Only in Ukraine and Belarus have still not implemented the European tariff regulation for electricity distribution media

Только в Украине и Беларуси до сих пор не внедрено европейское тарифное регулирование на распределение электроэнергии - СМИ

In Europe there are only two countries where it is not introduced incentive regulation (RAB-tariff) – Ukraine and Belarus. This is the cause of the significant depreciation of the electricity network and low quality of power supply in Ukraine. But the proposed National Commission, carrying out state regulation in the energy and utilities, the option of transition to RAB tariff is contrary to the successful European experience. This is referred to in a special project Agency “RBC-Ukraine” on stimulating the tariff.

Updating energy infrastructure of electrical networks, all European countries introduced the model of the catalytic RAB for energy companies-operators infarstructure, the authors write, citing a report by Ernst & Young.

In 2013, the most common approach to regulation in Europe was “the one that accepts the regulatory asset base (RAB) as its main structure.” Close to Ukraine starting conditions of the Czech Republic, Lithuania and Poland switched to incentive regulation in the early 2000s. Slovakia and Montenegro in 2007, Germany in 2009.

“The consequences have been positive: in most countries the time of power outage (SAIDI index) has fallen, capex and the value of the assets grew. In Romania for 10 years, SAIDI has demonstrated good dynamics: grew 2.5 times, from 1025 minutes (more than in Ukraine) to 474 in 2016, and the amount of investment per kilometer was $985 (in Ukraine – about $250)”, – stated in the article.

In Ukraine also offer to move to incentive tariff model. 29 April 2020, the regulator has adopted a draft transition to RAB tariff. In it the assets of the power companies are divided into new and old. New appeared in this year, the implementation of the new regulation, the old early. For old assets the regulator proposes to charge 1% profit on new – 15%.

The study authors analyzed the model and came to the conclusion that it is close to that which was proposed at the time of former President Viktor Yanukovych during the Premiership of Mykola Azarov, in 2013. Then there were two base assets: the “old” and “new.” The rate of return on “old” – from 0% to 2% for the methodology, for new – 14,79%. Such “attractive investment conditions” did not stimulate any of 32 Ukrainian companies-operators to move to a new model of regulation and reform was not implemented, according to the material.

“If the company thinks that the old asset is completely worn out in 10 years and no compensation, it makes no sense to modernize this asset. More profitable to invest in a new one. This approach threatens the existing infrastructure and, according to former U.S. Ambassador to Ukraine and senior Vice President of IHS Energy Carlos Pascual, “will lead to a crisis in electricity distribution in Ukraine,” the authors write.

The replacement methodology NKREKU experts offer the European version of RAB-tariff: not to divide the asset base of regional power and to apply a single rate of return. Rate, according to the respondents by Agency experts, should be at least higher than Bank deposits.

“If the investor chooses to invest his money in a risky business, like power companies, or to put in the Bank on Deposit at interest, the only additional benefit motivates him to invest,” – noted in the study.

Incentive regulation is a tariff mechanism based on long-term regulation of tariffs. This method is aimed at attracting investments for construction and modernization of infrastructure networks that transmit energy, and stimulation of efficiency of expenses distribution and supply companies.

According to the national Commission, the deterioration of the networks in Ukraine is 80%, said in 2017 the air NewsOne, the then Minister Dmitry Vovk.

According to the national Commission on energy since 2012, is considering a move to the stimulating tariff, but it is still not introduced.