This publication has been produced with the assistance of the European Union in the framework of the

EU4Energy Initiative and with the support of the International Renaissance Foundation. The contents of

this publication are the sole responsibility of NGO “DIXI GROUP”, as well as Civil Network “OPORA”, All-

Ukrainian NGO “Energy Association of Ukraine”, Resource & Analysis Center “Society and Environment”,

Association “European-Ukrainian Energy Agency”, and can under no circumstances be regarded as

reflecting the position of the European Union and/or the International Renaissance Foundation.

The EU4Energy Initiative covers all EU support to improve energy supply, security and connectivity, as well

as to promote energy efficiency and the use of renewables in the Eastern Partner countries Armenia,

Azerbaijan, Belarus, Georgia, Moldova and Ukraine. It does this by financing projects and programmes that

help to reform energy markets and to reduce national energy dependence and consumption. Over the longer

term, this makes energy supply more reliable, transparent and affordable, thus reducing energy poverty and

energy bills for both citizens and the private sector. More information on: www.EU4Energy.eu

The project “Enhancing impact of civil society in monitoring and policy dialogue on energy and related

sectors’ reforms in line with the Association Agreement implementation” aims at strengthening the role

of civil society in advocating reforms in the energy and related sectors.

The key objectives of the project are:

• monitoring of the implementation of the energy provisions of the Association Agreement, including

relevant environmental and trade-related commitments;

• strengthening the civic experts’ and local actors’ capacity to track actual implementation of the

reforms;

• facilitation of public dialog to lead in proper implementation of the European energy and

environmental reforms;

• informing stakeholders and the Ukrainian society about the meaning and potential benefits of

European reforms in energy and related sectors in order to empower them to keep the government

accountable for pursuing these reforms.

The Project is supported by the European Union within the framework of EU4Energy initiative and co-

funded by the International Renaissance Foundation

www.enref.org/en

Executive Summary

Experts from the Gas task force drew attention to the government’s decision, which resumed lower

standards of gas consumption for consumers without meters, having applied them retroactively - from

August 2018. For the first time in many years, test gas exports from Ukraine have also been conducted. At

the same time, Naftogaz actions to create TSO in the form of LLC and discussions on the new unbundling

model have not yet added significant dynamics to the process.

The Electricity and Nuclear Safety task force draws attention to the fact that the first month of operation of

the retail electricity market has not yet become indicative, but has already revealed some problems with the

organization of contracting with supplier of last report. The state-owned coal sector in 2019 may increase

the rate of debt accumulation, and the extension of the moratorium on bankruptcy without a systemic public

policy to bring the state coal sector out from the financial crisis and without billions of investments may in

turn become the only way not to pay the bills.

Experts from the Energy Efficiency and Social Issues task force believe that, given the virtually no progress

in the implementation of EU energy efficiency legislation, the government’s inability to develop and

implement an effective monetization model supporting most vulnerable consumers of energy provides the

basis for further politicization of this issue on the eve of the elections.

In the field of Environment, the first step towards the implementation of EU legislation in the field of ambient

air has been made. In the area of Renewable Energy Sources, the Energy Community strongly supports the

need to move from the feed-in tariff currently in force in the Ukrainian legislation to a competitive system

based on “green” auctions.

The Oil and Oil Products Sector experts congratulate the successful implementation of pilot project on the

sale of special permits for the use of oil and gas subsoil by e-tenders, in particular the placement of 17 lots in

ProZorro.Sale system and the decision to announce 12 tenders for the conclusion of production sharing

agreements. However, experts are concerned about the failure to comply with the deadlines for the

implementation of tasks set out in the implementation plans of Directives 2009/119/EC, 99/32/EC, 98/70/EC

and 94/63/EC; the absence of all orders specified by the government’s resolutions and orders in the relevant

sphere in the plans of regulatory activities of public authorities in 2019; non-compliance of the Ministry of

Energy and Coal Industry, the Ministry of Environment and Natural Resources, the State Service for Geology

and Mineral Resources with the key principles of the state regulatory policy in preparation of draft

documents aimed at the implementation of Ukraine’s international obligations.

The Business Climate task force once again records the introduction or improvement of e-services, which is

definitely a positive change for companies. In the reporting month, the ProZorro system has been improved

in terms of structuring the database, and the Single State Registry has been supplemented with new

information about companies.

Most used abbreviations:

CcSUP – Complex (Consolidated) Safety Upgrade Program of Power Units of Nuclear Power Plants CSNFSF – Centralized Spent Nuclear Fuel Storage Facility DHC – district heating company DSO – distribution system operator EBRD – European Bank for Reconstruction and Development ESCO – energy service company GTS – gas transportation system IAEA – International Atomic Energy Agency KhNPP – Khmelnytskyi Nuclear Power Plant MBCA – multi-apartment building co-owners association NEURC – National Energy and Utilities Regulatory Commission

NNEGC - National Nuclear Energy Generating Company NPP – nuclear power plant NSC – New Safe Confinement PSO – public service obligations RNPP – Rivne Nuclear Power Plant SAEZM – State Agency on Exclusion Zone Management SE – state enterprise SSE – state specialized enterprise TSO – transmission system operator UES – United Energy System of Ukraine VAT – value-added tax WANO – World Association of Nuclear Operators

Gas

There was no significant activity of lawmakers in reforming the gas sector with the coming of the new year. MPs did not consider draft laws in this field in January, only registered several initiatives, mainly related ones, as in the end of 2018, with the gas price households and the mechanisms for repaying debts for its consumption.

Meanwhile, the Cabinet of Ministers approved the size of the reserve gas stocks for 2019, resumed lower levels of gas consumption standards for households without meters (which were valid from 2016 until they were canceled by the court in the summer of 2018), and restricted the current term of office of the Naftogaz board to March 2019.

At the same time, in January, the regulator’s activity was mostly concentrated on licensing, with more than 20 resolutions adopted, as well as on monitoring of the transition to daily balancing.

Naftogaz has clarified and made public its own view of the unbundling concept, which is based on concession and conforms to the ISO (Independent System Operator) model. In addition, another step was taken to implement the unbundling roadmap: under JSC Ukrtransgaz, a new legal entity - the gas transmission system operator was created in the form of LLC.

The delegation of Ukraine took part in trilateral negotiations on the contract for gas transit by the Ukrainian gas transmission system after 2019, which did not reach results, but came to nothing more than communicating the positions of the parties. The European party reaffirmed its commitment to European principles, expressed its support for Ukraine’s requirements, and for the first time, in person, demonstrated its interest in preserving the existing level of supplies to the EU though Ukrainian gas pipelines.

Against the background of lower transmission tariffs for entry and exit points, for the first time in history, test gas exports from Ukraine have been implemented.

Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (Art. 338, 341, Annex XXVII of the AA) in accordance with Art. 278 of the AA

The first legislative initiative in the gas sector, registered by the Verkhovna Rada in 2019, implies indirectly the regulation of the price of gas for the population, as it consists in the proposal to limit the total monthly cost of housing and communal services by 10 per cent of the monthly total income of the household (draft law No. 94631).

The second draft law (No. 95002) concerns the other side of the gas supply problem - the presence of significant, multibillion-dollar debt to Naftogaz for the gas already supplied in the previous periods3. Referring to the tendency of increasing arrears, the author4 emphasizes the need to legislatively provide additional mechanisms for its repayment (except for court ones). It is proposed to amend the Law On the Natural Gas Market in order to secure for Naftogaz, as the subject of the regulation on public service obligations (PSO), the opportunity to sell the right to claim the debt for consumed gas at electronic bids in the ProZorro system. At the same time, these changes provide for that the right to claim the debts of heat producers, which have arisen through the debt of state or local budgets in the difference in the tariffs for heat energy, cannot be sold.

Finally, the third draft law registered in January (No. 95015) is essentially another attempt to introduce a single register of gas consumers, which will be maintained by “business entity engaged in natural gas

1 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=65318 2 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=65373 3 E.g., at the beginning of January 2019, the total overdue debt of only enterprises of DHCs and CHPs to Naftogaz was almost UAH 29 billion, regional supply companies - about UAH 18.5 billion(http://www.naftogaz.com/www/3/nakweb.nsf/0/3C0009703C11D36BC225837700494062?OpenDocument&year=2019&month=01&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8&) 4 MP Tetiana Chornovol 5 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?id=&pf3511=65377

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transmission”, this time - in the form of a separate consumer information database and the volumes of gas consumed by them, formed taking into account the requirements of personal data protection. Data for this database will be required to be provided by “business entities engaged in natural gas distribution in the relevant territory and natural gas suppliers”. It is provided for to make the relevant amendments to the law on commercial metering of natural gas.

The Cabinet of Ministers ordered natural gas suppliers (Resolution No. 356), in the event of a crisis situation in the gas market in 2019, to create the reserve gas stock with the volume of 10% of the planned volume of gas supplies to consumers for the following month (that is, it left the same size of the reserve gas stock the same, as in 2018).

In parallel, according to the media7, the government has decided to return to the lower level - 3.29 cubic meters/person (instead of 9.8 cubic meters per person after the court decision8) - monthly standard of gas consumption for households not equipped with meters (before canceling in court the CMU Resolution No. 203 dated March 23, 2016, the standard of 3.3 cubic meters/person, regulated by this resolution, was valid). In addition, the Government recommended that Naftogaz install gas meters to all consumers, and, as the media reported9, according to the government’s decision, Naftogaz should provide consumers with individual meters, together with DSOs. The text of the resolution published later refers to the recommendation of Naftogaz to predict these expenditures in its financial plan10.

Taking into account the final transition of registration of licensing and permitting procedures from paper to electronic form, the Government decided to complete the information about the business entity with data on their availability in the unified state register and approved the procedure for the introduction of these data into the Single State Registry by the licensing authorities, including the energy regulator (Resolution No. 4711). The mechanism approved by the Government will allow integration of information from dozens of registers of various authorities into the Single State Registry12. Due to this, the Single State Registry will contain comprehensive information about the business entity and all its activities.

The Cabinet of Ministers also approved the order (No. 9-r13), which established the term of office of the top management of Naftogaz, including the chairman of the board, his first deputy and deputy - until March 22, 2019.

The process of encouraging foreign partners to invest in the gas extraction sector, initiated by the Government, is still going on. The State Service for Geodesy, Cartography and Cadastre officially announced the launch of the 2nd round of electronic oil and gas auctions for international companies14, during which 7 licensed plots with projected resources of over 2 bcm of gas will be put up for a tender in the ProZorro system. According to the results of the Ukrainian Forum on Natural Gas Exploration and Production, held in London on January 29, 201915, the interest of foreign companies in the production of hydrocarbons in Ukraine is increasing.

The memorandum, signed in January by the heads of state regulators – of energy (NEURC) and the stock

6 https://www.kmu.gov.ua/ua/npas/pro-zatverdzhennya-rozmiru-strahovogo-zapasu-prirodnogo-gazu-na-2019-rik 7 https://economics.unian.net/energetics/10427268-ukraincam-vernuli-normu-potrebleniya-gaza-v-3-29-kubometra-na-cheloveka.html 8 Resolution of the Higher Court No. 826/2507/18 of 27.11.2018 (https://zakon.rada.gov.ua/rada/show/v2507780-18#n2) 9 https://www.bbc.com/ukrainian/news-47053792 10 https://www.kmu.gov.ua/ua/npas/deyaki-pitannya-spozhivannya-prirodnogo-gazu-pobutovimi-spozhivachami 11 https://www.kmu.gov.ua/ua/npas/pro-vnogo-reyestru-yuridichnih-osib-fizichnih-osib-pidpriyemciv-ta-gromadskih-formuvan-

vidomostej-pro-licenzuvannya-vidu-gospodarskoyi-diyalnosti-dokumenti-dozvilnogo-harakteru 12 Only in the licensed register of the gas sector, maintained by the NEURC (http://www.nerc.gov.ua/?id=11957), as of February

2019, 569 licensees (521 – in natural gas supply, 46 – in distribution, 2 – in gas transmission and storage) were registered. 13 https://www.kmu.gov.ua/ua/npas/pitannya-publichnogo-akcionernogo-tovaristva-nacionalna-akcionerna-kompaniya-naftogaz-ukrayini 14 http://www.geo.gov.ua/v-londoni-kerivnik-derzhgeonadr-oleg-kirilyuk-predstaviv-7-naftogazovix-dilyanok-dlya-mizhnarodnix-kompanij/ 15 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article;jsessionid=71B6668F76EA6A53101A6F00499B3444.app1?art_id=245

338464&cat_id=35109

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market (NSSMC), approaches changes in the area of organizing exchange trade16. The document laid the foundation for closer coordination of these regulatory bodies in the process of reforming and developing energy and financial markets, developing common effective mechanisms, mutual consultations and information cooperation.

Within the framework of the extension of the gas licensing campaign, the NEURC registered 4 new natural gas suppliers (Resolutions No. 317 and No. 8018) in January, after which the total number of gas supply licensees reached 521. At the same time, according to the results of inspections of compliance with licensing conditions, the regulator imposed fines on five suppliers (Resolutions No. 76-79 and No. 107)19. PJSC Ukrnafta (non-compliance with the quality standards of the natural gas supplier, rules for placing information on the website and reporting requirements: in the end - a fine of UAH 255,000) is among penalized entities20.

In addition to the aforementioned, the NEURC appointed unscheduled inspections of two DSO from the Regional Gas Company (RGC) group - Dnipropetrovskgaz and Zaporizhgaz (Resolutions No. 109-110)21, as regards which they received the relevant letters from the State Regulatory Service, and also adopted 9 more resolutions (No. 67-75)22, for approval of plans for the development of gas distribution systems of other DSOs.

As a result of the monitoring of the natural gas market, which is regulated by the Regulator on a regular basis, it was reported23 that the maximum price of natural gas for consumers not subject to PSO (excluding tariffs for natural gas transportation and distribution), in December 2018, in comparison with November 2018, did not change and amounted to UAH 15,523.54 per tcm (VAT included).

At the same time, according to the media, the average price of gas imported into Ukraine in November 2018 was the highest (336 USD/tcm), and in December, it decreased - to 323 USD/tcm24. During 2018, the average monthly price of imported gas varied, depending on the volume of its purchase. In general, gas traders cleared 9.3 bcm of gas from Europe last year25, of which Naftogaz - 6.44 bcm (about two thirds)26. At the same time, according to Naftogaz27, Ukraine has purchased 10.6 bcm of gas from the European direction in total.

Naftogaz published new price proposals for February 201928. Compared with January 2019 prices, for February, gas prices for industrial and other consumers that do not subject to PSO were reduced by 3.2-3.3%. According to the new price list29, the price of gas as a commodity (VAT included) was established from February 1, 2019 at the following levels: for monthly gas needs up to 50 tcm inclusive - UAH 11,458.8 per tcm; in the absence of debt to Naftogaz and monthly needs from 50 tcm: a) without prepayment - also UAH 11,458.8 per tcm; b) on condition of pre-payment30 - UAH 10,460.4 per tcm.

16 https://www.nssmc.gov.ua/2019/01/29/nktspfr-ta-nkrekp-koordinuvatimuty-rozbudovu-efektivnih-mehanzmv-brzhovo-torgvl-na-energetitchnomu-ta-fnansovomu-rinkah-ukrani/ 17 http://www.nerc.gov.ua/index.php?id=37913 18 http://www.nerc.gov.ua/?id=38237 19 http://www.nerc.gov.ua/?id=37896 20 http://www.nerc.gov.ua/?id=38405 21 http://www.nerc.gov.ua/?id=37896 22 http://www.nerc.gov.ua/?id=37896 23 http://www.nerc.gov.ua/?news=8648 24 https://biz.censor.net.ua/resonance/3108322/kak_ukraina_importirovala_prirodnyyi_gaz_v_2018_godu 25 As of the end of 2018, the number of importing traders clearing gas through the customs reached for 26 https://biz.censor.net.ua/resonance/3108322/kak_ukraina_importirovala_prirodnyyi_gaz_v_2018_godu 27 http://www.naftogaz.com/www/3/nakweb.nsf/0/2AFFDE2203E7BBA3C22583900050CD59?OpenDocument&year=2019&month

=01&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 28 http://www.naftogaz.com/www/3/nakweb.nsf/0/C29D76AA5C4A5247C225836A0055E7E7?OpenDocument&year=2018&month=12&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 29 http://www.naftogaz.com/files/Information/Naftogaz-gas-prices-ne-PSO-February-2019.pdf 30 Payment during the calendar month preceding the month of gas supply

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Regulation (EC) No. 715/2009 on conditions for access to the natural gas transmission networks, replacing Regulation (EC) No. 1775/2005 (Art. 338, 341, Annex XXVII of the AA) according to Art. 278 of the AA, trade issues (Art. 269-274 of the AA)

At the forum in Davos, the CEO of Naftogaz A. Kobolyev introduced the community with the unbundling option, proposed by the company, which provides for concessioning of GTS31. According to A. Kobolyev, this option has already been discussed with representatives of the European Commission, and it will be presented to the general public in early February. Although, according to the head of Naftogaz, the implementation of the concession option will require some changes to the legislative field, this scenario is aimed at minimizing them, it is well in line with the ISO model and does not require the transfer of ownership of the GTS (as is determined by the OU (Ownership Unbundling) model). The final word in the choice of model rests with the Cabinet of Ministers.

Within the framework of the implementation of the next stage of the unbundling roadmap32 (to ensure the legal separation of TSO), Naftogaz created a new company in the ownership structure of Ukrtransgaz - LLC Gas Transmission System Operator of Ukraine33, the manager of which, under the terms of the term contract, was P. Stanczak. This is exactly the structure that, after implementing the mission of testing the operation of TSO as a separate legal entity (within Naftogaz) during 2019, will be transferred to PJSC MGU from January 1, 2020. Naftogaz plans not only to complete unbundling by the end of 2019, but also involve an international partner into managing the gas transmission system34.

In the context of transition to a new regime of the GTS balancing, the regulator planned to carry out the January scheduled inspection of JSC Ukrtransgaz in January35, in spite of the low activity of the market participants in the implementation of transactions, provided for by the daily balancing, through the information platform of the TSO, incident of duplication of submitting nominations and disconnection of platforms, other deficiencies revealed during deployment, as well as complaints about the technical imperfection of the information platform of Ukrtransgaz of a representative of DSOs from RGC group36.

In January, the urgency of operational control of the readiness of TSO and its platform to implement the daily regime only increased. Having received the approval of it by the State Regulatory Service, according to media37, the NEURC was aiming to start the inspection from January 10. However, Ukrtransgaz refused to admit the commission representatives, referring to the violation of the periodicity terms of such verification, and offered to perform an unscheduled inspection38.

The Regulator did not acknowledge that its representatives were not legally allowed for a scheduled inspection, rejecting the arguments given, and applied the maximum possible fine for violation of licensing conditions of activities against JSC Ukrtransgaz twice: gas transportation - UAH 850,000 (Resolution No. 4039) and gas storage - also in the amount of UAH 850,000 (Resolution No. 4140).

According to the media41, the NEURC did not give up its intention to check the readiness of the information of the TSO platform, now during an unscheduled inspection, but after the start of the daily balancing, that is, after March 1. Thus, the responsibility for the readiness and working status of the information platform as of this date lies entirely with Ukrtransgaz, however, the Regulator promises sanctions for users of the platform too. “If other market participants do not comply with the requirements of the current legislation and work

31 https://interfax.com.ua/news/economic/561238.html 32 http://www.naftogaz.com/files/Information/Operator-GTS-2018-12-19-Unbundling.pdf 33 http://utg.ua/utg/media/news/2019/01/at-ukrtransgaz-zavershyv-chergovyi-etap-vidokremlennya-operatora-gts.html 34 https://www.facebook.com/andriy.kobolyev/posts/10156317453513440 35 https://daily.rbc.ua/rus/show/igra-strelki-pochemu-ukraine-gazovogo-rynka-1544553515.html 36 https://www.rbc.ua/ukr/news/regulyator-poyasnil-perenos-sutochnoy-balansirovki-1544606374.html 37 http://ua-energy.org/uk/posts/ukrtranshaz-ne-dopustyv-na-perevirku-nkrekp 38 http://utg.ua/utg/media/news/2019/01/ukrtransgaz-zaklykae-nkrekp-pereviryty-hotovnist-do-perekhodu-na-dobove-balansuvannia.html?fbclid=IwAR2A5RNIET7J-hvMdF4e1leEdQAFKcg4EkEzObLaW1wc7QBzCQgmaawEQTQ 39 http://www.nerc.gov.ua/?id=38051 40 http://www.nerc.gov.ua/?id=38052 41 http://ua-energy.org/uk/posts/rehuliator-pereviryt-ukrtranshaz-navesni

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in the working information platform, they will be inspected and punished for it,” the NEURC member O. Formagei noted42.

On January 18, Ukrtransgaz reported that it started preparing the information platform for the switching from the testing regime to the real mode of daily balancing, and the preparation process provides for that, after February 5, that is, at the moment when all the applications (nominations) for February will be received and confirmed by TSO, the practical initial registration of gas consumers will start on the information platform, and the function of reserving a consumer to a supplier in the test mode will be blocked43. On the other hand, on 25 January, Ukrtransgaz reported on the state of complete readiness of the information platform before switching to daily balancing44.

At the same time, according to Ukrtransgaz data, at the beginning of February 201945, problems with the filling in of databases by DSOs were not solved: only 1 out of 44 DSOs provided full information, 7 DSOs did not submit information to the system at all. The average indicator in terms of entering data on gas withdrawal and consumption did not exceed 72%.

Establishing temporary tariffs of Ukrtransgaz, reduced more than twice, for natural gas transmission for entry and exit points at the end of 2018 encouraged gas traders to initiate a preparatory process for testing the possibility of gas exports from Ukraine. According to ICIS46, a number of companies planned to investigate the readiness of the operator of the Ukrainian GTS and customs regimes for new types of operations on the exports to Hungary and Slovakia. Ukrtransgaz itself also started negotiations with the Polish TSO - Gaz-System, in order to provide transit flows (forward flow/reverse flow) through the interconnector in Hermanowice on the border with Poland.

At the end of January, TAS Energia Krainy (TAS Group) carried out the first gas export to Europe in the process of testing for the past 13 years in the direction of Slovakia. Metalex Limited was a buyer of gas in test exports47.

On January 28, experts from the Energy Community Secretariat presented the results of the report developed under the EU4Energy initiative48 aimed at improving the regulatory environment in the Ukrainian gas market by harmonizing existing legislation with the EU legal norms. The report provides the best practice of monitoring the activities of DSOs and small gas suppliers by regulators of countries of the EU and the Energy Community.

Directive 2004/67/EC concerning measures to safeguard security of gas supply (Art. 338, 341, Annex XXVII of the AA), action of “Early Warning Mechanism” (Annex XXVI of the AA), actions in emergencies (Art. 275-276, 309, 314 of the AA)

Despite the intensive natural gas withdrawal from storage facilities in the first month of 2019 (the volume of the last two weeks of January, respectively, amounted to 629 mcm49 and 587 mcm)50, according to Naftogaz,

42 Ibid. 43 http://utg.ua/utg/media/news/2019/01/ukrtransgaz-rozpochynae-pidgotovku-info-platformy-do-perehodu-v-rezhym-dobovogo-balansuvannya.html 44 http://utg.ua/utg/media/news/2019/01/status-testuvannya-informaciinoi-platformy-dobovogo-balansuvannya-v-perod-14-20-

01-2019.html 45 http://utg.ua/utg/media/news/2019/01/status-testuvannya-informaciinoi-platformy-dobovogo-balansuvannya-v-perod-21-27-

01-2019.html 46 https://economics.unian.ua/energetics/10424625-ukrajinski-gazovi-kompaniji-gotuyutsya-do-testuvannya-eksportu-gazu-do-yevropi.html 47 http://reform.energy/news/tas-energiya-strany-osushchestvila-pervyy-eksport-gaza-iz-ukrainy-v-es-10454 48 https://energy-community.org/news/Energy-Community-News/2019/01/29.html 49 https://www.facebook.com/822906361122484/posts/2110627829016991/ 50 http://www.naftogaz.com/www/3/nakweb.nsf/0/49F1A17E8104B97FC225839400354269?OpenDocument&year=2019&month=

02&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8&

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at the beginning of February, 11.2 bcm of gas remained in storage facilities. Such a level of reserves in the storages of Ukraine is sufficient for the stable going through 2018/19 heating season.

The long-awaited negotiations on an agreement on the continuation of transit of Russian gas to Ukraine’s GTS after 2019, held in Brussels in a trilateral format (EU-Ukraine-Russia) on January 2151, were preceded by the breakdown by Gazprom of technical trilateral consultations at the expert level scheduled for January 1552. Considering this as preparation for the negotiation process, it is not surprising that Gazprom’s main position, outlined during the second round of such negotiations, was the assertion of the fact that, as before, it does not recognize the decisions of the Stockholm arbitration, and offers Naftogaz simply to “extend the current contract” without any consultation and without any warranty53.

The Ukrainian side, in consensus with the European Commission, stressed the need to conclude a new long-term agreement from 2020, in compliance with the norms of European legislation. And this provides for, in particular, the conclusion of interconnection agreements, standard for the EU, already implemented in the Ukrainian legislation, between operators of the Ukrainian and all neighboring GTSs. The EU position was voiced by the Vice-President of the European Commission on Energy Issues M. Sefcovic at the talks. For the first time, the European Commission officially confirmed its interest in maintaining the transit volumes of the Ukrainian GTS, which are not lower than the current level (60-90 bcm per year)54. Two other key parameters are the terms of the contract and the tariff for transit (M. Sefcovic did not mention precise figures at the briefing).

The next round of talks is scheduled for May 2019. The European Commission called on the parties to work on the proposals announced by M.Sefcovic and to move within the legal framework.

Meanwhile, German auditors, representatives of TÜV SÜD international certification body, confirmed the compliance of the Ukrainian GTS with international standards after conducting a supervisory audit at Ukrtransgaz facilities in January 201955. The audit did not reveal significant inconsistencies in the functioning of quality management systems, labor safety, environmental management and energy management of the company, on the contrary, a positive tendency in the development of these systems was noted. As a result, it can be stated that JSC Ukrtransgaz is a reliable partner and safely operates Ukraine’s GTS at the acceptable level from the point of view of energy saving.

The Ministry of Energy and Coal Industry developed and published56 draft amendments to the procedure for the implementation of technical and preventive measures for the safe operation of gas supply systems in order to improve them.

51 http://www.naftogaz.com/www/3/nakweb.nsf/0/C96B6AC7921F1BD5C22583890055A24B?OpenDocument&year=2019&month

=01&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 52 https://www.facebook.com/lana.zerkal/posts/2316697731696724 53 http://www.naftogaz.com/www/3/nakweb.nsf/0/C96B6AC7921F1BD5C22583890055A24B?OpenDocument&year=2019&month

=01&nt=%D0%9D%D0%BE%D0%B2%D0%B8%D0%BD%D0%B8& 54 https://www.rbc.ua/ukr/news/bryusselskiy-format-nak-gazprom-dogovarivayutsya-1548119962.html 55 http://utg.ua/utg/media/news/2019/01/ukrtransgaz-pidtverdyv-vidpovidnist-chotyriom-mizhnarodnym-standartam-yakist-

ekologichnist-bezpeka-praci-ta-energetychnyi-menegment.html 56 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245333113&cat_id=35082

Gas

Acquis update

On 31 October 2018, the European Commission approved the decision of the Government of Lithuania

on compensation to LITGAS for special obligations imposed on the company to supply liquefied natural

gas via LNG terminal in Klaipeda. Changes in the scheme of the purchase of compulsory volume of gas

that will be valid until the end of 2024 were evaluated in accordance with EU rules on state aid for services

of general economic interest. The European Commission also found that changes to the original scheme,

including the cancellation of obligations of heat and electricity producers to purchase a part of gas from

LITGAS, will improve the competitiveness of the Lithuanian market.

On November 8, 2018, the European Commission approved the state aid measures for the governments

of Bulgaria and Greece, aimed at supporting the construction and operation of the interconnector (the

IGB project). The project will promote security and diversification of energy supplies without excessive

distortion of competition. The measures approved by the European Commission include both loan

guarantees and direct budget financing and special tax treatment for 182 km Interconnector with the

capacity of 3 bcm of gas per year, with the prospect of expanding to 5 bcm.

On November 20, 2018, the European Commission announced the receipt of applications of infrastructure

projects for inclusion in the list of projects of common interest of the EU. Projects being applicants should

be included in the ten-year network development plan approved by the ENTSOG and aimed at

strengthening the EU internal market, improving the security of supply. The receipt of applications was

closed on January 16, 2019, the results will be approved by the end of 2019.

On January 23, 2019, under Connecting Europe Facility (CEF) program, the EU allocated EUR 800 million

for energy infrastructure projects, including almost EUR 215 million for the construction of Poland-

Denmark sea interconnector (Baltic Pipe project), EUR 44 million for the modernization of Incukalns

underground gas storage facility in Latvia, EUR 27 million for the expansion and modernization of the GTS

of Bulgaria.

Electricity and Nuclear Safety

From January 1, 2019, the retail electricity market started operating in accordance with the Law on Electricity Market. The first month of work has shown some difficulties for consumers who are connected to TSO networks and to power generators, and for supplier of last resort. The Regulator and the WEM Council responded promptly. State-owned mines, which became consumers of the supplier of last resort, increase the rate of accumulation of debt for electricity. The day-ahead market operator program started its work in a test mode.

Directive 2009/72/EC of 13 July 2009 on common rules for the internal market in electricity and repealing Directive 2003/54/EC (Art. 269, Chapter 11, Section IV of the EU-Ukraine Association Agreement)

Since January 1, the retail electricity market has started its work. SE Ukrinterenergo, as supplier of last resort, determined by the Cabinet of Ministers in January 2019, began to publish information about consumers which switched to supplier of last resort. The average number of consumers which got supplier of last resort - 15-25 for each DSO. There are such DSOs, where 30-40 industrial consumers were not able to choose a supplier, but the sad record was set by the Zaporizhia region, where there are more than 500 such consumers57.

At the beginning of the year, the government approved a revised financial plan of SE Energorynok. The plan provides for financing measures to ensure the operation of the new electricity market. This, first of all, is the material support of Market Operator affiliate for the purchase of office equipment, server and switching equipment, as well as software and licenses necessary for the operation of the day-ahead market and the internal market.

SE Energorynok will create two clusters for data storage - the main and backup one, with automatic backup. Both SE Energorynok and Guaranteed Buyer affiliate will be provided with anti-virus software and other information security systems58.

In October 2018, SE Energorynok entered into an agreement with the winning bidder SFERA a.s. (Slovak Republic) for the purchase of services in introducing support (servicing) and providing the right to use the software for the day-ahead market and the intraday market operation.

By installing a test version of the Market Operator software complex in December 2018, SE Energorynok opened this complex for testing by the participants of the electricity market from January 15, 201859.

On January 21, the NEURC held a corresponding meeting with market participants on the implementation of testing transactions for the purchase and sale of electricity in the relevant segments of the new electricity market, and provided the following recommendations for the participants of the electricity market: by February 1, 2019, to apply to SE Energorynok for access to the test environment of the software complexes of the market operator and the guaranteed buyer; to test the test environments of the software complexes of the Market Operator and the Guaranteed Buyer; by February 15, 2019, to submit its comments and suggestions as to the procedure of work to SE Energorynok60.

In January, Market Operator affiliate of SE Energorynok started the test operations on the purchase and sale of electricity, and, for the first week (January 15-21), 313,800 MWh of electricity were sold at an average price of 733.83 UAH/MWh.

The maximum price is 1,500 UAH/MWh (delivery date - January 22 from 18:00 to 21:00, the volume – 7,500 MWh)61.

57 https://uie.kiev.ua/diyalnist/napryamky-diyalnosti/postachalnyk-elektrychnoyi-energiyi-ostannoyi-

nadiyi/?fbclid=IwAR3U9JXpImybYHFVKODsn-8HJcdhp_BlY7it2ODIIaiXPkzycmonzFGnM5c#1546110140638-8bd9edf4-b027 58 http://reform.energy/news/energorynok-v-2018-godu-nachal-gotovit-k-rabote-novye-struktury-kotorye-obespechat-

deyatelnost-konkurentnogo-rynka-ee-10234?fbclid=iwar1553of2n2dy36qw0lxrg5yekt6f2cb1nsmbgvdritkpn-57-wqjpsaew4 59 http://www.or.er.gov.ua/ 60 http://www.nerc.gov.ua/?news=8646 61 https://expro.com.ua/novini/operator-rinku-za-tijden-testovih-operacy-realzuvav-3138-tis-mvt-god-elektroenerg-za-73383-

grnmvt-go?fbclid=iwar3-sztxjko57n5fy_8wzewzttqnoadlr7ggkrq5vp7hyxusk60ldhgdq9u

Electricity and Nuclear Safety

Regulation 714/2009/EC of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation 1228/2003 (Art. 271, Chapter 11, Section IV of the EU-Ukraine Association Agreement)

SE NPC Ukrenergo, SE Moldelectrica, as well as experts of the Energy Community held the first meeting of the international working group on the prospects of creating a joint balancing electricity market in Ukraine and Moldova on January 17 in Kyiv. The main topic of the meeting was the harmonization of the phased process of exchange of balancing capacities and reserves between Ukraine and Moldova62.

On January 31, 2019, SE NPC Ukrenergo held a public discussion on the draft Guidelines for the Submission and Publication of Data in the Electricity Market. This draft was prepared in pursuance of the NEURC Resolution No. 459 of 19.06.2008 On Approval of the Procedure for Collecting and Transferring Data on the Operation of the Electricity Market for Publication on the ENTSO-E Transparency Platform63.

Directive 2009/72/EC of 13 July 2009 on common rules for the internal market in electricity and repealing Directive 2003/54/EC (Art. 273, Chapter 11, Section IV of the EU-Ukraine Association Agreement)

Retail Electricity Market

On January 14-15, at an extraordinary meeting of the WEM Council, a decision was made to conclude contracts for the supply and transmission of electricity consumed by enterprises and their sub-customers, connected directly to the power grids of NPC Ukrenergo and energy generating companies. This problem arose for about 30 enterprises being consumers, which, according to the new rules of the retail market, were not able to conclude distribution contracts with the network owners64. The WEM Council decision is considered as the implementation of the NEURC Resolution No. 2108 of 28.12.2018. The WEM Council decided that, from 01.01.2019, SE NPC Ukrenergo will conclude contracts on the provision of electricity transmission services with the Main Consumers, representing commercial accounting measures and algorithms provided by DSO for determining the volume of electricity received by networks of the Main Customers and volumes of return of electricity from networks of the Main Customers65.

Commercial Metering

SE NPC Ukrenergo prepared a draft annex to the Commercial Metering Code “Regulation for the Registration of Suppliers of Commercial Electricity Metering Services”66. The project is posted on the company’s website. The discussion of it is scheduled for February.

Directive 2009/72/EC of 13 July 2009 on common rules for the internal market in electricity and repealing Directive 2003/54/EC (Art. 305, Chapter 14, Section IV of the EU-Ukraine Association Agreement)

Article 339, Chapter 1, Section V of the EU-Ukraine Association Agreement, Coal Market

In accordance with the Electricity Market Law, the retail electricity market was liberalized on January 1, 2019. In this regard, many state-owned mines which could not find a supplier for themselves became consumers of the supplier of last resort, which has the highest price for electricity in Ukraine. However,

62 https://ua.energy/media/pres-tsentr/pres-relizy/ukrayina-i-moldova-pochaly-obgovorennya-protsesu-obminu-

balansuyuchymym-potuzhnostyamy-ta-rezervamy-u-ramkah-integratsiyi-do-entso/ 63 https://ua.energy/osnovni-podiyi/zaproshuyemo-do-rozglyadu-proektu-instruktsiyi-shhodo-podannya-ta-publikatsiyi-danyh-

na-rynku-elektrychnoyi-energiyi/ 64 http://reform.energy/news/sovet-ore-razrabotaet-mekhanizm-zaklyucheniya-dogovorov-na-postavku-i-peredachu-ee-prompredpriyatiyami-prisoedinennymi-k-setyam-nek-ukrenergo-10305?fbclid=iwar3xshboasanduckx9vlptr3anysoyjd1yrwdmiafcn9buwqlblleeqnk-w 65 http://www.er.gov.ua/data/rish_sajt.pdf 66 https://ua.energy/osnovni-podiyi/zaproshuyemo-do-rozglyadu-proektu-dodatku-do-kodeksu-reglament-reyestratsiyi-

postachalnykiv-poslug-komertsijnogo-obliku-elektrychnoyi-energiyi/

Electricity and Nuclear Safety

through the difficult financial and logistical state of state coal-mining enterprises, the level of settlements for the consumed electricity of these enterprises is likely to be extremely low. This will lead to an increase in the rate of accumulation of debts, which, by the end of 2018, exceeded UAH 13 billion.

The Cabinet of Ministers of Ukraine approved the procedure for using the funds provided for in the state budget for the restructuring of the coal industry. The document defines the Ministry of Energy and Coal Industry as the main spending unit, and state mines - as recipients. It is stated in the procedure that the mines which are declared bankrupt or are in the stage of liquidation will not be able to receive funds67.

On January 19, the Law On Amending Certain Laws of Ukraine on Creating Conditions for State Support of the Coal Industry, which extended the moratorium on bankruptcy and blocking the accounts of state-owned coal-mining enterprises until 2022, entered into force68.

On January 30, the government approved at its meeting a draft order On the Allocation of Funds from the Reserve Fund of the State Budget. The draft order is prepared on the results of the meeting of the Governmental Committee on Economic, Financial and Legal Policy, Development of the Fuel and Energy Complex, Infrastructure, Defense and Law Enforcement Activities of 24.01.2019, and will contribute to ensuring the reliable functioning of state coal-mining enterprises and preventing man-made emergencies. The draft decree provides for allocating 450 million UAH to the Ministry of Energy and Coal Industry to ensure payment for consumed electricity by state coal-mining enterprises in 201969.

Art. 342, Chapter 1, Section V of the EU-Ukraine Association Agreement, Cooperation in the Nuclear Field, Directive No. 96/29/Euratom, Council Directive No. 2006/117/Euratom, Council Directive No. 2003/122/Euratom

On January 6, functional testing of the equipment delivered recently to Ukraine by Holtec International (USA) - HI-TRAC container - took place at the site of the Rivne NPP. The container is intended for reloading the spent nuclear fuel from at-reactor spent fuel storage pools to a special transport railway platform for further transportation to the site of the Centralized Spent Nuclear Fuel Storage Facility from Ukrainian NPPs. In addition to the tests, a meeting, during which they provided the detailed information on the current state of construction of the CSNFSF, which is currently in the final stage of implementation, was held. They also noted that in addition to the construction of the CSNFSF, at three nuclear power plants of Ukraine - Rivne, Khmelnytskyi and South-Ukrainian, a project for modification of nuclear power units of the NPP, which involves performing a significant range of works: upgrading of reloading machines and lifting cranes for large and heavy equipment, reinforcement reinforced concrete structures, grounding in seismic, nuclear and radiation safety, construction of sites for the deposit of containers at NPPs and sites of maintenance of the CSNFSF equipment of the special warehouse and others, is being implemented 70.

SE NNEGC Energoatom announced the beginning of public discussion of the report on the environmental impact assessment of the third and fourth power units of the Khmelnytskyi NPP planned for construction.

According to the announcement on the website of the state enterprise, the hearing will take place from February 11 to February 21, 2019 in nine cities. In addition, during January-February, expert consultations with Belarus, Poland and Austria are scheduled within the framework of the EIA cross-border procedure71.

The two-day visit of the team of experts of the EU technical assistance project “Determination of Forms of Waste Ensuring the Safe Processing, Storage and Disposal of Radioactive Waste Stored at Ukrainian Nuclear Power Plants took place at Rivne NPP. The project is being implemented within the framework of the

67 https://www.rbc.ua/rus/news/kabmin-utverdil-poryadok-pogasheniya-zadolzhennostey-1548244931.html 68 https://zakon.rada.gov.ua/laws/show/2658-viii?fbclid=IwAR1eSfWvHmpBKEGUAwrBe_aGcbechZ10UNwm5scqKhPVnEF04_1-

h5GYBEI 69 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245338379&cat_id=35109 70 http://www.npp.zp.ua/news/naek?fbclid=IwAR3hSmxJoGV1RSqYrXfGRwRp3ZsTNrURGd3uMTGA8APi2GaPeBOWbpMzL0w 71 http://ars.atom.gov.ua/index.php/news/energoatom-ogolosiv-pro-pochatok-gromadskih-sluhan-shhodo-budivnitstva-blokiv-3-

4-hmelnitskoyi-aes/

Electricity and Nuclear Safety

Cooperation Program “Nuclear Safety Cooperation Instrument”, funded by the European Commission’s budget72.

As of January 28, the press service of Rivne NPP informed on the continuation of the implementation of a project to build the Technical Center for Automated Metal Remote Control Means for the needs of the metal control service. The new modern facility will become the only place, where all the high-tech and unique metal remote control systems will be concentrated, which in turn will help to increase the efficiency of the personnel of the service73.

At the end of January, the inspection of the International Atomic Energy Agency, which controls the application of safeguards to nuclear material under the Agreement between Ukraine and the IAEA in connection with the Treaty on the Non-Proliferation of Nuclear Weapons, was successfully carried out at the power units 1, 2 of the Rivne NPP. The inspection was carried out on time and in full. The objectives of the inspection have been achieved74.

On January 25, a meeting on the coordination of positions on the draft Law of Ukraine On the Placement, Design and Construction of Power Units No. 3 and No. 4 of the Khmelnytskyi Nuclear Power Plant was held at the Ministry of Energy and Coal Industry. The said project was developed in pursuance of paragraph 35 of the Action Plan for the Implementation of the Stage “Energy Sector Reform (2020)” of the Energy Strategy of Ukraine for the period up to 2035 “Safety, Energy Efficiency, Competitiveness”, in accordance with the requirements of the Law of Ukraine On the Procedure for Decision Making on Placement , Design, Construction of Nuclear Plants and Facilities Intended for Management of Radioactive Waste of National Importance”.

Art. 342, Chapter 1, Section V of the EU-Ukraine Association Agreement, Cooperation in the Nuclear Field. Cooperation is aimed at solving the problems that arose as a result of the Chernobyl disaster, as well as the decommissioning of the Chernobyl NPP

On January 1, the Law of Ukraine On Amendments to the National Program for the Decommissioning of the Chernobyl Nuclear Power Plant and Transformation of the Shelter Object into an Environmentally Safe System came into force. The law extends the Program for ChNPP Decommissioning and Transformation of the Shelter Object into an Environmentally Safe System by 2020. Within 2 years, almost UAH 3 billion are planned to be spent for this program during 2019-2020. The law defines the measures to be taken in order to decommission the Chernobyl NPP and the final closure and conservation of NPP power units75.

On January 4, the IAEA Expert Mission, within the framework of UKR9038 national project, has developed, together with the SAEZM and relevant enterprises of Ukraine, recommendations on the choice of the site for the geological storage of radioactive waste (RW). The international experts, together with the Ukrainian experts, reviewed the preliminary assessment of the geological conditions of potential sites for the storage facility in the exclusion zone and prepared a draft recommendation for Ukraine.

Representatives of the IAEA, SAEZM, the Ministry of Energy and Coal Industry, the National Academy of Sciences, the State Service for Geology and Subsoil, the State Nuclear Regulatory Inspectorate, State Corporation UkrDO Radon, SSE CRWME, SSE Ekotsentr, SE NAEK Energoatom took part in the project76.

On January 16, integrated testing of the radiation control system of the New Safe Confinement (NSC) started at SSE Chornobyl NPP. During the tests, emergency situations are simulated and the reaction of

72 http://www.atom.gov.ua/ua/press_centr-19/novini_kompanii-20/p/na_raes_obgovorili_proekt_z_udoskonalenna_sistemi_povodzenna_z_ridkimi_rav-44646 73 http://www.atom.gov.ua/ua/press_centr-19/novini_kompanii-20/p/na_raes_trivae_sporudzenna_sucasnogo_tehnicnogo_centru-44659 74 http://www.atom.gov.ua/ua/press_centr-19/novini_kompanii-20/p/na_raes_uspisno_zaversilas_cergova_inspekcia_magate-

44675 75 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62101 76 https://www.ukrinform.ua/rubric-economy/2613748-v-ukraini-razom-z-magate-obiraut-majdancik-dla-shovisa-radioaktivnih-

vidhodiv.html?fbclid=IwAR3i-8scZLW41qUkSUPoX6heHr807pvNGC0ko7j0iZhIqkqHj1aRbsnIf4U

Electricity and Nuclear Safety

systems on them is checked. The objective is to make sure that the radiation control system operates according to the project criteria. Tests are carried out as close as possible to the actual conditions of the operation of facilities. At present, testing of the NSC systems is ongoing.

ChNPP got the permit to operate the NSC fencing circuit and continues to work for putting the Arc into operation. The reason for the issuance of the permit was a positive opinion of the state examination of nuclear and radiation safety, the package of documents provided by the SSE ChNPP, as well as the inspection carried out by the State Nuclear Regulatory Inspectorate from January 14 to 17, 2019. During the survey, the capacity of the SSE ChNPP to carry out the declared activity in operating these constructions was confirmed77.

On January 28, Ukrainian specialists were trained by the IAEA on the creation of a radioactive waste storage facility in deep geological formations. During the IAEA training course on the fundamental principles of the creation of a geological storage facility for radioactive waste disposal in Ukraine, international and Ukrainian experts reviewed the world experience in this area and the next steps within the framework of UKR9038 national project. In addition to technical and security aspects, experts also focused on the issue of public involvement in such disposal projects78.

On January 30, the press service of the SAEZM reported that the Government of Norway approved the continuation of the project “Chernobyl NPP Decommissioning Visualization Center”, aimed at the development of the system established in 2016. During 2019-2020, Chernobyl NPP and the Norwegian Energy Technology Institute are planning to expand the Center: the number of users will be increased, additional equipment will be bought, licenses and software functional will be renewed. Preferably, the Center is used during periodic engineering and radiation surveys, dismantling works, for storing and transmitting information about ChNPP facilities to generations of specialists who will take part in work on the next and final stages of decommissioning, for informing the public, and for staff training79.

77 http://dazv.gov.ua/novini-ta-media/vsi-novyny/chaes-otrimala-dozvil-na-ekspluatatsiyu-ogorodzhuvalnogo-konturu-nbk-ta-prodovzhue-roboti-dlya-vvedennya-arki-v-ekspluatatsiyu.html 78 http://dazv.gov.ua/novini-ta-media/vsi-novyny/ukrajinski-fakhivtsi-projshli-navchalnij-kurs-vid-magate-shchodo-stvorennya-skhovishcha-rav-u-glibokikh-geologichnikh-formatsiyakh.html 79 http://dazv.gov.ua/novini-ta-media/vsi-novyny/ukrajina-ta-norvegiya-udoskonalyuvatimut-sistemu-virtualnogo-

modelyuvannya-protsesiv-znyattya-chaes-z-ekspluatatsiji.html

Electricity and Nuclear Safety

Acquis update

On June 28, 2018, the President of the Commission Jean-Claude Juncker together with the heads of the states

or governments of Lithuania, Latvia, Estonia and Poland agreed on a political road map for the

synchronization of the electrical grid of the Baltic States with the continental European grid by the end of

2025. This Political Roadmap defines the process and offers specific solutions for synchronizing the electricity

system of the Baltic countries with the continental European grid. In accordance with the Market Integration

Plan, in September 2018, Polish and Baltic transmission system operators (TSOs) will launch an official

procedure, operated by the European Network of Transmission System Operators (ENTSO-E).

(http://europa.eu/rapid/press-release_IP-18-4284_en.htm)

The results of the study show that the synchronization option chosen by the political leaders in June consists

of an existing two-loop line of alternating current (AC) between Poland and Lithuania (LitPol Link)

complemented by the construction of a new sea high-voltage DC cable (HVDC) - as a link between Poland

and Lithuania - technically feasible at a reasonable price. It is important to note that the High Level Group

agrees with the analysis that the selected option guarantees the safe operation of the electrical grid of the

Baltic States at the same level as in the continental electrical grids, provided that the technical measures

identified in the study will be implemented. (https://ec.europa.eu/info/news/synchronisation-baltic-states-

electricity-grid-continental-european-system-2018-sep-14_en)

On July 27, in the presence of the European Commission, Prime Minister of Portugal Antonio Costa, French

President Emmanuel Macron and President of the Spanish Government Pedro Sanchez held a high-level

meeting and, underlining the EU’s readiness to complete the creation of the Energy Union and fulfill its

obligations under the Paris Agreement, signed the Lisbon Declaration, which clearly defines the way forward.

It is based on the Madrid Declaration of March 2015, which began the process of integrating the Iberian

Peninsula into Europe’s grid. A grant agreement on the electric power line crossing the Bay of Biscay with a

total value of EUR 578 million was signed. It will be the largest Connecting Europe investment fund, which

has ever been awarded to the energy infrastructure project. Thanks to the 280-kilometer electricity

connection, this link will double the exchange capacity between France and Spain by 2025 and bring Spain

closer to the 15% interconnection goal contained in the new Energy Community Management Regulation.

(http://europa.eu/rapid/press-release_IP-18-4621_en.htm)

On November 13, the European Parliament completed parliamentary approval of half of the eight legislative

proposals in the “Clean Energy for All Europeans” package of 2016. The package is a key element of the

political priority of the Juncker Commission on “sustainable energy alliance with promising climate change

policy”, aimed at providing Europeans with access to safe, affordable and environmentally safe energy and

transforming the European Union into a world leader in renewable energy. The new regulatory framework,

in particular through the introduction of the first national energy and climate plans, brings regulatory

certainty and creates conditions for major investments in this important sector. It enables European

consumers to become full-fledged players in the energy transition and determines two new objectives for

the EU in 2030: the mandatory objective of renewable energy of at least 32% and the objective of energy

efficiency of at least 32.5%, which will stimulate Europe’s industry to competitiveness, stimulating growth of

the number of workplaces, reducing the amounts in energy bills, helping solving the problem of energy

poverty and improving air quality. (http://europa.eu/rapid/press-release_IP-18-6383_en.htm)

On December 24, 2018, the three key pieces of legislation in the “Clean Energy for All Europeans"” package

entered into force: this is the revised Renewable Energy Directive (EU) 2018/2001, which makes binding the

EU objective of at least 32% of RES by 2030 with a view to increasing this figure by 2023. The revised Energy

Efficiency Directive (EU) 2018/2002 sets the objective of 2030 at 32.5%, as well as with a possible revision in

the direction of an increase in 2023. Regulation (EC) 2018/1999 includes the requirement for Member States

to develop integrated national energy and climate plans for the period from 2021 to 2030, which specify how

to achieve the objectives and submit the project to the European Commission by the end of 2018.

(https://ec.europa.eu/info/news/new-renewables-energy-efficiency-and-governance-legislation-comes-

force-24-december-2018-2018-dec-21_en).

Energy Efficiency and Social Issues

In January, the government virtually failed to implement EU energy efficiency legislation. The publication of the draft order of the Ministry of Regional Development On Approval of the Technical Regulation for the Energy Labeling of Water Heaters, Battery Tanks and Kits from a Water Heater and Solar Equipment - one of two technical regulations, the adoption of which is necessary for the full implementation of the relevant Directive - on the website of the State Agency on Energy Efficiency and Energy Saving may be called a sign of some progress.

The attention of the society and the expert community was focused on the government’s actions to implement the monetization of benefits and subsidies. The debate between the public and the officials became even more intense - both parties blamed each other for incompetence and inconsistency in the implementation of reforms and their advocacy. To reduce the degree of outlining the issue of monetization, the President intervened in resolving this issue. As of the end of January, the issue of the introduction of subsidy monetization remained at the stage of preparing proposals for the government.

Directive 2012/27/ЄС on energy efficiency

Despite the activation of the discussion of the draft Law of Ukraine On Energy Efficiency in connection with the extension of the relevant version of the document by the Ministry of Regional Development at the end of last year, according to information available to the working group, as of the end of January 2019, the draft is being coordinated with the legal department of the Ministry of Regional Development. The further procedure for adopting the Law provides for, after the positive opinion of the Ministry’s lawyers, to submit an opinion from the Ministry of Justice of Ukraine, considering and approving the draft law by the Government and registration and voting in the Parliament. According to experts from the Ministry of Regional Development, after obtaining the necessary opinion, the Ministry of Regional Development intends to immediately submit the draft law for consideration by the Cabinet of Ministers.

Energy audits and energy management systems (Article 8)

Against the backdrop of significant work of the State Agency on Energy Efficiency and Energy Saving in attracting investment in renewable energy and energy service contracts, implementation of the national policy on the introduction of energy audits and energy management systems looks at least as non-priority. During January, the responsible state agency did not report any progress in this area. Thus, the institutionalized approach to optimizing energy consumption at the level of settlements remains the responsibility of the local authorities, and the implementation of the not-too-ambitious decree of the Cabinet of Ministers on energy management in budgetary institutions is unsatisfactory.

Metering (Article 9)

As of the end of January, for the full implementation of the Law of Ukraine On Commercial Metering of Heat Energy and Water Supply in the part of the adoption of by-laws, a single order of the Ministry of Regional Development No. 315 of 22.11.2018 On Approval of the Methodology of Distribution among Consumers of Volumes Consumed in the Utility Services Building. According to the information available to the working group, this document, which should resolve very sensitive issues that directly concern financial costs among consumers of energy services in multi-apartment buildings, was submitted to the Ministry of Justice and waits for state registration.

As at the end of January, the level of equipping residential and non-residential buildings with commercial heat and water supply metering units did not significantly change from the previous reporting period80:

Equipping residential and non-residential buildings with heat energy commercial metering units

78,6% of residential buildings

77,7% of non-residential buildings

80 http://saee.gov.ua/sites/default/files/20.01.2019%20%281%29.zip

Energy Efficiency and Social Issues

Residential buildings Non-residential buildings

Highest indices Cherkasy, Mykolaiv, Khmelnytskyi, Vinnytsia regions

Mykolaiv region

Lowest indices Luhansk, Ternopil, Kirovohrad regions

Zhytomyr and Kyiv regions

Equipping residential and non-residential buildings with hot water commercial metering units

15,9% of residential buildings

53,5% of non-residential buildings

Residential buildings Non-residential buildings

Highest indices Kyiv, Mykolaiv and Ivano-Frankivsk regions (in Zhytomyr, Zakarpattia, Kirovohrad, Odesa, Kherson and Chernivtsi regions, hot water supply services are not provided)

Kyiv, Khmelnytskyi, Dnipropetrovsk regions (in Zhytomyr, Zakarpattia, Kirovohrad, Odesa, Kherson and Chernivtsi regions, hot water supply services are not provided)

Lowest indices Other regions The city of Kyiv, Sumy and Luhansk regions

Equipping residential and non-residential buildings with drinking water commercial metering units

71,0% of residential buildings

93,5% of non-residential buildings

Residential buildings Non-residential buildings

Highest indices Mykolaiv, Ivano-Frankivsk and Zakarpattia regions

Dnipropetrovsk, Donetsk and Ivano-Frankivsk regions

Lowest indices Poltava, Zaporizhia, Kharkiv, Chernivtsi regions

-

Energy services market (Article 18)

In January, the State Agency on Energy Efficiency and Energy Saving issued updated data on the results of the energy service contracts market for 2018: during the year, 210 ESCO contracts for the amount of UAH 218 million were concluded, which is 10 times more than in 2016, and the geography of contracts covered 12 regions of Ukraine. In addition, during the first week of January, only 9 contracts for the amount of UAH 14 million were concluded in Kyiv. Such progress is due in particular to the improvement of the provisions of the legislation regulating relations in this area and as a result of the introduction of a model of advanced ESCO-partnership, in which a part of energy-efficient measures is performed by the customer of the energy service, and the rest - by the ESCO-investor. In addition, the savings are distributed according to the depth of energy-efficient solutions proposed by the parties. Today, according to the model of in-depth partnership, 9 ESCO-tenders were announced in 5 pilot cities, in particular, in Odesa, Nizhyn, Slavutych, Borodianka and Savran.

The introduction of ESCO-mechanisms is also relevant for state-owned objects, examples of which are 4 energy service contracts for the modernization of the pump stations of the State Agency of Water Resources, concluded in January, which, according to projected estimates, will save up to UAH 310 thousand of budget funds during the term of contracts, and after their completion - more than UAH 3 million per year. In addition, for the facilities of the Ministry of Education (T. Shevchenko Kyiv National University, University of Food

Energy Efficiency and Social Issues

Technologies, Igor Sikorsky Kyiv Polytechnic Institute, and National Aviation University), 17 ESCO-tenders are announced and facilities of the State Statistics Agency - 11 tenders, etc. It is expected that 66 tenders for facilities of the Ministry of Education and SES will be additionally concluded81.

As a rule, ESCO-mechanisms are practically implemented for facilities of the budget sphere. However, as of today, the first 6 ESCO-contracts in the cities of Kyiv and Kherson are being implemented82.

It should also be emphasized that the relevant agency pays a considerable attention to the establishment of the energy service market, in particular the introduction of innovations in this area. Therefore, in cooperation with experts from the international technical support of the UNDP, the State Agency on Energy Efficiency and Energy Saving, based on the EU experience, has developed a factoring model that provides for lending to ESCO projects without collateral. Such a model started in January, and the first factoring agreement for the amount of about UAH 3 million was concluded between KyivESCO and JSC Commercial Industrial Bank for the implementation of ESCO projects in the budget sphere. Cash flows from ESCO-contracts already implemented by the energy service company will be the guarantee of repayment of the bank’s money83.

In order to obtain expert advice on the implementation of ESCO in 2018, the All-Ukrainian Center for Energy Services was established on the initiative of the relevant Agency and the UNDP Project. In particular, information can be received as to the benefits of the ECKO mechanism, the peculiarities of preparing and concluding contracts, attracting investment, the stages of project implementation; implementation of the energy management system; ESCO-factoring and obtaining cheap credit resources; publishing potential attractive facilities for the attraction of investments under the ESCO-mechanism in an open database84.

The draft laws registered in December in the Verkhovna Rada of Ukraine under the numbers 9386 and 9387 for the further improvement of the model of energy service contracts, unfortunately, have not made any progress during January, and the date of the possible voting for them in the session hall is not known at this time.

National Energy Efficiency Fund, financing and technical support (Article 20)

The Supervisory Board of the Energy Efficiency Fund does not reduce the pace of meetings gained in December. As part of the regular working session of January 16, the members of this body approved the organizational structure of the Fund, documents regarding the schedule of the competitive selection of the directorate and the head of internal audit, approved the documents on approving the conditions of the competitive selection of an auditor to conduct the audit of the Fund’s annual financial statements, which is a prerequisite for the implementation of the Law On the Energy Efficiency Fund. In addition, the Supervisory Board considered the issue of starting the launch of pilot projects within the framework of the ambitious “First Swallows” program, which will help to test the procedures of the Fund85.

In order to test the products of the Energy Efficiency Fund, a pilot project for 15 MBCAs, the chairpersons of which received detailed instructions on the procedure for submitting applications and the subsequent use of the Fund’s test financial products, was launched. Such inspection of the procedures will initially identify deficiencies of work for timely elimination and formulate recommendations for MBCAs on the algorithm of action based on practical experience86.

Taking into account the fact that the Head of Government has outlined the priorities of the Cabinet of Ministers for 2019, among which there were energy efficiency and energy independence87, we can hope that

81 https://www.kmu.gov.ua/ua/news/u-2018-r-ukladeno-ponad-200-esko-kontraktiv-shcho-u-10-raziv-bilshe-nizh-u-2016-roci 82 http://saee.gov.ua/uk/news/2736 83 http://saee.gov.ua/uk/news/2748 84 http://saee.gov.ua/uk/news/2753 85 http://www.minregion.gov.ua/press/news/naglyadova-rada-fondu-energoefektivnosti-zatverdila-organizatsiynu-strukturu-derzhavnoyi-ustanovi/ 86 https://drive.google.com/file/d/1RAsrEk7pp3O-cdYdLtLXueh173DYQO9E/view?fbclid=IwAR1XSRLmJO9tZjlKuO-_rHMKNiJQfpkUylZ2VDGBYRV5NVFcvKfRiH-ka5A 87 https://www.kmu.gov.ua/ua/news/glava-uryadu-nazvav-prioriteti-roboti-kabinetu-ministriv-na-2019-

rik?fbclid=IwAR3hCyUgso5cvvLQuGWwEut7PRQqnLgQaImjLH73DZMkFyCs_EYEGV9gGGQ

Energy Efficiency and Social Issues

the Fund will allow creating conditions for launching a full-scale campaign for the modernization of the housing stock. This year, the state budget provides for UAH 2 billion for energy efficiency measures in the housing stock, of which UAH 1.6 billion - for the Energy Efficiency Fund, UAH 400 million - for the “warm loans” government program.

The high demand for the program was from MBCAs, of which 1,604 benefited from the program in the amount of UAH 463 million. This amount is greater than for all previous 3 years. Leading regions by the number of loans issued to MBCAs are Dnipropetrovsk region (373), Zaporizhzhia region (296), Rivne region (282). Within the framework of the program, about UAH 7 billion have already been invested in energy efficiency. The energy saving in the equivalent of gas is about 273 mcm annually.

In 2019, the “warm loans” program provides for UAH 400 million from the state budget. In addition, financing of energy saving and energy efficiency measures is possible through attracting funds from local budgets, which are provided for in the amount of UAH 106 million for the implementation of almost 60 local programs for the reduction of prices for products of the “warm loans” program, representing 65% of the total funding of programs in 201888. As of today, there are 171 local programs.

However, it should be emphasized that, at the end of January 2019, the “warm loans” program does not work. This is related to the fact that the Government, like in previous years, did not timely prepare documents on its implementation in terms of agreeing amending the budget program with the Ministry of Finance. This situation was typical of the previous years, and the experts of the working group see the solution of it in amending the Resolution of the Cabinet of Ministers No. 243 of 01.03.2010 in such a way as to ensure functioning of the program for several years in advance.

Directive 2010/31/EC on the energy performance of buildings

According to the Ministry of Regional Development, in accordance with the provisions of the Law of Ukraine On the Energy Efficiency of Buildings, 3 resolutions of the Cabinet of Ministers and 7 orders of the Ministry of Regional Development were adopted, two draft resolutions of the government were approved: the Procedure for the Acquisition of Self-Regulatory Organization in the Field of Energy Efficiency and Model Articles of Association of the Self-Regulatory Organization in the Field of Energy Efficiency and On Making Amendments to the List of Construction Works that Do not Require the Documents Giving the Right to Their Execution, and after the Completion of Which the Facility is not Subject to Commissioning (approved at the meeting of the Government on 18.12.2018).

From now on, it is not necessary to obtain such permitting documents for the construction of integrated heat insulation of residential buildings (walls, roof, attic, technical floor, base or basement) already put into operation. This applies to individual residential buildings belonging to facilities with minor (СС1) consequences, and multi-apartment housing with a height of up to 100 m - facilities with average (CC2) consequences. However, as of the end of January 2019, the mentioned draft resolutions of the Cabinet of Ministers were not submitted for consideration to the Government, and thus their approval remains questionable.

As reported in the relevant Agency, cooperation agreements with higher educational institutions were signed, there are 39 of them now, at 33 of which energy auditors may be certified, because relevant commissions for their certification are created at them89. In addition, in January, informational materials with important information were posted on the official website of the State Agency on Energy Efficiency and Energy Saving:

− Databases of experts (certified energy auditors for certification of energy efficiency of buildings and specialists in the examination of engineering systems of buildings, as well as design engineers)90;

88 http://saee.gov.ua/uk/news/2737 89 http://saee.gov.ua/uk/content/buildings-certification 90 http://saee.gov.ua/sites/default/files/BDF_08_02_19.xlsx

Energy Efficiency and Social Issues

− Examples of test questions and situational tasks for certification of energy auditors91;

− Databases of certificates of energy efficiency of buildings92;

− Model regulation on the certification commission with annexes, examples of educational and professional Programs of the OSABA, samples of test and situational tasks of the KNUСA93.

In total, 284 energy auditors and 208 experts on the inspection of engineering systems of buildings have been certified and confirmed their qualification.

Directive 2010/30/EC on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products

On the penultimate day of January 2019, a draft order of the Ministry of Regional Development “On Approval of the Technical Regulation on Energy Labelling of Water Heaters, Battery Tanks and Kits from a Water Heater and Solar Equipment” was placed on the website of the State Agency on Energy Efficiency and Energy Saving94. This is one of two technical regulations, the adoption of which will allow the implementation of the Directive in Ukraine to be completed (the other is the technical regulation on the requirements for energy labeling of space heaters, combined heaters, kits from space heaters, temperature regulator and solar system, and kits from the combined heater, temperature regulator and solar installation). The developers indicate that the regulation will reduce the national level of energy consumption by increasing the number of energy efficient products in the market, will facilitate the supply of products to the European Union market for business entities, and will mean lower costs for the use of electricity, the use of energy efficient and environmentally friendly equipment and long service life for citizens. After conducting electronic consultations with the public on the website of the State Agency on Energy Efficiency and Energy Saving, the draft order should be approved by the Ministry of Regional Development.

Social Issues

The draft resolution issued by the Ministry of Social Policy in December 2018 provided for a radical change in the system of granting subsidies to the population, in particular, as claimed by the developers, switching such a form of state support to the monetary form95. Despite warnings from public sector experts and other participants of these relations regarding the introduction of subsidy monetization in the wording proposed by the government, officials continue to insist on the correctness of their actions.

A more detailed analysis of the proposed system can reveal significant changes and risks for MBCAs. In fact, these associations may be deprived of reimbursement of energy efficiency measures and programs in the event of such changes. The amount of administrative work will be increased as MBCAs will obliged to provides JSC Oschadbank with registers of housing subsidies with information about their accounts, amounts accrued in the previous month and the total amount payable, including debt/overpayment for prior periods. For this, MBCAs will be required to receive an electronic digital signature for the exchange of information with the bank and to pay commission fee to JSC Oschadbank specified in the contract with it.

In addition, the scheme proposed by the Ministry of Social Policy provides that “in case the total amount accrued, filed by administrators, associations, utility service providers in the Registers of Accrued Amounts of Payments for specific subsidy recipient is more than the amount of money displayed in the Account of the housing subsidy recipient in JSC Oschadbank automated systems, the following order of transfer of funds for services (expenses) shall be established: supply and distribution of natural gas, heat supply, electricity supply and distribution, hot water, central water, central sewage supply, household waste management, multiapartment house management services (costs of managing a multi-apartment building), payments for

91 http://saee.gov.ua/sites/default/files/1_14.pdf 92 http://saee.gov.ua/sites/default/files/BDS_08_02_19.xlsx 93 http://saee.gov.ua/sites/default/files/P_0.pdf 94 http://saee.gov.ua/sites/default/files/nakaz%20vodonagrivachi_0.doc 95 https://www.msp.gov.ua/projects/374/

Energy Efficiency and Social Issues

the installation, maintenance and replacement of commercial metering units, for customser services to consumers of utility services, provided in multi-apartment buildings. The analysis of this regulation gives reason to conclude that the state sets different priorities for payment of various utility services and contributions for maintenance, and this standard is unacceptable and has signs of discrimination against providers of one utility services comparing to providers of other services. This situation gave reason for some radical observers to assert the desire of the Cabinet of Ministers to make advances, primarily to gas companies and operators of natural monopolies in this market, which already have a negative reputation associated with the businessman Dmytro Firtash, who controls a significant share of these markets.

The absurdity of such provisions was outlined by a number of civil society activists, experts and directly representatives of MBCAs, which contacted the relevant ministry and the government to improve the provision of the project in order to prevent inefficient management decisions and increase social tension in society. However, the ministry representatives virtually ignored any special offers and reacted aggressively to fairly obvious and effective solutions for the introduction of subsidy monetization96.

In addition, the Government’s proposal to introduce monetization of subsidies for a trial period of 3 months looked like political campaigning for the period of pre-election campaign of the current government.

In order to resolve the issue at the level of the President of Ukraine, a meeting was held with industry experts, which outlined the issues of monetization implementation, which resulted in the Government reviewing the proposed rules of the game, taking into account the public proposals. However, during January, there were no Government’s decision to adopt the final wording of the said resolution.

96 https://www.facebook.com/tetyana.boyko/videos/10218589336586688/

Acquis update

In the reporting period, the EU energy efficiency legislation has undergone significant changes due to the

effective voting, adoption and further publication of updated versions of the three key acts - Renewable

Energy Directive 2018/2001, Regulation (EU) 2018/1999 on Governance and, most importantly, Energy

Efficiency Directive 2018/2002. After reaching a political agreement on the essential conditions of the

new regulatory environment in the previous period, all three acts were voted for in the European

Parliament in mid-November 2018 and subsequently published in the Official Journal of the EU on

December 21, 2018. Thus, since December 24, 2018, the European Union has received an updated law

that partially implements the Clean Energy for All Europeans initiative, which has fully entered into force.

In particular, such a new regulatory and legislative environment provides for an increase in the energy

efficiency improvement target across the Union to at least 32.5% by 2030 (with the agreement to return

to reviewing this level again in 2023), extends obligations as to annual objectives to preserve energy after

2020, which, according to the developers, will increase the attractiveness of energy efficiency area for

private investment. In addition, the standards and requirements for individual accounting and billing for

energy services consumption have been substantially raised, which is especially relevant for residents of

multi-apartment buildings - now the rules on the distribution of costs for the payment of such services

should be established by the Member States in the most transparent and accessible manner possible, and

the information they receive will become even more detailed and clearer.

In addition, it should be noted that a total of 4 of the 8 acts, which are provided for by the more general

Clean Energy for All Europeans initiative, have now come into force in total, although it is not worthwhile

to expect significant changes in the adoption of further acts on energy efficiency issues.

Environment and Renewable Energy Sources

In January 2019, the government adopted the resolution amending the series of regulatory legal acts necessary for the practical implementation of the Law On Strategic Environmental Assessment. From January 1, 2019, a new Procedure for the Implementation of State Monitoring of Waters, which will help to obtain more information about the state of water in Ukraine, has come into force. The main achievement of January 2019 was the publication of the CMU resolution on state monitoring of ambient air. The project proposes to approve a number of regulatory legal acts on monitoring the quality of air adopted for the implementation of the requirements of Directive 2008/50/EC. At present, the draft resolution is discussed by the public.

As regards renewable energy, the Energy Community Secretariat has publicly supported the draft Law No. 8449-d on the introduction of auctions in the field of renewable energy, stating the need for its adoption as soon as possible in Ukraine.

Directive 2001/42/EC on the assessment of the effects of certain plans and programs on the environment (Article 363 of the AA)

On January 23, 2019, the Cabinet of Ministers of Ukraine adopted Resolution No. 45 On Amending Certain Resolutions of the Cabinet of Ministers of Ukraine97. Such amendments are necessary for the implementation of the Law On Strategic Environmental Assessment98. These are amendments to the Procedure for the Development of Regional Programs for Protecting the Population against the Effects of Ionizing Radiation, to the development of forecast and program documents for economic and social development, and the drafting of the state budget (these amendments shall be applied only from 2020), to the Regulation of the Cabinet of Ministers, to the Procedure for the Development of Regional Programs of Modernization of Heat Supply Systems.

Attention is also drawn to the conduct of public hearings, in particular, when developing local-level urban planning documents. The negative point is that the resolution determines that the definition of the term “public” in the Procedure for Conducting Public Hearings is used in the meaning given in the Law of Ukraine On Strategic Environmental Assessment. As we have already mentioned, such a definition of the public does not conform to either the directive or the Aarhus Convention.

Recall that the practical implementation of the Law of Ukraine On Strategic Environmental Assessment started in October 2018. Several SEA procedures are underway, including the National Waste Management Plan until 2030.

Directive 2003/4/EC on public access to environmental information

From January 1, 2019, a new Procedure for the Implementation of State Monitoring of Waters99, which will help to obtain more information about the state of water in Ukraine, has come into force. The new procedure eliminates duplication of functions between different monitoring entities, provides for a clear procedure and a systematic approach to tracking the state of land, underground, sea waters.

The new monitoring system for surface, groundwater and seawater provides for:

• clear division of responsibilities between organizations that measure indicators without duplication of authorities

• advanced list of biological, hydromorphological, chemical and physic-chemical indicators for monitoring

• introduced six-year monitoring cycle

• classification of the state of waters is introduced: 5 classes of ecological condition and 2 classes of chemical condition

• increasing the number of water monitoring points from hundreds to several thousand.

97 https://zakon.rada.gov.ua/laws/show/45-2019-%D0%BF/print 98 https://zakon.rada.gov.ua/laws/show/2354-19 99 https://zakon.rada.gov.ua/laws/show/758-2018-%D0%BF

Environment and Renewable Energy Sources

Directive 2008/50/EC on ambient air quality and cleaner air for Europe (Article 363 of the AA)

In 2019, Ukraine should fully approximate national legislation to the requirements of Directive 2008/50/EC on the ambient air quality and clean air for Europe. Therefore, it is time to publish and conduct a public discussion of the draft government resolution “Some Issues of Implementation of State Monitoring in the Field of Ambient Air100, which approves a number of regulatory legal acts on monitoring the ambient air quality adopted for the implementation of the requirements of Directive 2008/50/EC.

In general, welcoming this norm-setting initiative, we draw attention to its key issues. On a range of issues, the Draft Procedure for State Monitoring of the Protection of the Ambient Air (hereinafter referred to as the Draft) sets requirements not only for the implementation of state monitoring, but also regulates issues of public administration in the field of air pollution, in particular, it provides for the establishment and designation of authorities of air quality management bodies. Monitoring and management are different phenomena, therefore the complex bringing of the current legislation in line with the requirements of the directive should have taken place at the level of the Law of Ukraine On the Protection of the Ambient Air.

At the same time, certain issues of monitoring have not been given due attention, for example, measuring at monitoring points in the countryside. The issues of the list of zones and agglomerations in the territory of Ukraine still remain open. The list of zones is the actual reproduction of the administrative-territorial division of Ukraine only at the level of regions, and the list of agglomerations is restricted to the cities with a population of more than 250,000 people. Under Directive 2008/50/EC, the “agglomeration” means zones, including suburbs, with a population of more than 250,000 people, and this concept provides for the inclusion of areas with smaller number of inhabitants, but taking into account their population density. Therefore, the proposed list of agglomerations is not complete.

Directive 2009/29/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC (Article 338 of the Association Agreement)

The director of the Energy Community Secretariat J.Kopac, officially confirmed that the Secretariat expects that the draft Law No. 8449-d will be adopted by the Verkhovna Rada at second reading in February-March101. According to Mr. Kopac, adoption of this draft law will allow attracting much more investments in the industry, reducing the cost of green energy for consumers and creating transparent and understandable competitor conditions in the market.

It should also be noted that the State Agency on Energy Efficiency and Energy Saving will launch a new Twinning project aimed at bringing Ukrainian legislation to European requirements and stimulating the development of RES in Ukraine. In particular, the work in the following areas is planned within the framework of the program:

• assistance in implementing the National Renewable Energy Action Plan by 2020;

• facilitating the implementation of the Energy Strategy of Ukraine until 2035 as part of the RES;

• implementation of the Articles of the EU Renewable Energy Directive in Ukrainian legislation.

100 https://menr.gov.ua/projects/142/?fbclid=IwAR3e3pSb_1JF7UR9rM0MHwy-QjuMG3K6nI0_key5SGoYUgQUwA1I47_TybQ 101 http://saee.gov.ua/uk/news/2757

Environment and Renewable Energy Sources

Acquis update

On 11 October 2018, the European Commission adopted Decision 2018/1522 on establishing a common

format for national air pollution control programs in accordance with Directive 2016/2284/EC on the

reduction of national emissions of certain air pollutants. According to the decision, Member States shall

use a single format of programs attached to the decision.

Source: Official Journal of the European Union, L 256/87

At the moment, the EU is in the process of updating its energy policy, which aims at a gradual transition

to clean energy. New amendments are reflected in the package of legislative chahges called “Clean Energy

for All Europeans”. Among the changes that are provided for in the RES field, the following should be

highlighted:

− Member States should ensure that RES communities have the right to create, consume, store and sell

“green” energy without conducting economically inappropriate procedures and without imposing

unreasonable fees. Within the framework of this paragraph, the concept of the RES community is

defined.

Member States should take into account the particularities of such communities and should not prejudice

or impede the state support rules of the creation of such communities.

Oil

Despite the successful implementation of the pilot project on the sale of special permits for the use of oil and gas subsoil through electronic bidding, in particular the placement of 17 lots in the ProZorro.Sale system and the decision to announce 12 tenders for the conclusion of production sharing agreements, the beginning of 2019 confirmed the number of problems with fulfillment of Ukraine’s international obligations in the oil sector.

The timing of the implementation of the tasks identified in the implementation plans of Directives 2009/119/EC, 99/32/EC, 98/70/EC and 94/63/EC is systematically violated. The reasons for non-fulfillment of obligations are not analyzed, and the persons responsible for the failure to meet the established deadlines are not determined. Draft plans of regulatory activity of central executive bodies for 2019 do not cover all orders specified by the resolutions and orders of the government. The Ministry of Energy and Coal Industry, the Ministry of Environment and Natural Resources, the State Service for Geology and Mineral Resources consider a number of tasks in the oil sector as implemented, although draft documents developed by them have been returned for finalization. It is about improving the conditions for granting special permits for subsoil use, developing recommendations for controlling the work of filling stations, updating the technical regulations regarding the requirements for motor fuel, etc. The quality of the developed documents remains low, since more than half of them do not meet the key principles of regulatory policy. Obviously, without solving these problems, the proper implementation of Ukraine’s international obligations in the oil sector is impossible.

Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products (Article 338 of the Association Agreement)

As of February 5, 2019, paragraphs 128 and 129 of the Plan102, which provided for the development and submission of the following drafts to the Cabinet of Ministers:

− the regulatory legal act on approval of the model of maintaining minimum stocks of crude oil and petroleum products and their use in case of supply violations (July 2018);

− the Law On Minimum Oil and Petroleum Products Reserves (including amendments to legislative acts) and drafts of other regulatory legal acts necessary for the implementation of the selected model of minimum oil and oil products reserves (Q3 2018).

The design of additional reservoirs required for the formation of minimum oil and petroleum products in full (paragraph 130 of the plan103, the deadline for implementation by the end of 2018) has also not been implemented.

From open sources, it is only known that the draft Law On Minimum Oil and Petroleum Products Reserves, which was submitted to the Ministry of Economic Development and Trade on November 12, 2018104, is “at the final stage”, while the State Agency of Reserve has prepared the “provisions on the Central Stock Management Company and the Plan for Overcoming the Crisis Situation in the Oil and Petroleum Products Market” approved by the Energy Community105.

Directive 99/32/EC106 relating to a reduction in the sulfur of certain liquid fuels and amending Directive 93/12/EC, as amended by Regulation (EC) 1882/2003 and Directive 2005/33/EC

As of February 5, 2019, the results of the agreement by the authorities concerned of the draft resolution107 on amendments to the Technical Regulations concerning Requirements for Motor Petroleum, Diesel, Ship

102 http://zakon5.rada.gov.ua/laws/show/497-2018-%D1%80 103 http://zakon5.rada.gov.ua/laws/show/497-2018-%D1%80 104 https://rezerv.gov.ua/novini-mznn/zakonoproekt-pro-stvorennya-ta-zberigannya-minimalnih-zapasi 105 https://rezerv.gov.ua/news/golova-derzhrezervu-pro-pidsumki-2018-roku 106 Directive 99/32/EC (other designation – 1999/32/EC) was codified on May 11, 2016 (Directive 2016/802/EC). 107 http://www.drs.gov.ua/wp-content/uploads/2018/05/6795-10.05.18.pdf

Oil

and Boiler Fuels108 (task 1702.4 of the plan109) remain unclear. The pace of adoption of 52 national standards (including amendments110 to the program111) required to harmonize the quality and safety requirements for fuel in Ukraine and the EU is unsatisfactory. Only five out of them were issued until December 20, 2018. For 35 standards, the first wordings have been developed, for four - the following, for one - the final, seven projects have been returned for finalization112.

Directive 98/70/EC relating to the quality of petrol and diesel fuels and amending Directive 93/12/EEC, as amended by Directives 2000/71/EC, 2003/17/EC and 2009/30/EC and Regulation (EC) 1882/2003 (Annex XXX, Articles 360-363, 365, 366 of the AA)

In pursuance of paragraph 127 of the plan113, by which the Ministry of Energy and Coal Industry was instructed to develop and submit a draft Concept for the Development of the Gas and Oil Refining Industry, the Market for Oil Products and Gas Fuels to the Cabinet of Ministers by the end of 2019, a working group was set up to prepare the mentioned document114. The draft concept should provide for the formation of a comprehensive government vision of the goal, objectives, priorities, measures and volumes of investment necessary to ensure:

− the development of the domestic market of oil products and gas fuels;

− an increase in the supply and transit of gas fuels in the territory of Ukraine;

− increase of the share of gas fuel in the balance of fuel consumption of the country;

− development of production capacities for the production of oil products and gas fuels;

− optimization of the level of diversification of deliveries of oil, oil products and gas fuels, which will ensure acceptable price conditions, the security of supply to consumers and energy security of Ukraine.

Directive 94/63/EC on the control of volatile organic compound emissions resulting from the storage of patrol and its distribution from terminals to service stations, as amended by Regulation (EC) 1882/2003 (Annex XXX, Articles 360-363, 365, 366 of the AA)

Although the presence of the list of tasks115 on the official site of the Ministry of Regional Development confirms bringing the plan116 to the notion of the executors, as of February 5, 2019, there is no information in open sources on the status of the implementation of the task 1695, which, until December 31, 2018, provided for:

− developing a draft technical regulation that establishes requirements for fuel storage, transportation and reloading, appropriate equipment and service stations;

− conducting an inventory of “terminals for storage and loading of gasoline”;

− developing recommendations for the control of the operation of petrol stations and “small oil storage tanks”.

108 http://zakon.rada.gov.ua/go/927-2013-п 109 http://zakon.rada.gov.ua/laws/show/1106-2017-%D0%BF 110 http://uas.org.ua/ua/messages/zvid-tem-yaki-vilucheno-z-programi-robit-z-natsionalnoyi-standartizatsiyi/ 111 http://uas.org.ua/ua/messages/dodatok-2-do-programi-robit-z-natsionalnoyi-standartizatsiyi-na-2018-rik/ 112 http://uas.org.ua/wp-content/uploads/2018/12/Zvit_vikon-gruden-20-12-2018_Program-2018.xlsx 113 http://zakon5.rada.gov.ua/laws/show/497-2018-%D1%80 114 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245336530&cat_id=35109 115 https://menr.gov.ua/files/images/news/23052018/Всі%20завдання%20Мінприроди.docx 116 https://www.kmu.gov.ua/ua/npas/pro-vikonannya-ugodi-pro-asociaciyu-mizh-ukrayinoyu-z-odniyeyi-storoni-ta-yevropejskim-soyuzom-yevropejskim-spivtovaristvom-z-atomnoyi-energiyi-i-yihnimi-derzhavami-chlenami-z-inshoyi-storoni

Oil

Directive 94/22/EC on the conditions of granting and using authorizations for prospection, exploration and production of hydrocarbons (Annex XXVII, Articles 279, 280, 341 of the AA)

On January 3, 2019, the State Regulatory Service refused to approve the draft government resolution “Issues of Determining the Price of a Special Permit for the Use of Subsoil117 (the work plan of the Ministry for Environment and Natural Resources118, section 1, task 1, Government priorities, task 189 of the plan119, the deadline - November 2018) due to violations by developer of the basic principles of state regulatory policy120. The document provides for updating the Methodology for determining the starting price of sale at the auction for a special permit for subsoil use121 by replacing the procedure for determining the cost of permit through discounting cash flows by establishing the initial price at the customs value of oil and/or gas condensate, set by the State Fiscal Service, and the volumes of their stocks (resources) determined by the results of geological and economic assessments122.

As of February 5, 2019, there is no information in open sources on the progress with the draft Government Resolution “On Amendments to the Methodology for Determining the Value of Reserves and Resources of Minerals of the Field or Subsoil Areas Provided for Use”123, published by the State Service for Geodesy, Cartography and Cadastre (the deadline is postponed to October124 and December 2018125126), rejected by the State Regulatory Service127 due to the failure of developers to implement the key principles of regulatory policy and submitted again on July 17, 2018128.

The following issues remain unresolved:

− cancelling mining allotment for the oil and gas industry: although on November 14, 2018, the State Regulatory Service agreed129 the draft Resolution On Amendments to the Regulation on the Procedure for the Supply of Mining Allotments130 submitted to the State Labor Service of Ukraine131 (the deadline is the first quarter 2017132), the document has not been filed for consideration to the Government;

− approval of granting subsoil for the use: the draft law on the introduction of appropriate amendments to the Law On Local Self-Government in Ukraine was developed in September 2017133, but has not yet been agreed and submitted for consideration to the Parliament (paragraph 36 of the plan134).

The situation around the following issues provided for by the plan for 2018135 has not changed:

− drafting and submitting for approval of the draft Government resolution on amending the Regulation on the Procedure for Conducting State Expertise and Evaluation of Reserves of Mineral Resources136 in order to switch to the internationally accepted hydrocarbon reserves assessment (PRMS, JORC, etc.) (responsible authority – the Ministry of Environment and Natural Resources);

117 http://www.drs.gov.ua/wp-content/uploads/2018/12/15900-04.12.2018.pdf 118 https://menr.gov.ua/news/32415.html 119 http://zakon.rada.gov.ua/laws/show/244-2018-%D1%80 120 http://www.drs.gov.ua/wp-content/uploads/2018/12/22_20-19.pdf 121 http://zakon0.rada.gov.ua/laws/show/1374-2004-%D0%BF 122 https://menr.gov.ua/news/32934.html 123 http://www.geo.gov.ua/wp-content/uploads/2018/05/zmpostkmu1117_2017_ok_0.doc 124 https://menr.gov.ua/news/32415.html 125 https://menr.gov.ua/files/docs/nakazy/nakaz_475.pdf 126 http://geo.gov.ua/sites/default/files/imce/nakaz_no_557.pdf 127 http://www.drs.gov.ua/wp-content/uploads/2018/04/4384-vid-07.05.18.pdf 128 http://www.drs.gov.ua/wp-content/uploads/2018/07/10137_19-18.pdf 129 http://www.drs.gov.ua/wp-content/uploads/2018/11/11023-14.11.18.pdf 130 http://zakon2.rada.gov.ua/laws/show/59-95-%D0%BF 131 http://www.drs.gov.ua/wp-content/uploads/2018/11/10077-25.10.18.pdf 132 http://zakon2.rada.gov.ua/laws/show/1079-2016-%D1%80/paran146#n146 133 http://www.geo.gov.ua/wp-content/uploads/2018/05/proekt_zakonu_0.doc 134 https://www.kmu.gov.ua/storage/app/uploads/public/5bc/de8/62a/5bcde862a988c706756328.doc 135 http://zakon.rada.gov.ua/laws/show/842-2018-%D1%80 136 http://zakon.rada.gov.ua/laws/show/865-94-%D0%BF

Oil

− adoption of the order “regarding the creation of a software environment for the electronic submission of reporting by disclosure entities in the extractive industries, as well as publication of the received data in the format of open data” (responsible authority – the Ministry of Energy and Coal Industry).

Article 275 of the Association Agreement in relation to the prohibition and elimination of unauthorized selection of oil and oil products transported through the territory of Ukraine

In 2018, the special units of JSC Ukrtransnafta, which performs functions to eliminate unauthorized withdrawal of oil and oil products transported through the territory of Ukraine, detected about 400 illegal connections to pipeline systems137. However, despite the increasing number of cases when organized criminal groups use modern methods and equipment for unauthorized withdrawal of oil, there is no systematic work in this area.

In early 2016, Naftogaz initiated increased liability for damage to main oil pipelines and developed a concept for ensuring their safety, which will provide for, in particular, the introduction of modern oil accounting systems and systems for early detection of instances of interference with the operation of main oil pipelines. However, the relevant regulatory documents were not developed.

Article 276 of the Association Agreement as regards the prevention of disruptions in the transit and transportation of oil and petroleum products

As of February 5, 2019, the paragraph 126 of the plan138, by which the Ministry of Energy and Coal Industry was instructed to develop and submit to the Cabinet of Ministers a draft decision on amending the Concept of State Policy in the field of supply and transit of crude oil by the end of 2018 in order to create conditions for technical re-equipment and increase the reliability of the oil transportation system of Ukraine and the effective attraction of investments, remains unfulfilled.

The order of the Ministry of Energy and Coal Industry for the approval of the Regulation on the Commission on the Decommissioning of Main Pipelines for Oil, Gas and Products of Their Processing, submitted in pursuance with Article 276 (a) of the Government resolution139, has not yet been signed and filed in compliance with clause (a) of Article 276 and Government resolution140. The relevant document, agreed by the State Regulatory Service on November 2, 2018141, should set out the main tasks of the Commission, its rights, powers of the chairman of the Commission, the rights and obligations of its members, the sequence of actions of the Commission for consideration of documents prepared by the business entity, execution of the minutes and preparing proposals for the decommissioning of the main pipeline or refusing to do so.

Article 279 of the Association Agreement as regards ensuring equity of access and exercising of the activities of prospecting, exploring and producing hydrocarbons

As of February 5, 2019, 17 lots - oil and gas subsoil plots were posted in the ProZorro.Sale system142. Electronic auctions for the sale of special permits for their use will be held in March-May 2019 in accordance with the temporary procedure143. In general, in 2019, it is planned to put up for tender 30 oil and gas plots with an initial price of lots of USD 50 million144.

137 http://enkorr.com.ua/a/news/Ukrtransnafta_likvidirovala_ocherednuyu_vrezku_v_nefteprovod_Druzhba/235476 138 http://zakon5.rada.gov.ua/laws/show/497-2018-%D1%80 139 http://zakon.rada.gov.ua/laws/show/209-2018-%D0%BF 140 http://mpe.kmu.gov.ua/minugol/control/uk/publish/article?art_id=245306373&cat_id=35082 141 http://www.drs.gov.ua/wp-content/uploads/2018/10/10693-vid-02.11.18.pdf 142 http://www.geo.gov.ua/all-advertisement/ 143 https://zakon.rada.gov.ua/laws/show/848-2018-%D0%BF 144 http://www.geo.gov.ua/v-londoni-kerivnik-derzhgeonadr-oleg-kirilyuk-predstaviv-7-naftogazovix-dilyanok-dlya-mizhnarodnix-kompanij/

Oil

This means that the State Service for Geology and Mineral Resources will no longer be able to fulfill paragraphs 2 and 3 of the plan145, according to which, before the end of 2018, they had to hold:

− an auction for obtaining special permits for the use of subsoil or a competition for the conclusion of production sharing agreements, at which at least five plots on the continental shelf and the exclusive (marine) economic zone for the exploration and production of hydrocarbons will be offered;

− open auctions for the sale of special permits for the use of subsurface areas by reducing the number of instances of their provision outside the auctions, at which at least 50 new fields for the exploration and production of hydrocarbons will be offered.

On January 5, 2019, a number of resolutions of the government (No. 1178-1189 of 18 December 2018) on conducting tenders for the conclusion of production sharing agreements for hydrocarbons extracted in 12 oil and gas fields were published146. According to them, the Interdepartmental Commission for the Organization and Implementation of Production Sharing Agreements is entrusted:

− within two months from the date of the decision on the tender competition, to develop and approve the tender documentation and to ensure the placement of the announcement of the competition in the official printed editions of Ukraine and foreign media;

− to ensure acceptance of applications for participation in the tender competition within three months from the date of publication of the announcement of the competition;

− to prepare and submit to the Cabinet of Ministers of Ukraine, not later than within one month from the date of expiration of the deadline for submission of applications for participation in the tender competition, opinions and proposals for the definition of the winner of the tender competition.

It is provided for that the government share in the profitable production will be not less than 11% of its total volume, the maximum share of the investor - 70% of the total production (until the full compensation of the investor).

In general, while congratulating “a unique chance to write a new landmark page in the upsteam history of Ukraine”, experts, however, expressed concern about:

− the absence among the majority of members of the Interdepartmental Commission of sectoral competencies and the limited resources in its secretariat in view of the scope of the processed tender documentation;

− the qualitative nature of the evaluation of applications and the uncertain significance of each individual criterion in the overall evaluation, which increases the subjectivity of the selection and, as a consequence, reduces the trust in the work of the Interagency Commission147.

145 http://zakon.rada.gov.ua/laws/show/842-2018-%D1%80 146 http://www.geo.gov.ua/ukra%d1%97na-ogolosila-12-konkursiv-na-rozrobku-vuglevodnevix-rodovishh-za-urp-na-50-rokiv/ 147 https://www.epravda.com.ua/columns/2019/01/25/644576/

Oil

Acquis update

In Europe, a new, harmonized set of fuel brands has emerged. They will provide drivers with better

information on the suitability of fuel for their vehicles, wherever they travel across the EU territory,

helping to avoid fueling with inappropriate fuel and informing about the environmental impact. This

initiative was adopted on the basis of Article 7 of Directive on the deployment of alternative fuel

infrastructures of October 2014 and is in line with the Commission Action Plan on the Deployment of

Alternative Fuels Infrastructure, adopted in November 2017. (http://europa.eu/rapid/press-release_IP-

18-6101_en.htm)

The European Commission has adopted an updated Directive on minimum stocks of crude oil and/or

petroleum products in the EU, in order to guarantee the highest level of security of energy supply in

Europe. The amendments will improve the method of calculating the minimum level of emergency stock,

the amount of petroleum products used for petrochemical and non-energy needs.

(https://ec.europa.eu/info/news/ensuring-security-energy-supply-eu-update-emergency-oil-stocks-

directive-2018-oct-19_en)

Business Climate

ProZorro introduced two technical innovations that improve the search for tender bids by purchase subject and automatic translation of the search word. The list of information in the Single State Registry is expanding: the information about the licenses and permits of business entities is added. The draft law on regulating the process of disclosing information on end-users of energy resources and energy consumption volumes is also registered. Against this backdrop, the AMCU initiated an investigation into the violation of competition laws by DSOs in connection additional charges for the supplied gas.

Articles 150, 153 on public procurement (as regards the implementation of certain provisions of Directives 2014/24/EC, 2014/25/EC, 89/665/EEC and 92/13/EEC)

According to a report on the official website of electronic public procurement, the ProZorro system acquires even more exciting new products, this time – this is the appearance of a new field “type of procurement subject”. First of all, it will allow customers to more clearly formulate announcements to contractors and tenderers, rather find the necessary orders by the criteria: goods, work or services148. The search system in situations, where the customer uses the term in Russian and the search of a tender is made in Ukrainian, is also optimized149.

Article 378-379 on creation of favorable conditions for doing business

After a year of practical application of the Law of Ukraine On Privatization, the draft law, which makes some clarifications to the wording of the basic law, is registered in the Verkhovna Rada. In order to avoid further collisions, it is proposed to introduce the term “privatization bodies”, replacing the terms “state privatization bodies” and “privatization bodies of territorial communities”150.

From now on, information about the licenses and permits issued by the company will be added in the open Single State Registry of Business Entities. Upon the recommendation of the Ministry of Economic Development and Trade, the Cabinet of Ministers approved the relevant procedure. It is expected to simplify the search for information on business entities, both for public authorities, and for consumers and counterparties when entering into contracts151.

According to the State Property Fund’s report on the results of the sale and purchase of privatization facilities during 2018, state property was sold in the amount of 1.587 billion UAH and 424,970 USD. This includes the sale of blocks of shares, assets under construction and small-scale privatization facilites, and so on. 12,732 contracts for the sale and purchase of state property were concluded during 2018 and are registered by the privatization bodies, a significant proportion of them being contracts within the framework of small privatization: 8,719 contracts152.

Article 258 on fair competition in the markets of natural monopolies

The Antimonopoly Committee and its territorial bodies have received many appeals from domestic consumers regarding the legality of additional accrual of the cost of the consumed gas by suppliers on the basis of “bringing the volume of natural gas consumed by domestic consumers to standard conditions”. In this regard, the AMCU has begun studying such activities of DSOs in compliance with the legislation on the protection of economic competition153.

148 https://prozorro.gov.ua/news/monitoriti-tenderi-staye-legshe-v-prozorro-zyavilosya-pole-vid-predmetu-zakupivli 149 https://prozorro.gov.ua/news/izitrade-vdoskonaliv-funkcional 150 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=65366 151 https://www.kmu.gov.ua/ua/news/yedinij-derzhavnij-reyestr-subyektiv-gospodaryuvannya-dopovnyat-informaciyeyu-pro-licenziyi-ta-inshi-dozvilni-dokumenti 152 http://www.spfu.gov.ua/userfiles/pdf/zvit65_13579.pdf 153 http://www.amc.gov.ua/amku/control/main/uk/publish/article/147246

Business Climate

The AMCU holds a public discussion on the draft Concept of State Policy of Development and Protection of Economic Competition in Ukraine. The document is basic and reveals the essence of defining the national competition policy and emphasizes the most problematic aspects of the Ukrainian competition policy as well as precise ways of implementing the competition policy154.

Article 337-339 on cooperation in the field of energy (as regards the implementation of certain provisions of Directives 2012/27/EC, 2009/72/EC and 2009/73/EC)

In the first month of the new 2019, a draft law on amendments to the Law On Ensuring Commercial Gas Metering, aimed at introducing the mechanism for providing of generalized information on final energy consumers by energy and gas supplying, gas distribution organizations and fuel suppliers at the request of public authorities was submitted to the Verkhovna Rada, which is provided for Directive 2012/27/EC and is a condition for the implementation of the Association Agreement. The registration of the draft law took place in advance of the deadline by the end of October 2019 in accordance with the Action Plan for the Implementation of the Association Agreement. Thus, it is proposed to add Article 21 on ensuring control over the use of natural gas by means of automated accounting of consumers of natural gas and volumes of natural gas consumed by them in the form of a separate information database. Gas distribution companies have to provide their customers with information about companies transporting gas. Access to such information by consumers is possible only within the limits of information about their own consumption155.

Article 277 on the Regulator (provisions of Directives 2009/72/EC and 2009/73/EC in terms of the regulatory body)

For the eighth month, the competition for two vacant NEURC members’ posts was blocked through legal actions of D. Vovk and A. Gudachenko concerning the decision of the Competition Commission not to allow them to participate in the selection. The plaintiffs never appeared at the court sessions. Consequently, the regulator still consists of 5 members who continue to perform functions of 7 members.

154 http://www.amc.gov.ua/amku/control/main/uk/publish/article/146849 155 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=65377

Acquis update

Half of the eight directives and regulations of the “Clean Energy for All Europeans” package, which provides for an update of the EU energy policy, have been approved. In particular, amendments to the Directives and Regulations on Energy Efficiency in Buildings, on Renewable Energy, on Energy Efficiency, and on Regulating Management have already been approved. During January 1, 2019, it is expected that amendments to the Electricity Directive, Electricity Regulation, Regulation on Risk Management in the Energy Sector, Regulation on the Agency for Cooperation of Energy Regulators will be approved (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L:2018:328:TOC).

On December 24, 2018, the Energy Community Management and Climate Change Regulation (Regulation (EU) 2018/1999) came into force. The main objective is to ensure the security, vitality and availability of energy supply for all EU member states, which involves the development of integrated national energy and climate plans for the period 2021-2030 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2018.328.01.0001.01.ENG&toc=OJ:L:2018:328:TOC).

Methodology

ANNEX 1.

List of Articles of the Association Agreement and Acquis Subject to Monitoring

The group Electricity and Nuclear Safety conducts monitoring and assessment of issues relating to electricity, nuclear energy, coal and elimination of consequences of the Chornobyl accident. Acquis concerned:

Article 269, Chapter 11, Title IV, Directive 2009/72/EC (market-related provisions)

Article 270, Chapter 11, Title IV, Regulation (EC) 714/2009

Article 271, Chapter 11, Title IV, Regulation (EC) 714/2009

Article 273, Chapter 11, Title IV, Regulation (EC) 714/2009, Directive 2009/72/EC

Article 274, Chapter 11, Title IV, Regulation (EC) 714/2009, Directive 2009/72/EC

Article 305, Chapter 14, Title IV, Directive 2009/72/EC, Directive 2005/89/EC

Article 338, Chapter 1, Title V

Article 338, Chapter 1, Title V, Cooperation Agreements with IFIs

Article 339, Chapter 1, Title V, coal market

Article 342, Chapter 1, Title V, cooperation in the nuclear safety sector, Council Directive 2014/87/Euratom, Council Directive 2013/59/Euratom, Council Directive 2006/117/Euratom

Article 342, Chapter 1, Title V, cooperation in the nuclear safety sector

The group Gas conducts monitoring and assessment of issues relating to gas, in particular, the implementation of the following acquis:

Articles 338, 341, Directive 2009/73/EC (market-related provisions)

Articles 338, 341, Regulation (EC) 715/2009

Articles 338, 341, Directive 2004/67/EC + Annex XXVI (Early Warning Mechanism), Articles 275 (Unauthorised taking of energy goods), 276 (Interruption), 309 and 314 (resolution of disputes) of the

Association Agreement

Chapter 11 Trade-related energy, in particular Articles 269 (Domestic regulated prices), 270 (Prohibition of dual pricing), 271 (Customs duties and quantitative restrictions), 272 (Transit) and 273–274 (Transport,

cooperation on infrastructure)

Annex XXVII to Chapter 1 Energy cooperation, including nuclear issues — Directive 94/22/EC + Articles 279–280 (Access to and exercise of the activities of prospecting, exploring for and producing hydrocarbons, and

licensing conditions)

The group Energy Efficiency and Social Issues conducts monitoring and assessment of the implementation of the following acquis:

Directive 2010/30/EU

Directive 2010/31/EU

Directive 2006/32/EU

Directive 2012/27/EU

Directive 2009/72/EC (social issues)

Articles 338, 341 of the Association Agreement

Directive 2009/73/EC (social issues)

Articles 338, 341 of the Association Agreement

Methodology

The group Environment and Renewable Energy Sources conducts monitoring and assessment of the implementation of the following acquis:

Article 363, Directive 2011/92/EU

Article 363, Directive 2001/42/EC

Article 363, Directive 2003/42/EC

Article 363, Directive 2003/35/EC

Directives 85/337/EEC and 96/61/EC

Article 363, Directive 2008/50/EC

Article 363, Directive 1999/32/EC

Article 363, Directive 94/63/EC

Article 363, Directive 2009/147/EC

Article 363, Directive 2010/75/EU

Article 338, Directive 2009/28/EC

The group Oil conducts monitoring and assessment of the implementation of the following acquis:

Directive 2009/119/EC

Directive 94/22/EC

Directive 98/70/EC

Articles 274, Chapter 11 of the Association Agreement (Trade-related energy)

Articles 275, Chapter 11 of the Association Agreement (Trade-related energy)

Articles 276, Chapter 11 of the Association Agreement (Trade-related energy)

Articles 279, Chapter 11 of the Association Agreement (Trade-related energy)

Articles 280, Chapter 11 of the Association Agreement (Trade-related energy)

Article 337 of the Association Agreement

Article 338 of the Association Agreement

Article 339 of the Association Agreement

The group Business Climate conducts monitoring and assessment of the implementation of the following acquis:

Article 27, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 28, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 29, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 88, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 93, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Articles 97-102, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 104, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 105, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 107, Chapter 6 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Articles 144-147, Chapter 7 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Chapter 8 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement and the Directive 2014/25/EU

Article 255, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 256, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 258, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Methodology

Article 263, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 267, Chapter 10 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement

Article 277, Chapter 11 (Title IV TRADE AND TRADE-RELATED MATTERS) of the Association Agreement and Directives 2003/54/EC and 2003/55/EC (as regards the regulatory authority)

Articles 355-359, Chapter 5, (Title V ECONOMIC AND SECTOR COOPERATION) of the Association Agreement and Directive 2008/92/EC

Article 379, Chapter 10 (Title V ECONOMIC AND SECTOR COOPERATION) of the Association Agreement

Glossary

ANNEX 2. Glossary (Short Description) of EU Acquis Subject to Implementation Monitoring

Gas Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC This Directive establishes common rules for the transmission, distribution, supply and storage of natural gas. The rules established by this Directive apply to natural gas, liquefied natural gas (LNG), biogas and gas from biomass. They aim to achieve a competitive, secure and environmentally sustainable market. This Directive provides for compulsory functional unbinding (supply) of transmission system operators (TSO) in vertically integrated undertakings. EU Member States must ensure that all customers are entitled to freely choose natural gas supplier and can easily change supplier within three weeks. At the same time, Member States may impose on suppliers selling gas to household customers obligations which may relate to security, including security of supply, regularity, quality and price of supplies, and environmental protection, including energy efficiency. Regulation (EU) No. 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No. 1775/2005 This Regulation sets common rules for access to gas transmission systems, LNG terminals and storage facilities taking into account the special characteristics of national and regional markets. The document establishes the procedures of certification of transmission system operators, as well as development, elaboration and implementation of network codes (with the participation of the European Network of Transmission System Operators — ENTSO — for Gas). The key objective of this Regulation is to ensure that all market participants have free and non-discriminatory access to relevant infrastructure and capacities. Directive 2004/67/EC concerning measures to safeguard security of natural gas supply This Directive establishes a common framework within which Member States must define general, transparent and non-discriminatory security of supply policies compatible with the requirements of a competitive market, and clarify the roles and responsibilities of market players (including in case of emergency). The government must specify minimum security of supply standards to be complied with by the market players, prepare and update national emergency measures, identify “vulnerable” customers and ensure adequate security for them, establish cooperation with the European Commission and other stakeholders.

Electricity and Nuclear Security Council Directive 2014/87/Euratom of 8 July 2014 amending Directive 2009/71/Euratom establishing a Community framework for the nuclear safety of nuclear installations The Directive establishes a European framework for maintaining and promoting consistent improvement of nuclear safety and its regulation. It sets an ambitious safety goal across the EU in order to prevent accidents and avoid radioactive waste from nuclear installations. The directive applies to any nuclear installation subject to licensing. Council Directive 2013/59/Euratom laying down basic safety standards for protection against the dangers arising from exposure to ionising radiation The Directive establishes basic safety standards to protect the health of employees, the general public, patients and others from the dangers of exposure to ionising radiation. The Directive applies to any planned, existing or emergency situation which involves a risk to ionising radiation. In particular, it applies to: the manufacture, production, processing, handling, disposal, use, storage, holding, transport, import to and export from the EU of radioactive material; the manufacture and operation of electrical equipment emitting ionising radiation; human activities withnatural radiation sources that could lead to a significant increase in the exposure of employees or the public, such as the exposure of space crew to cosmic radiation; domestic

Glossary

exposure to radon gas in indoor air and external exposure to gamma radiation from building materials; managing emergency exposure situations that require measures to protect the public and workers. Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC This Directive establishes common rules for the generation, transmission, distribution and supply of electricity. It also lays down universal service obligations and the rights of electricity consumers and clarifies competition requirements. Open internal market enables all consumers freely to choose their suppliers and all suppliers freely to deliver to their customers (free movement of goods, the freedom of establishment and the freedom to provide services). At the same time, this Directive sets stricter requirements to unbundling of transmission system operators (TSO) in vertically integrated undertakings. It also contains consumer rights provisions, reinforces and clarifies the functions and powers of regulatory authorities. Regulation (EC) No. 714/2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No. 1228/2003 This Regulation establishes the rules for cross-border exchanges of electricity with the view to enhancing competition and achieving harmonization within the internal market in electricity. Comparing to the previous Regulation No. 1228/2003, this Regulation contains additional provisions on certification of transmission system operators (TSO), introduction of network codes and publication of information by system operators. It also clarifies that the European Network of Transmission System Operators for Electricity (the ENTSO for Electricity) is responsible for the management of electricity transmission networks to allow trading and supplying electricity across borders within the EU. Directive 2005/89/EC concerning measures to safeguard security of electricity supply and infrastructure investment This Directive establishes measures aimed at safeguarding security of electricity supply so as to ensure the proper functioning of the internal market for electricity, an appropriate level of interconnection between Member States, an adequate level of generation capacity and an adequate balance between supply and demand. It establishes a framework within which Member States are to define general transparent and non-discriminatory policies on security of electricity supply compatible with the requirements of a competitive market for electricity. They must define and publish roles and responsibilities of competent authorities and all relevant market actors. In implementing these measures, Member States are supposed to guarantee continuity of electricity supplies, explore possibilities for cross-border cooperation in relation to security of electricity supply, reduce the long-term effects of the growth of electricity demand, ensure diversity in electricity generation, encourage energy efficiency and the adoption of new technologies, ensure regular renewal of networks. Council Directive 2006/117/Euratom on the supervision and control of shipments of radioactive waste and spent fuel This Directive authorizes transboundary shipments of spent fuel between Member States for processing, requires prior authorization for transboundary shipments of radioactive waste and spent fuel where such fuel is moved from, through the territory of or to a Member State. This Directive also requires return of radioactive waste to its country of origin.

Energy Efficiency and Social Issues Directive 2010/30/EU on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products This Directive regulates labelling of energy-related products and provision of information to consumers relating to their consumption of electric energy. It applies to products which have a direct or indirect impact on the consumption of energy and on other resources during use. Suppliers placing products on the market must ensure that such products are labelled with the information about their consumption of energy and other resources. Suppliers must also produce technical documentation to include: a general description of

Glossary

the product; the results of design calculations carried out; test reports; the references allowing identification of similar models. The technical documentation must be available for inspection purposes for a period ending five years. Suppliers must provide the labels and product-related information free of charge to dealers, and the latter must display labels properly, in a visible and legible manner. Directive 2010/31/EU on the energy performance of buildings This Directive promotes the improvement of the energy performance of buildings within the Union, taking into account outdoor climatic and local conditions. It lays down minimum requirements, common general framework for a methodology and covers energy used for heating, hot water, cooling, ventilation and lighting. National authorities must establish reasonable minimum requirements to energy efficiency to be reviewed every five years. They also establish a system of certification of the energy efficiency. Such certificates provide information to prospective buyers or tenants on the energy performance of buildings, and advice on enhancing it. Directive 2012/27/EU on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC This Directive establishes a common framework of measures for the promotion of energy efficiency within the Union in order to ensure the achievement of the Union’s 2020 20% headline target on energy efficiency. Such measures include:

• annual 1.5% energy savings resulting from implementing energy efficiency measures by distribution network operators and suppliers;

• enhancing energy performance of heating systems, installation of double-glazed windows and roof insulation;

• purchase of buildings, products and services with high energy-efficiency performance by public bodies;

• annual energy modernization of at least 3% of the total floor area of buildings owned and occupied by public bodies;

• expanding rights and possibilities of consumers in the area of energy management which includes easy and free access to the metering data on the actual consumption;

• national incentives for small and medium-sized enterprises to conduct energy audit that should be mandatory for all large enterprises;

• monitoring of the energy performance of new energy generating capacities.

Environment and Renewable Energy Sources Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment (codification) This Directive introduces an important instrument of the environmental policy — environmental impact assessment. Member States must ensure, first of all, that projects likely to have significant effects on the environment (by virtue, inter alia, of their nature, size or location) are made subject to a requirement for development consent and an assessment with regard to their effects. This Directive contains two lists of projects subject to environmental impact assessment (from nuclear power stations, gas pipelines, etc., to large pig farms). An important element is stricter publicity requirements, including to the public participation in the environmental impact assessment. Directive 2001/42/EC on the assessment of the effects of certain plans and programmes on the environment This Directive introduces an important instrument of environmental policy — strategic environmental assessment. An environmental assessment must be carried out of certain plans and programmes during their preparation. Such assessment includes preparation of the environmental report (that must contain detail information on the likely significant environmental effects and reasonable alternatives) and consultations with the relevant authorities and the public. Where a transboundary effect is possible, an assessment and consultations in a transboundary context must be carried out.

Glossary

Directive 2003/4/EC on public access to environmental information and repealing Council Directive 90/313/EEC This Directive implements the provisions of the Aarhus Conventions relating to public access to environmental information. It aims to guarantee public access to environmental information owned by public authorities — both upon request and through active dissemination thereof. Environmental information must be made available to an applicant within one month after the receipt by the public authority of the applicant’s request. A request for environmental information may be refused if the request is manifestly unreasonable, or formulated in too general a manner, concerns an unfinished document or internal communications. Directive 2003/35/EC providing for public participation in respect of the drawing up of certain plans and programmes relating to the environment and amending with regard to public participation and access to justice Council Directives 85/337/EEC and 96/61/EC This Directive addresses the implementation of the Aarhus Convention in respect of public participation and access to justice. It sets the requirements to the introduction of mechanisms of informing the public, holding consultations with the public and taking account of comments and proposals of the public in decision-making. Member States must ensure that the public is given early and effective opportunities to participate in the preparation and modification or review of the plans or programmes required to be drawn up under the provisions listed in Annex I of the Directive. Directive 2008/50/EC on ambient air quality and cleaner air for Europe This Directive establishes ambient air quality and ambient air quality management standards. For this purpose, it establishes upper and lower assessment thresholds, target and threshold values, sets objectives for the reduction of the effect of particulate matters, defines and classifies zones and agglomerations, introduces the systems of informing the public and ambient air quality assessment with respect to various pollutants. Where, in a given zone or agglomeration, there is a risk that the levels of pollutants will exceed the alert thresholds, short-term action plans must be drawn up. Directive 1999/32/ЕС relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC, as amended by the Regulation (EC) No. 1882/2003 and Directive 2005/33/EC The purpose of this Directive is to reduce the emissions of sulphur dioxide resulting from the combustion of certain types of liquid fuels and thereby to reduce the harmful effects of such emissions on man and the environment. It sets the maximum sulphur content in heavy fuel oil, gas oil and marine gas oils. It also specifies methods of sampling and analysis of sulphur content in fuel to check compliance with the requirements. Directive 2009/147/EC on the conservation of wild birds (Article 4.2) This Directive relates to the conservation of all species of naturally occurring birds in the wild state in the European territory of the Member States. The mechanism of conservation of wild birds provides for the protection of their habitats; protection and use of birds; prevention of harm that can be caused by invasive species; research and reporting. According to Article 4.2, special protection areas need to be established based on ornitological criteria. Special measures also need to be taken to protect migratory species naturally occurring in the territory of a particular state, especially in wetlands. Directive 2010/75/EU on industrial emissions (integrated pollution prevention and control) This Directive lays down rules on integrated prevention and control of pollution arising from industrial activities. It requires using the integrated approach to activities referred to in Annex I thereto. All installations covered by this Directive must prevent or reduce pollution due to using best available techniques, efficient energy use, prevention and control of emissions. Transparency of the integrated approach is ensured by the public participation.

Glossary

Directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC This Directive provides for setting mandatory national targets for the overall share of energy from renewable sources in the overall energy balance to take account of statistics and potential of each particular country. These targets include the achievement of a 20% share of energy from renewable sources in overall Energy Community energy consumption by 2020 and a 10% target to be achieved for the share of RES in the transport sector. This Directive, among other, establishes rules for joint green energy projects between Member States and third countries and access to the grid-system of electricity produced from renewable energy sources.

Oil Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products This Directive lays down rules aimed at ensuring a high level of security of oil supply in the Community through reliable and transparent mechanisms based on solidarity amongst Member States. It provides for the adoption of such laws, regulations or administrative provisions as may be appropriate in order to ensure that the total oil stocks maintained at all times within the Community for their benefit correspond, at the very least, to 90 days of average daily net imports or 61 days of average daily inland consumption, whichever of the two quantities is greater. Directive 98/70/EC relating to the quality of petrol and diesel fuels The EU introduced rules prohibiting leaded petrol and limiting the permitted sulphur content in diesel fuel with the view to improving air quality and reducing greenhouse gas emissions. This Directive sets technical specifications applicable to petrol, diesel fuels and biofuels used in vehicles, as well as to gas oils used in non-road mobile machinery. Apart from the prohibition of marketing leaded petrol, Member States must conduct assessment of national consumption of fuel, adopt laws and identify the authorized body (bodies) to introduce the fuel quality monitoring system. Directive 94/63/EC on the control of volatile organic compound (VOC) emissions resulting from the storage of petrol and its distribution from terminals to service stations, as amended by Regulation No. 1882/2003 156 This Directive provides for the registration of all terminals used for storage, loading and unloading of oil products, installation of technical means allowing reduction of VOC emissions from mobile containers with oil products, bringing all stationary tanks, rail, marine and motor vehicle tanks and loading installations in compliance with the established requirements. Directive 94/22/EC on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons This Directive establishes common rules to ensure the non-discriminatory access to and pursuit of activities relating to the prospection, exploration and production of hydrocarbons. These objective and transparent rules reinforce integration of the internal energy market, encourage greater competition and improve security of supply. The document provides for the implementation of measures to ensure:

• equal access to all organizations possessing necessary resources for prospecting, exploring for and producing hydrocarbons;

• granting authorizations on the basis of objective, published criteria;

• communication of all necessary information to all organizations participating in the established procedures.

156 The official translation has a lot of mistakes resulting from inaccurate translation

Glossary

Business Climate Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC This Directive aims to ensure market openness, as well as fair procurements, in particular in the energy sector: extraction (production), transmission and distribution of gas, heat, electricity. Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC This Directive provides for the implementation of laws on the electricity market which defines electricity as an energy-related product to be purchased/sold/produced/transmitted/stored. These operations may be carried out by all licensed companies on equal competitive conditions. The state also ensures non-discriminatory access to the existing infrastructure, creates favourable conditions for electricity producers to invest in new forms of energy (wind, solar, etc.). Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC This Directive provides for the implementation of laws on the gas market which defines gas as an energy-related product to be purchased/sold/produced/transmitted/stored. These operations may be carried out by all licensed companies on equal competitive conditions. The state also ensures that companies have non-discriminatory access to distribution networks, gas storage facilities and cross-border gas pipelines. Directive 2008/92/EС concerning a Community procedure to improve the transparency of gas and

electricity prices charged to industrial end-users

Pursuant to that Directive, open, generally accessible mechanisms of providing information on the prices of energy resources for customers must be introduced. A particular methodology of collection of respective information about gas and electricity prices is to be drawn up and the respective mechanism to that effect is to be introduced.