Part 2: Deregulation, REMIT and Connection to the Electricity Grid
In our previous publication, we analysed amendments in the energy markets introduced by 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 dated 14 January 2025 (Law), which relate to REMIT regulation and connection to the electricity grid. Below, we consider other key amendments in the electricity and gas markets provided by the Law.
Amendments to public information on the terms of connection to gas and electricity networks
From now on, gas TSO and DSOs shall publish and update information on the terms of connection to their networks on their websites. This requirement is already in place for the electricity TSO and DSOs.
Now, both the gas and electricity TSO/DSOs shall ensure the development of geoinformation systems with detailed information about their energy facilities (gas and electricity transmission and distribution systems).
This data should be integrated with the official geoportal of the national geospatial data infrastructure, the urban planning cadastre and the Unified State Electronic System in the Construction Sector.
Amendments regarding the suspension of enforcement proceedings in the electricity market:
For the period of martial law in Ukraine, collection of penalties (fines, interests), inflation index for the entire period of delay in the monetary obligation, 3% per annum of the overdue amount of the monetary obligation or other interest established by the contract or law is suspended, provided that the following conditions are met:
the monetary obligation occurred in the period between 24 February 2022 and 1 September 2024,
the debtors under monetary obligations are electricity market participants, the list of which is compiled by the Regulator based on the requests from electricity market participants. The Regulator publishes the list indicating the relevant court cases on its website.
The Law defines the list of contracts to which the above suspension applies.
Other changes in the energy sector
an approach to calculating the penalty for late payment of the Regulator’s fine has been changed and is now calculated based on the double discount rate of the National Bank of Ukraine instead of 1.5% of the fine for each day of delay. Law provision limiting the amount of penalty, which may not exceed the amount of the fine imposed by the Regulator, remains in force. The Law explicitly excludes the possibility of applying penalties for late payment of fines for abuse in WEM (violation of the established prohibitions on the use of insider information, manipulation and attempts to manipulate);
regulation of market participants that are part of a vertically integrated entity or are affiliated is simplified, namely, the requirement for such entities to inform the Regulator of essential terms of a bilateral agreement between them was cancelled. Such notification will now be included in the reporting under REMIT. Law provision on the Regulator’s right to set a limit on the monthly volume of electricity sales under bilateral contracts between market participants that are part of a vertically integrated business entity or are affiliated has also been cancelled;
provision exempting importers from the mandatory monthly volume of electricity sales in the day-ahead market was extended until 1 April 2025;
in the field of "green” auctions regulation: the maximum amount of the annual support quota that may be received by one auction participant or participants with a common ultimate beneficial owner (controller) was increased from 25% to 50%;
regulation of the activities of an active consumer with an installed capacity of generating facilities exceeding 1 MW was amended to remove a restrictive provision, which provided for the loss of the active consumer status for one year if the volume of electricity output to the grid by the consumer’s facilities exceeded 50% of its consumption in the previous calendar year;
until 1 January 2028, active consumers and third parties connected to the networks of active consumers are entitled to generate electricity without a licence if the installed capacity of generating facilities at one metering site does not exceed 20 MW, such generation is considered to be for their own needs;
an approach to the utilisation of energy storage facilities by producers without a separate licence for energy storage has been amended, in particular, such facilities may now also withdraw electricity from the TSO/DSO networks, provided that at any given time, the total capacity of output to the TSO/DSO network or withdraw from the TSO/DSO networks does not exceed the capacity ordered for connection, and considering the permitted (contractual) capacity of production/consumption of electricity of such producer’s electrical installations at the place of its licensed activity under the connection agreement; it is also necessary to have separate commercial metering of electricity to/from the storage facility.
This approach applies to producers (i) from RES under feed-in tariff and who left the balancing group of the Guaranteed Buyer, (ii) who acquired the right to support based on the results of the "green” auction, (iii) who are not entitled to support. Amendments do not apply to RES producers under feed-in tariff and which are part of the balancing group of the Guaranteed Buyer;
the term "electricity facility” has been expanded to include energy storage facilities;
a new term "unauthorised electricity withdrawal” is introduced at the electricity market – which is electricity withdrawal in the absence of a concluded and valid electricity supply agreement or in case of unauthorised connection to the electricity networks of the TSO/DSO outside the consumer’s commercial metering facility. This violation is included in the list of offences in the electricity market. The TSO/ DSOs are obliged to disconnect the power supply in this case;
amendments in the interaction with the supplier of last resort, namely:
a separate procedure for interaction with the supplier of last resort has been established for protected consumers and critical infrastructure facilities, under which the term of electricity supply by the supplier of last resort may exceed 90 days (such a limitation is set for other consumers) if such a consumer opens an account with a special regime of use and has current accounts only in the respective bank (where the special account is opened) and/or in the Treasury. The supplier of last resort may request information from the State Tax Service on all accounts of the respective consumer.
until 1 January 2028, special conditions for the interaction of the supplier of last resort with protected consumers and consumers with critical infrastructure facilities apply to consumers whose lists are approved by the procedure established by law;
regulation of services based on the market premium mechanism stipulates that the premium is not charged for the volumes of electricity supplied by the energy storage facilities;
for the period of martial law, the TSO’s excess income for dispatch (operational and technological) management in 2023 and 2024 will be distributed as follows: 45% for repayment of the TSO’s debt in the balancing market; 45% for the TSO’s settlements with the Guaranteed Buyer under the agreement on support of producers at the FIT and the market premium mechanism; 10% for the TSO’s settlements with the suppliers of universal services for further settlements with private households producing electricity from RES;
procedure for installation and connection of third-party’s generating and storage units to the grids of state/municipal facilities, which shall be carried out by leasing state/municipal property or land plots (their rights) for placement of generating/storage units with a mandatory purchase by the state/municipal entity of the entire volume of the produced electricity, whereby such relations do not constitute electricity supply to the consumer (i.e., no licence is required);
the Law provides for the possibility of connecting third-party cogeneration units with a capacity of up to 20 MW to the networks of electricity producers and/or heat supply organisations (which also perform heat transmission activities), as well as mechanisms for interaction between the said entities regarding the production/sale/consumption of electricity generated by the cogeneration unit, subject to the requirements set out in the Law.
Entry of amendments into force
The above amendments entered into force on 9 February 2025, except for:
the provisions of the Law relating to unauthorised electricity withdrawals, which shall enter into force two months later;
provisions relating to the development and implementation of geoinformation systems by grid operators shall come into force six months after the termination or cancellation of martial law in Ukraine.
Within four months from the date of entry into force of the Law, the Government shall ensure the adoption of regulations necessary to implement the Law.
Within six months from the date of entry into force of the Law, the NEURC shall bring its regulations in line with the Law and take measures to regulate the issues within its competence.
Conclusions
In general, amendments provided for by the Law aim to deregulate and simplify activities in the electricity and natural gas markets, as they abolish several restrictive rules that market participants have pointed out as obstacles to their activities. Additionally, the Law establishes regulation of new schemes of interaction between participants, the effectiveness of which is to be determined in practical interaction.