The energy market turned on the brake?

Рынку электроэнергии включили тормоз?

To launch the new model of the electricity market remained little more than a month. But suddenly, the discussion focused on the fact that the date of the reform is to be postponed.

“Starting” July 1

In accordance with the decision taken two years ago by the Parliament law “On electricity market”, the market runs from 1 July. The reform of the market – one of the commitments made by Ukraine within the framework of the implementation of the EU Third energy package. We’re moving into a new competitive market model, which work in Europe. To market-based pricing, excluding policy, not quite transparent tariff setting. It was assumed that thus, in the electricity sector will be able to eliminate the space for potential corruption, as the rates will be formed as the result of the correlation of supply and demand.

According to the calculations of economists of the Institute for the future, the timely implementation of the commitments of Ukraine to launch electricity market could provide an additional increase Ukraine’s real GDP by 0.3% per year (about $ 5 billion), as well as additional revenues to the budget in taxes in the amount of 0.8-1.5 billion dollars annually (1.8-3.5% of the consolidated budget of Ukraine in 2018). In the long term (2019-2030 gg) the impact of the launch market is estimated to amount to additional GDP amounting to 72 billion dollars and additional income taxes in the amount of us $ 12 billion.

In addition, due to additional economic growth, creation of new jobs (approximately 100 thousand), the growth of wages at the enterprises of power and increase the investment attractiveness of the industry is expected an additional increase of income for the population in the amount of 18 billion dollars. While the average salary in the industry in 2021 (if the reform will be implemented in the scheduled period) will grow by 3.4% due to secondary effects from General economic growth and promote inward investment.

If we put reform on pause

Contrary to the statements of the Cabinet, the Ministry of energy, the national Commission and power companies about the readiness for the launch of the electricity market in the period, representatives of the new President was thrown the message that the market needs to be postponed. And in the Verkhovna Rada, began the registration of bills providing for the postponement: one with a proposal to defer the market on October 1, 2019 (authors – Alexander Dombrowski and the lion Pidlisetskiy), the second – already in April 2020 (the author Yuriy Chizhmar).

If the Parliament will vote for one of these proposals, Ukraine will get a lot of problems. First of all, with European partners, because they violate its responsibility is to them. The delay will also jeopardize cooperation with international financial organizations, without whose help to keep the national currency would be extremely difficult. In particular, at issue are two tranches of the IMF loan totaling $ 2.5 billion. And the termination of cooperation with the IMF will make it impossible to obtain “associated financing” – macro-financial assistance from EU (€0.5 billion), loans from the World Bank (€0.5 billion) and EBRD.

As for the economic component of the postponement of the launch market, for each year of deferment the country will not receive 6.5 billion dollars of GDP, $ 1 billion state budget revenues, $ 3.2 billion of capital investment.

It is easy to calculate how much it will cost initiatives the authors of the bills on the transfer market. GDP: a delay of 3 months is forgone GDP at $ 1.6 billion for 9 months – $ 4.9 billion. According to the state budget, the deferral of 3 months – the shortfall of budget revenues by 0.25 billion us dollars, 9 months is 0.75 billion. Generating companies (primarily “Energoatom” and “Ukrhydroenergo”) will receive less investment resources in the amount of $ 2.5 billion, and companies involved in distribution of electricity in the amount of $ 0.5 billion.

Look, who benefits

The initiative to postpone the launch of the electricity market is not accidental has arisen now, when on Bank together with the new President came a new team, and the country began to return the disgraced oligarchs and people from their surroundings. Igor Kolomoisky has a special interest in the electricity sector. He is the owner of Ferroalloy plants, in the production costs of which energy costs make up 40-50%, and to maintain high profitability low cost of energy is a key factor. The delay in the reform of the electricity market him as it is impossible by the way.

Kolomoisky is more than satisfied with the current status quo, with the prospect of tariffs to be set in “manual mode” through the influence of members of the national Commission, the composition of which can be fairly shake up in the case that the Commission would resist. And the successful experience of knocking out individual special rates for Ferroalloy enterprises he has signed in 2012 a Memorandum with the government allowed Kolomoisky few years to get electricity for their businesses at a reduced price.

In case of recovery the practice of manual regulation, low tariffs for Ferroalloy enterprises have to compensate for by increasing rates for companies in other industries. Ferroalloy plants – a very large electricity consumers. For example, at the Zaporozhye plant of ferroalloys accounted for half of the electricity consumption of the whole Zaporizhia region. Nikopol plant of ferroalloys consumes more electric power than in Ivano-Frankivsk and Ternopil regions together. And tariffs for the population is likely to grow.

The failure of the reform of the energy market, as well as the ongoing maneuvers around the return of control of PrivatBank, will inevitably lead to the termination of cooperation of Ukraine with international financial organizations. This year Ukraine must repay foreign debt of 5.3 billion, in 2020 – to 6.7 billion Without the IMF loans, World Bank and EU macro-financial assistance Ukraine will default on external public debt, which will lead to a significant devaluation of the national currency.

However, it also has a rational explanation – torpedoing the energy market and causing international financial institutions to open conflict, Igor Kolomoisky, paradoxically, pursuing quite clear benefits. A large part of its ferro alloys plants sell for export, for hard currency. In turn, the weakening of the national currency leads to an increase in the national currency equivalent of export revenue its energy-intensive enterprises.