Economy

People have billions of debts that have nothing to do with them, – Oleh Popenko

The situation in the utilities sector leaves much to be desired, as services are getting worse every year and their cost is rising. The population’s debts are growing, and utility companies complain about the lack of funds even for minor repairs and replacement of pipes or equipment – it’s a vicious circle. What will happen next in the utility industry, how can people get out of the debt hole, and whether they should count on the help of the state and foreign sponsors – this is the conversation Komersant ukrainskyi had with Oleg Popenko, the chairman of the Union of Consumers of Public Utilities of Ukraine.

How would you characterize the situation in the country’s utilities sector: bad, very bad or a disaster?

It all depends on the interpretation. For example, there is no gas. Well, we can buy it, but we have no money. We have money, but it’s expensive. What will be bad, very bad, or good for Ukrainians in this situation? In this case, I would divide the term “bad” into several subcategories: technical, financial, resource, and managerial. And all of these need to be analyzed separately. For example, an average resident of Lviv is not concerned about the problems of a resident of Kryvyi Rih. This is the peculiarity of Ukrainians’ perception of the situation in the housing and utilities sector. And while 150,000 residents of Kryvyi Rih are without heating this heating season, for many Ukrainians it is nothing. One of the biggest problems in Ukraine is that 80% of Ukrainians live below the poverty line, and about 10% of them are on the verge of biological survival, meaning they don’t have enough to eat, let alone pay their utility bills on time.

Due to the insolvent population, debts are growing from year to year. And they are growing at a tremendous rate. I found data from the State Statistics Service for 2021 that shows the situation well. The total amount of debt for housing and communal services as of 12/31/2021 amounted to UAH 82.4 billion. Compared to 2020, the debt for the same period (12/31/2021) increased by UAH 7 billion. By February 1, 2022, the debt for housing and communal services was expected to reach UAH 90 billion.

The housing and communal services reform of Poroshenko, Yatsenyuk, and Groysman has completely failed. The idea that residents would repair their homes at their own expense and local councils would receive a lot of money after the tariff increase turned out to be a complete failure. And it got worse. In 2024, sociological data showed that people became even poorer. We have to understand that the higher the tariffs, the lower the people’s ability to pay.

Unfortunately, this plays into the hands of the state. The whole policy is built on the following model: the poorer the Ukrainian, the better the situation for the state, because the poor are easier to manage. After all, they are completely dependent on the state, on the minimum pension and social benefits of UAH 3,060.

Is it possible to estimate the amount of housing and utility debts that people have today?

Well, if in 2022 they were at the level of UAH 81.4 billion, today they may well be UAH 200 billion. After all, in 2021, only 71% of the population paid for utilities. Today, at best, it is 65-70%, but there are doubts.

What utilities do Ukrainians owe the most for?

Currently, Ukrainians owe the most for gas and heat. “Naftogaz shows the debt of households and district heating companies for gas at UAH 195 billion. That is, it is essentially the debt of the population, and this is the point of no return, which began in 2018.

And if they raise tariffs again, what will happen then?

Any increase in tariffs will inevitably lead to an increase in utility debt. Ukrainians will leave the depressed areas, leave the country, look for work there and try to pay the utility bills to keep their homes. If it’s still worth something… If they can, they will sell their housing. Or they will leave apartments in the buildings, cut off the entrances from heat and water. Like in Kamianske, former Dniprodzerzhynsk, Svitlovodsk and other cities where entire apartment buildings have been abandoned, where there are entrances cut off from heating and water. This will continue to be a trend. The situation will be even worse in the border towns with Russia, in the frontline regions where there is no work, and people will abandon their homes. At best, they will move to regional centers. Small towns will die out.

Do subsidies somehow save the situation with debts?

In Ukraine, 60% of the population receive a pension of UAH 4000 and have a subsidy that covers part of their utility bills. But what will be left after paying the utility bills? How can we survive on that? But the subsidy is being cut, reduced, limited.

The state says that subsidy recipients should go to work and earn money for the utility bill, and they don’t care how a pensioner, student, or mother on maternity leave will do it. And this is not to mention the disabled, the real ones, not the prosecutors.

So it turns out that every second person in the country is a utility debtor. But the question arises: what to do with those who have lost their homes, whose houses remain in the occupied territories and have even been destroyed. Will their debts be written off?

I have not heard about such proposals from our authorities. People still have debts today. Because no one has done a debt audit and there is no real picture of debts. Since January 2022, there has been no data. Despite the fact that after the occupation, the utilities of the cities issued bills to consumers until the end of 2023, these are Mariupol, Sievierodonetsk, Berdiansk, and the same happened in Kharkiv region. Moreover, I am sure that the population has billions of debts that have nothing to do with them, but people are forced to pay them. And no one will ever cancel these debts, don’t even hope. The state and monopolists did not create them to write them off.

Do you mean fictitious debts, when people don’t pay because, for example, they don’t live, but they are still charged amounts for the services they have used? But despite the martial law, such debtors are already being disconnected. Is there any way out of this situation?

Unfortunately, if you have a debt, no matter how it came about, you will be disconnected from services. No one has any control over this issue. And we should not even expect any changes, because there is no system that could change the situation. Without the role of the state, it is impossible to resolve the issue of illegal charges and illegal disconnections. But the state is run by the same people who are doing all this. There is a dependence between the same regional power distribution companies, regional gas companies and the state. Because the owners of service providers are donors to the state system and the state plays by their rules.

The entire legal framework is designed for monopolists, not consumers. No one thinks about how to do things better. Disconnecting people from utilities for debts is the easiest way out.

Today, the number of enforcement proceedings in courts has increased by 500,000, bringing the total to about 700,000. And no one knows how many of them are those whose property remained in the occupied territory, how many debts were illegally accrued, how many illegal payments were made by monopolists. And these amounts will be a burden on Ukrainians. And when there is an enforcement proceeding, there is no escape. Ukrainians will be forced to pay.

Today, the state is taking ownership of utility companies from oligarchs. Will this change the situation for the better?

Well, regional gas companies have already been taken away and transferred to Naftogaz. Some regional power distribution companies have already been taken away from the oligarchs. But I deeply doubt that if all regional power distribution companies become state-owned, it will somehow change the situation for us. As the practice of managing state-owned regional power distribution companies shows, it is even worse than managing private ones. It is a complete disaster. First of all, there are illegal charges for electricity, such as in Volchansk and the district, when officials sent people to the war zone to take meter readings, otherwise they threatened to send payments based on the formula, which is two to three times more. Secondly, the company’s losses. Thirdly, the sale of cheap electricity to the business, which is allocated to cover the costs for the population. Fourthly, it is illegal mining, which no one actually controls and no one knows its scale, nor whether we are without electricity just to keep them working. After all, the equipment has not disappeared, and mining farms were very common in Khmelnytsky, Kirovohrad, and Dnipro regions.

It’s hard to imagine what will happen if tariffs continue to rise. Will they continue to rise?

I repeat, any increase in tariffs will lead to an increase in utility debt. In 2024, utility tariffs have already increased by an average of 20%, despite the fact that gas and heat prices have not risen. This year, they will continue to grow, as will household debts. And, as a result, the entire housing and utilities sector and the energy sector will collapse, because a small solvent part of the population will not save the situation. But few people think about this today. After all, it is not even clear what will happen with heating, water supply, and electricity in the country as a whole, which will survive the shelling.

Will any of the officials listen to your advice on the utilities sector?

It is unlikely. They pay attention. Here is an example of Kryvyi Rih. They didn’t seem to react much, but they had to listen. Because the problem did not disappear, 150 thousand people were left without heating in the winter. And this problem is still not fully resolved. Because the batteries are barely alive. Today is almost the middle of February, and 600 apartment buildings in Kryvyi Rih are still without heat.

What needs to be done to fix everything and put things in order in the housing and utilities sector?

We need a massive modernization of the housing and utilities sector, like in Poland, where about $150 billion was raised for this purpose with money from the EU and the US. In Ukraine, the situation is even worse: not only has nothing been repaired or modernized, but much has been destroyed. We need even more, but no one will give us that kind of money. The EU has repeatedly given us $300 million for modernization, but working groups, supervisory boards, and so on were immediately created to set conditions and block the actual allocation of money, so that we either could not spend the money or could spend it on some plans or projects, not on the business.

What advice would you give to Ukrainians today on what to do, whether to borrow money, sell their homes, or pay off their debts?

This is the most difficult question. I would advise people to think with their heads every time they come to the polling station. They should understand their responsibility for who they voted for or for not coming to the polls. Because by choosing the government, we condemn ourselves to certain problems every time. Not all promises should be believed.