Regulator raises gas transportation tariffs: what it means for the state and consumers
30 December 15:54
Starting January 1, 2025, gas transportation in Ukraine will quadruple in price due to zero transit. This decision was made on December 30 by the National Energy and Utilities Regulatory Commission (NEURC), Komersant ukrainskyi reports.
The tariff for the transportation of natural gas will increase from UAH 124.16 to UAH 501.97 per 1000 cubic meters, or by almost 305%. The decision was made in connection with the suspension of Russian gas transit through Ukraine.
“In 2024, 85% of the revenue will be the transportation of gas originating from the Russian Federation. That is, 15% is what we receive from domestic customers. This tariff increase is not enough to fully compensate us, but we agree, we understand that Ukraine’s economy needs balanced decisions,” explained Dmytro Lypa, CEO of the Ukrainian GTS Operator.
Meanwhile, the Association of Gas Producers of Ukraine, which will be the main and largest customers of natural gas transportation services next year, predicts that such a significant tariff increase will have negative consequences for both the industry and the country’s economy. In particular, it will directly affect the investment activities of state and private companies, which will lead to a decrease in Ukrainian gas production.
“The EBA has repeatedly appealed to the Regulator and the GTSOU with a request to discuss the issue of tariff formation and how they are calculated. Unfortunately, no consultations with market participants have been held, which is completely inconsistent with European standards,” the EBA said in a post on its Facebook page.
In turn, Oleksandr Trokhymets, Vice President for Energy at the Ukrainian National Committee of the International Chamber of Commerce (ICC Ukraine), argues that such a sharp increase in the tariff has a number of unreasonable features.
First, the regulator sets the profit margin for the GTS Operator at 3%.
Secondly, there is no program to optimize the GTS operation (decommissioning of unused or inexpedient capacities; optimization of operations and schemes). In other words, according to Mr. Trokhymets, the regulator supports the position of the GTS Operator to spend money without economic sense.
Third, there are no published cost items.
“The regulator refers to the fact that this is allegedly confidential information, and its disclosure may pose a threat under martial law. But in my opinion, this is a weak argument. Because if the Regulator applies the provisions of martial law, the entire economy must be put under martial law. And if market relations and transparency of tariff setting are preserved in the country, then all the cost items of the natural monopolist, which is the GTS Operator, should be published,” explains the Vice President for Energy at the Ukrainian National Committee of the International Chamber of Commerce.
According to Oleksandr Trokhymets, the increase in the gas transportation tariff will lead to additional costs for consumers in the amount of UAH 1.6 billion, which, given the decline in production and profits during the war, may, in turn, lead to an increase in debts in the gas market and bankruptcy of production enterprises.
It is worth noting that a sharp increase in tariffs for the transportation of “blue fuel” also occurred in 2019. The reason was that at that time, without warning, Russia reduced the volume of gas transit.
