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On the way to the gas market. What changes the regulator’s decision and what needs to be done?

On June 10, the National Energy and Utilities Regulatory Commission (NEURC) adopted the decision simplifying the procedure for changing the gas supplier for household consumers. In particular, amendments will be made to the Gas Transmission System Code, the Gas Distribution Systems Code, the Natural Gas Supply Rules and the Framework Agreement for the Supply of Natural Gas to Household Consumers. DiXi Group experts provided a number of proposals for this solution, and most of them were taken into account by the regulator.

Thus, the requirements for changing the supplier, such as obtaining a written certificate of absence of indebtedness, drawing up a reconciliation certificate or preparing a schedule of debt repayment to the existing supplier have been eliminated. This will allow the consumers to apply for a new supplier without artificial barriers and is in line with the recommendations of the Council of the European Energy Regulators (CEER).

However, it should be noted that from now the Annex to the Framework Agreement for the Supply of Natural Gas to Household Consumers provides for signing the following declaration: “I also hereby confirm that I have no overdue indebtedness for the consumed natural gas to previous supplier, and I am aware of the inevitability of liability under civil and criminal law in case of providing inaccurate information”.

The amendments stipulate that the procedure for changing the supplier takes place in an almost automatic mode on the information platform of the GTS operator. After receiving the application from the consumer, a new supplier has 3 days to agree or refuse to enter into the agreement. In case of positive decision, the supplier enters the consumer in its register, which results in his exclusion from the register of previous supplier. The procedure lasts maximum 21 days, and the fact of concluding a gas supply agreement is registration of the consumer in the register of a new supplier.

Moreover, a positive step is the ability to submit the documents required for changing the supplier in electronic form. This will greatly simplify the process of submitting the application for accession and accompanying documents by the consumers, and is fully in line with the European practice. However, we emphasize that there is no need to submit the entire package of documents, because all data are available from GDN operator (oblgas) to which the consumer is connected, and can be accessed by a new supplier through the operator’s electronic platform using the EIC code (to be provided by the consumer).

It should be noted that this decision of the NEURC is not enough for a truly efficient and competitive gas market for the population to start operating in Ukraine from July 1.

It is extremely important to protect household consumers in the event of bankruptcy of the existing supplier or refusal to provide services. Upon termination of the respective government resolution, both Naftogaz and regional gas supply companies will no longer have to perform their public service obligations. Roughly speaking, gas sellers will be also gree to choose the consumers to whom they want to supply gas. For the consumers, this situation can result in mass outages, and for the market –accumulation of debt caused by imbalances.

To prevent this, the government should hold a new full-fledged tender for the “last resort” supplier in order to assign obligations to particular market participants to provide guaranteed gas supplies in the absence of the supplier. Another formula referred to in the context of the memorandum with the IMF is the selection of a temporary guaranteed supplier through a tender.

A database for centralized exchange of information on gas consumers is also needed to encourage the competition on the retail market. Using such data hub, the suppliers could analyze the history of consumption and payments of a potential customer and make the informed decisions – to deal with such consumer or not. Such step would reduce the risks assumed by a new supplier and thus reduce the mark-up.

The best way to consolidate this practice is to amend the law, since previous attempts to implement the data transfer mechanism at the regulatory level have been blocked by the lawsuits of the existing suppliers.

Ongoing control and monitoring of the suppliers for compliance with standards and requirements to quality of customer service are equally important. In particular, the subject of monitoring should be the provision of sufficient gas resources for the needs of consumers belonging to the category of protected (including the population).

Also, according to the requirements of the Law “On Natural Gas Market”, the Cabinet of Ministers is obliged to develop and adopt the Procedure for protection of vulnerable consumers, which should include “special measures to protect vulnerable consumers in case of disconnection in critical periods to satisfy needs of the consumers for natural gas”.

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Website of the coalition which unites experts from leading think tanks and NGOs in the field of energy and environment 

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National website of Extractive Industries Transparensy Initiative in Ukraine 

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Information and analitical website “Ukrainian Energy UA-Energy.org” is unique   platform to inform

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Independent platform for public dialogue on the issues of unconventional gas exploration and production