Electricity suppliers are refusing to work with government agencies
Working with government agencies in the electricity market is becoming increasingly risky for suppliers due to specific judicial practices and aggressive procurement audits.
As a result, Energo Resource RI Group is currently preparing a lawsuit demanding the repeal of certain provisions of Ukrainian Cabinet of Ministers Resolution No. 1178.
This was announced by the company’s Director of Energy Sales, Khristina Yan, who highlighted the critical situation in the public procurement sector.
A number of energy companies have already decided to completely cease cooperation with the state-funded segment of the market.
Current regulations and their strict interpretation by regulatory authorities do not allow businesses to fulfill signed contracts in a stable and profitable manner.
“The rules have changed because working with government agencies is now a risk in itself. The very fact of signing this contract. And in practice, while other companies are already walking away from working with these agencies, we are still trying—it’s hard, but we’re trying to keep working,” says the director.
Energy suppliers have long been trying to prove to government officials and the courts that constant changes to the rules are destroying transparent market mechanisms.
Short-sighted decisions aimed at quickly filling the state budget threaten the very existence of private operators.
“Trying to convince the authorities that changing the rules along the way is a dead end. Short-term budget filling will simply destroy the market. We are currently actively appearing in court, arguing our position. And for now, I can say that it has been fruitless,” she noted.
The main reason for preparing a future lawsuit against the government is the restrictions on adjusting resource costs in contracts.
Restrictions on price fluctuations drive suppliers into debt during seasonal spikes in the cost per kilowatt-hour.
“We are currently preparing a lawsuit to overturn Resolution 1178, specifically the sections regarding price changes,” she said.
Numerous lawsuits filed by the prosecutor’s office, accusing companies of causing losses to the state, have become an additional source of pressure on businesses.
At the same time, law enforcement agencies completely ignore the actual tariff structure for the end consumer in their calculations.
“We received a calculation of damages amounting to 5 million. The prosecutor’s office states that the RDN was 5.40, but you are selling at 8.32. We ask what is included in the price for the end consumer. They don’t know. They compare 5.40 and 8.32. They have absolutely no idea what 8.32 represents—where the VAT and transmission costs fit in. They don’t know this, yet the courts accept it,” stated Khristina Yan.
A distinctive feature of the Ukrainian energy market is that traders have no legal means to purchase and lock in the necessary annual volume of electricity in advance. Any sudden decisions by the Regulator or price spikes on the exchange instantly render long-term government contracts unprofitable.
“Signing up for 10% means signing yourself up for a future termination of the supply contract, resulting in several more months of losses,” said Khristina Yan.
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