Part 1: Deregulation, REMIT and Connection to the Electricity Grid

On 9 February 2025, the Law of Ukraine "On Amendments to Certain Laws of Ukraine in the Energy and Heat Supply Sectors to Improve Certain Provisions Related to the Conduct of Business and Effect of Martial Law in Ukraine” No. 4213-IX (the Law) entered into force. The Parliament adopted the Law on the 14 January 2025 based on the Draft Law No. 9381 of 13 June 2023. The Law provides for several changes in the electricity and natural gas markets, including the following key amendments.

Changes in the area of ensuring integrity and transparency in wholesale energy markets (REMIT)

Amendments regarding REMIT are intended to clarify and simplify the regulation, and to reflect the specifics of regulation under martial law.

To this end, new terms are introduced in the wholesale energy markets (WEM), namely, the concepts of publication and disclosure of insider information are distinguished; certain terms are clarified, i.e. the term "wholesale energy product” now contains a reference to the place of delivery (performance) – which shall be in Ukraine.

The concept of "abuse in the wholesale energy market”’ now includes (i) violation of the established prohibitions on the use of insider information, (ii) manipulation and attempts to manipulate the WEM, and does not include non-disclosure/disclosure of insider information in violation of the established requirements.

The Law of Ukraine "On the Electricity Market” is also amended to establish a fine in the amount of approx. EUR 1,200– 38,700 for conducting transactions with wholesale energy products without registering as a WEM participant (which was previously absent). The Law of Ukraine "On the Natural Gas Market” now provides for liability for an attempt to manipulate in the form of a fine of up to approx. EUR 10.5 million (which was previously absent) and which is equivalent to liability for manipulation.

For the failure to publish/publication of insider information in violation of the established requirements a fine of approx. EUR 1,200 – 58,000, is established instead of the previously provided maximum fine of approx. EUR 1 mln.

Further, the Law also provides for several exemptions for WEM participants in terms of disclosure of insider information and prohibitions on handling it during martial law, which generally corresponds to the measures already established by the Regulator in Resolutions No. 614 dated 27 March 2024 and No. 137 dated 16 January 2024.

Amendments regarding connection to the power grid

Connection to the network of the transmission system operator (TSO)

"Prepayment” for connection

The Law regulates the issue of "prepayment” for connection to the TSO’s networks which is calculated at the rate of EUR 10 per 1 kW of capacity ordered for connection, 50% of which is payable within 30 days from the date of receipt of the technical specifications for connection (TS), and the remaining 50% – within 12 months from the date of receipt of the TS. The parties may agree on a different procedure in the agreement on connection.

If the customer initiates termination of the agreement on the connection within six months from the receipt of the TS, the actual payment of the connection fee shall be refunded to the customer.

If the customer fails to ensure development, approval (by the TSO and other stakeholders) and submission to the TSO of the design documentation for the construction/reconstruction/technical re-equipment of the power grids within 12 months from the date of receipt of TS, agreement on connection is terminated and the "prepayment” for connection paid by the customer is not refunded.

Capacity booking

The legislation introduces the concept of capacity booking for wind generation, where under a capacity booking agreement, the TSO reserves technical solutions for a connection (capacity delivery) scheme for wind generating units with a capacity of ≥ 20 MW, and the customer shall conclude an agreement on connection within two years from the date of the capacity booking agreement. The Regulator approves the standard form of agreement, and the procedure for its conclusion shall be determined by the Transmission System Code.

The capacity reservation fee shall be EUR 5 per 1 kW of capacity to be reserved and shall be paid within 20 calendar days from the date of conclusion of the capacity reservation agreement. Otherwise, the agreement shall be terminated.

If the capacity reservation customer applies to the TSO with an application for the conclusion of an agreement on connection for the reserved capacity within two years, the capacity reservation fee shall be credited against the connection fee. Otherwise, these funds shall be credited to the TSO’s account.

Other amendments regarding connection to the DSO and TSO networks:

For new grid connection agreements:

The Law stipulates that the validity of the TS for connection shall not exceed three years from the date of issue, which should consider the terms and priority of construction of the facility to be connected to the grid. At the request of the customer, the validity of the technical specifications is extended for the period necessary to complete the construction of the facility if (i) the design documentation for the connection is approved, (ii) the connection fee is paid, and (iii) permits for the construction of the facility to be connected are obtained. However, the total validity of the technical specifications may not exceed six years from the date of the agreement on connection.

An agreement on connection shall terminate if:

the customer has not ensured development and approval of the design documentation by by DSO/TSO (depending on the power grids to which connection is made) before the expiry of TS (if such a requirement is provided for in the agreement on connection), and

the customer has not paid the connection fee in the amount specified in the agreement on connection.

The Law explicitly provides for the possibility of connecting generating facilities from any source at one point of connection (the cable pooling), making combining of several production technologies at one facility possible.

In addition, the Law removes the restriction that the installed capacity of the customer’s electrical installations could not exceed the value of its permitted (contractual) capacity. Now, the actual capacity of electricity output to the grid shall not exceed the permitted (contractual) capacity at the connection point.

The Regulator is now empowered to determine the procedure for connecting generating facilities to the power grids of another producer that has a connection to the TSO/TSO networks (as another aspect of the cable pooling concept), provided that the capacity of electricity output to the grid by all electrical units does not exceed the permitted (contractual) capacity at the point of connection, as well as to ensure separate metering of electricity for different producers.

For the existing grid connection agreements:

Within three months from the date of entry into force of the Law, the customers shall bring their grid connection agreements into compliance with the Law, including in terms of ”prepayment” for connection. Grid connection agreements under which the "prepayment” for connection is not paid, are terminated after the expiry of the nine months from the date of entry into force of the Law.

Additionally, the customer shall submit to the TSO the design documentation required for connection works within nine months from the date of entry into force of the Law or initiate termination of the connection agreement. If the customer fails to submit the design documentation within the specified period, the grid connection agreement shall terminate. If the customer initiates termination of the connection agreement, the TSO shall return the actual "prepayment” for connection to the customer.

The above requirements do not apply to connection agreements for RES facilities planned to be located in territories which were further temporarily occupied (according to the list of the Ministry of National Unity of Ukraine), provided that as of 24 February 2022, such agreements were in force and the design documentation was developed and approved by TSO. The parties shall bring these connection agreements into compliance with the Law within one year from removing of the relevant territories from the list of temporarily occupied territories.

The term of the agreement on connection to the DSO’s/TSO’s networks of RES facility and the term of the relevant technical specifications shall be deemed extended for three years from the date of entry into force of the Law, if:

grid connection agreement was in force as of 24 February 2022;

the customer has developed, agreed with the DSO/TSO and submitted the design documentation to the relevant system operator. They have also paid the connection fee as provided for in the connection agreement as of the day the Law enters into force.

Conclusions

In general, amendments provided by the Law aim to address issues repeatedly raised and discussed by market participants. The amendments related to connection to the power grids are of particular importance, which are aimed at addressing urgent issues of connection required for the development of generation facilities and preventing reservation of connection capacity for projects that do not intend commissioning of a new generation.

Further amendments envisaged by the Law will be addressed in the following review.

If you would like to discuss the issues raised in this paper in more detail, please contact the SK team.

Information contained in this legal alert is for general informational purposes only, does not constitute legal or other professional advice and should not be relied upon as a substitute for specific professional advice adapted to the specific circumstances.