Photo from UNIAN
The formula has been criticized by many experts, as well as by the government.
Ukrainian President Volodymyr Zelensky's envoy to the Cabinet of Ministers Andriy Gerus says the country's thermal generation companies de facto no longer profit from the "Rotterdam Plus" coal pricing formula, which is evidenced by the tariffs at coal-fired power plants.
"According to the National Energy and Utilities Regulations Commission (NEURC) the calculated tariff at thermal power plants [TPPs] under the 'Rotterdam Plus' formula, which was supposed to be [used] in the first half of 2019, should have been UAH 2 [US$0.08] per kWh. However, in the last decade of May, the tariff fell to UAH 1.53 [$0.06] per kWh, which was 24% down. In the first 10 days of June, the tariff dropped again, to UAH 1.43 [$0.05], which is 29% lower than the tariff calculated under the 'Rotterdam Plus' formula," he wrote on Facebook on June 19.
"Thus, in June, coal-fired power plants will receive nearly UAH 1.5 billion less than they would have got with the actual tariff set under Rotterdam Plus," Gerus added.
Read alsoZelensky to submit bill on abolishing "Rotterdam+" formula – Gerus
"So, in the second quarter of 2019, the tariff revenue would be UAH 3 billion [$113.7 million] up under the actual 'Rotterdam Plus' formula. To be honest, some coal-fired power plants in June will even be unprofitable – well, it's okay, we will have to hunker down. The actual liquidation of 'Rotterdam Plus' took place thanks to the actions by a wide range of people, a large public outcry, and coverage of the corruption formula in the media, social networks, etc.," he wrote.
UNIAN memo. The "Rotterdam Plus," or Rotterdam+, is a method of forming a price of a coal in power generation by thermal power plants in Ukraine. It was introduced in March 2016 and became effective in May 2016.
The introduction of the "Rotterdam Plus" formula was predetermined by the loss by Ukraine of its coal-producing area in Donbas after Russia unleashed war in the east of Ukraine.
Almost all coal mines producing anthracite consumed by most of Ukraine's thermal power plants are now located on the territory beyond Ukraine government control.
Resolution No. 289 of the National Energy and Utilities Regulation Commission introducing the formula determines the indicative price of coal based on the average market price at the ports of Amsterdam-Rotterdam-Antwerpen for 12 months.
NEURC officials claimed that the measure would help Ukraine ensure energy independence and accumulate enough coal for a heating season. They also stated this method of calculation should eliminate manual price regulation, and ensure independence from supplies from the warzone.
The formula has been criticized by experts, as well as by the government.