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uk
01.06.2020

Lack of prerequisites for unbundling of electricity bills

The population currently pays for consumed electricity at a fixed two-rate tariff depending on the amount of monthly consumption – 0.9 UAH/kWh for consumption of up to 100 kWh, and 1.68 UAH/kWh for consumption exceeding this limit. However, current tariff, even its upper rate, does not reflect real costs incurred for the production, procurement and supply of electricity to households, since the country uses hidden cross-subsidization of the population through the mechanism of Public Service Obligations (PSO). The tariff in bills is not unbundled into commodity and transport components of electricity.

The tariff components shall be eventually unbundled. This is explained by the fact that, according to the law, the former regional power distribution companies (“oblenergo”) were divided into legally separate companies, one of which performs monopoly function of electricity transportation (distribution) through local networks – distribution system operator (DSO), and the other – electricity supply to the population – the supplier. So, each of the companies must receive its share of electricity payments, according to the tariffs approved for them by the Regulator. Unbundling the tariff components in the bills would also allow the consumer to see how much it costs to actually deliver electricity to “home” through local networks, and how much costs the other part, which should include the purchase price of electricity by the supplier on the wholesale market, transmission and supply to the customer.

Moreover, electricity distribution tariffs differ by regions, sometimes even significantly. Transportation costs depend on technical condition of the networks of a particular DSO, efficiency of its activities, the level of electricity losses in the networks and so on. For example, PJSC “Zakarpattiaoblenergo”, JSC “DTEK Donetsk Electricity Networks” and LLC “Luhansk Energy Association” have the highest distribution tariffs – 0.98, 0.96 and 0.95 UAH/kWh respectively (excluding VAT), already exceeding the lower limit of current tariff for the population – 0.9 UAH/kWh. Instead, the lowest distribution tariffs are at PJSC “DTEK Kyiv Electricity Networks” (Kyiv), JSC “DTEK Dnipro Electricity Networks” and PJSC “Kyivoblenergo” constituting 0.28, 0.54 and 0.61 UAH/kWh respectively. The second part of the tariff should be more or less similar by regions. And for the convenience of the population, the bills should indicate tariff components in separate lines.

At the same time, unbundling of tariff components in the bills is now unlikely due to the use of non-market and uniform tariffs for households throughout Ukraine. An important prerequisite for adequate unbundling of tariffs in the bills into commodity and transport components is the gradual transition to market pricing of electricity for the population. But there is still no political will to do this.

 

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