The Secretariat of the European Energy Community has analyzed amendments to the gas transmission tariff methodology published by Ukraine's National Energy and Utilities Regulation Commission (NEURC) for public debates. The Secretariat broadly welcomes the proposed changes as another step towards increasing transparency of tariff setting.

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"Having in mind the diversified transportation routes that can bring natural gas to Europe and the central role of Ukraine in this context, the Energy Community Secretariat advises NEURC to consider implementation of benchmarking methods in the process of tariff determination, at the same time keeping transparency, non-discrimination and cost-reflectivity as the main principles of tariff setting," reads a statement on the Energy Community's website.

At the same time, the Energy Community Secretariat underlines the need to respect the role of NEURC as an independent regulatory body in charge of designing the transmission tariff methodology.

"The Secretariat welcomes the interest of Ukraine's stakeholders in the tariff methodology reform process as a necessary and inseparable contribution to reflecting market conditions. The discussion thereto should be streamlined to enable the most effective solution, which has the highest social welfare and is compliant with the gas acquis. Still, it has to be clear that the final decision-making power remains with NEURC and is not to be influenced by regulated companies," it said.

As was reported, Ukraine extensively uses the methods of pegging to European benchmarks in prices of energy resources. In particular, on April 27, 2016, the Cabinet of Ministers adopted Resolution No. 315 and determined the price formula for gas based on quotations in the European NCG hub (near the German city of Düsseldorf) plus delivery to the Ukrainian-Slovak border.

On March 3, 2016, NEURC adopted Resolution No. 289 "On Approving the Procedure for the Formation of the Projected Wholesale Electricity Price," known as the "Rotterdam Plus" formula. According to this methodology, the coal component in the electricity tariff is based on the quotations of the coal hub ARA (Rotterdam) plus delivery to a Ukrainian port.