Competition on the provider “of last resort” opened to the monopolist a way to capture the market and increasing gas prices 3 times
Market or monopoly? What will happen to gas prices?
Ukrainians will soon see an abnormal reduction in gas prices in their bills as the result of fierce price war between providers in anticipation of the launch on 1 August of the natural gas market. But the war will be short – lived- obligativity, which is now supplying gas to the population, and other market participants will inevitably be squeezed out by dumping on the part of Naftogaz, with huge reserves of cheap gas state.
However, experts warn, to enjoy low gas prices will have not more than a month after seizing a monopoly position, NAC, of which the state will no longer be able to control, will immediately drive the price of gas 3 times, and no mechanisms to restrain their growth will be no more. The first step towards this is made of Naftogaz became a supplier of “last resort”, selected in the competition little or no competition.
On 10 July, the energy Ministry announced the results of the contest for the supplier of “last resort”, which was attended by three of the participant: NJSC “Naftogaz of Ukraine”, and his “daughter” LLC “Gaziosmanpasa company “Naftogaz of Ukraine” (or just GK “Naftogaz”) and EGAS. Won GK “Naftogaz”, which will supply gas to the population for 2 711,86 per thousand cubic meters (including VAT). But in fact the victory over NAC.
“This “daughter” of “Naftogaz”. Why independent? – the Chairman of the Expert Council on development of gas industry and natural gas market, Leonid Unihovskiy. – Yes, formally, all right. But we do understand that this company is in the group of Naftogaz and will implement its strategy”.
The Association of energy suppliers called the discriminatory conditions of competition, issued exclusively by the “Naftogaz”. Thus, among the conditions indicated that the provider “of last resort” should be in the vaults of 3.5 billion cubic meters this volume of the resource that no single private player in the market, as well as the ability to obtain a Bank loan at low interest rates to purchase. Agree with this and other companies who have not participated in the contest, but plan to work in the market of gas for the population after its launch.
“In our opinion, the terms and conditions of participation in the competition for the “Supplier of last resort” (PON) are not competitive. Only one company currently meets is “Naftogaz”. First of all it is connected with the amount of collateral that exceeds the sum of 3.5 billion cubic meters of gas monthly supply. This condition actually removes from the participation of other market players,” – said General Director of energy provider Vladimir.
With market participants agreed and the first Deputy head of the Verkhovna Rada Committee on energy and housing and communal services Alexey Kucherenko: “Held a contest without competition. Win can only Naftogaz, as spelled out conditions monthly resource 3.5 billion cubic meters”.
The role of the provider “of last resort” is essential, due to the launch of the free market of gas for the population since August 1. The essence of this reform lies in the fact that the consumer will be able to choose their own supplier of gas on the basis of the proposals offered by the various market participants: someone may be below the price, someone more delay, someone special offer suggestions, etc.
However, the free market and it is possible that the supplier with whom the end user agreement, go bankrupt or leave the market. But the gas will still need to deliver, and this function as long as abandoned by the client will not find the new seller, just needs to fulfill the provider “of last resort”, which ensures continuity of gas supply.
It was expected that the supplier will offer prices 2-3 times higher than the market to offset risks and encourage consumers to look for a new supplier. But, as the price competition to sell gas, he’s going for almost the same price at which it supplied the population of gas in June – 2 784 per thousand cubic meters Is, of course, best price for customers, but traders stressed that this is the first step to capture the Naftogaz monopoly on the market.
“Proposals from the “Naftogaz” we see that this company plans to use the “Provider of last resort” as one of the sales channels. The zero margin in this segment suggests that “Naftogaz” wants to become a monopolist in the market of deliveries to retail consumers. Let’s see what tools and models they can offer to serve a large mass of customers. By itself, the position of PON with a mark of 0 or even 5% is not consistent with the ideology of “Provider of last resort”, which by definition assumes high risks associated with debt. We therefore believe that the proposal “Naftogaz” is a struggle for the monopoly on the retail market of gas” – draws the attention of Vladimir.
The capture of a monopoly
Thus, the status of “Provider of last resort” is the first step of “Naftogaz” to capture natural gas market, because the NAK this time as an ordinary market participant, and not the PONT, already offers gas directly to the Ukrainians to bypass algassimo which supply gas now. Moreover, if traders buy gas at market exchange rates, the NAC has gas, which produces for him the state company “Ukrgazdobycha”.
“”Naftogaz” it is not their gas markets, it fully controls the gas produced “Subsidiary” and, therefore, dominates the market. It is a subject to Antimonopoly Committee. Naftogaz does not give low prices for our gas, and was forced to reduce the price of Ukrainian gas, when Europe fell in price. I’m sure the company will try to squeeze everyone, especially obligativity. It has a gas resource, it will try to sell it at any price, to squeeze out all the vendors,” – said Kucherenko.
Indeed, the Ukrainian energy exchange natural gas this month is trading at a 4 121,42 UAH per thousand cubic meters In the same time “Naftogaz of Ukraine” is the Ukrainian gas cost about 1 000 UAH per thousand cubic meters. m, which allows him to offer people virtually any price below that which in principle can give obligativity. Ultimately, this will allow Naftogaz to squeeze obligativity and capture a monopoly position in the market.
“Aside from the provider “of last resort” and to analyze the overall situation, then I think we can draw the following conclusions. That group Naftogaz wants to take not less than 20% of the market of gas for the population, there’s nothing wrong. But the thing is, how to achieve it. Group Naftogaz has a powerful resource of about 13 billion cubic meters of gas per year. This production company to the subsidiary, which is included in group. One of the possible options, it is called dumping, that is selling gas at prices below those prevailing on the market. So to gain market share, then it is possible that prices will rise and in the end will be even higher than it could be on the market. That is why the resource company should have access to every player on the market, for example, through the mechanisms of exchange trading, including group companies Naftogaz of Ukraine”, – said Unigovskiy.
The fact that Naftogaz is using its monopoly position, and previously skillfully inflated prices for the population, even in spite of the governmental PSO-guarantees have been the subject of proceedings, the Antimonopoly Committee and investigative journalism. For example, from the end of 2018, the NAC overestimated the price of gas by almost 35%, which led to growth of payment for heating by 25%.
Last year, the NAK is pumped into underground storage, in addition to Ukrainian, also purchased in Europe expensive gas that you want to sell at a profit. Capture a monopoly position allows to achieve now. In the fall of the price of gas could grow by 3 times compared with the current, but in terms of monopoly “down” it, experts say, may already be and no one. After the market launch, the state will no longer be able to limit his monopoly Naka even government regulations.
“Don’t forget that Naftogaz has pumped in the past year, gas at a very expensive price – $200 per thousand cubic meters of This gas now in storage and it is a loss now is certainly not going to sell. Well, the month will still be a low price and all. Experts believe that gas will fall to 7.5 UAH, without markups,” – said Kucherenko.
The Verkhovna Rada