets from the structure of vertically integrated undertaking, absence of single shareholder for companies in production/supply and transportation, as well as separation of management bodies in generation/supply and transportation. The final plan for restructuring is subject to coordination with the Energy Community Secretariat and approval by the government.


Fulfillment of commitments on implementation of the new sectoral policy under the Association Agreement and the Treaty establishing the Energy Community. Full-scale implementation of the Association Agreement in energy and environment sectors is possible under the condition of coordinated interaction of various authorities in charge of implementing commitments under the Energy Community.The long-awaited appointment of the respective Deputy Minister of Energy, systematic work in the framework of the Multi-Stakeholder Working Group and other coordination bodies with involvement of civil society will significantly accelerate this process.


Further facilitation of energy efficiency.Development of the legislation based on the Directive2012/27/EU on energy efficiency has to become an example of coordinated activity within the government and maximum involvement of experts. The very implementation of the Directive ambitious provisionshas to become the key result in the area of energy efficiencyreform. Of crucial importanceis prompt submission for consideration of the Verkhovna Rada, effective support and ensuring proper implementation of the draft laws on commercial metering of heat and hot water supply, and on the energy efficiency of buildings.The government has to get actively involved into the process and, having engaged international and Ukrainian experts, to make steps serving a basis for the breakthrough in the sector.


Increasing transparency and better governance of the extractive sector.It is the government responsibility to publishannualreportsunder the Extractive Industries Transparency Initiative, with the next report should be published in October 2016. For effective collection of information, it is necessary to start working on the report already now. This should be the task not only for the Ministry of Energy, but also for the Ministry of Finance and the Ministry of Environment. Besides, the new government has to improve the governance of extractive sector to increase interest of foreign investors and their readiness to invest in ramping up the domestic production of hydrocarbons.


We are confident that this agenda, despite all its ambition, is fully and effectively achievable in practice. Substantial outputs, engagement of international and Ukrainian experts, wider dialog held and readiness of stakeholders for fast implementation of these plans provides hope for results of the prepared changes.


We hope that the government formed has enough ambition, powers and strength to pave the way of reforms, becoming their true driving force. In such case, DiXi Group think tank, Civil network OPORA, Energy Reforms coalition and Stronger Together initiative will be honored to become your reliable partners.

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