Cabinet move to impose duties on electricity, coal imports from Russia leads to growing tariffs, two MPs say

Ukrainian legislator with the Servant of the People Party Oleksandr Dubinskyi says the Cabinet of Ministers' resolution to impose special duties on coal and electricity imports from Russia allegedly creates conditions for raising prices of coal in Ukraine, 80% of which is extracted by Ukrainian businessman Rinat Akhmetov's enterprises, as well as rising tariffs on electricity, a significant share of which is also generated from coal used by Akhmetov's power plants.

"Less than a month after being appointed PM, Akhmetov's ex-employee 'pushes' through the Cabinet a scheme even more brazen than 'Rotterdam Plus' formula. Like all dirty deeds of the last six years, this decision is also presented to public as 'patriotic' one, that is imposing a duty of 65% on the supplies of electricity and coal from Russia. Although, in fact, we are talking about a banal 'scheme'  – creating conditions for raising the price of coal, 80% of which in Ukraine is produced by Akhmetov's enterprises, and tariffs for electricity, 65% of which is also generated by Akhmetov's companies off of coal. Therefore, coal from the Russian Federation, which is now almost twice cheaper than Akhmetov's is extremely unprofitable for the latter (and therefore [Ukrainian Prime Minister Denys] Shmyhal)," Dubinskyi wrote on his Telegram channel on March 19.

Dubinskyi also noted that the price of coal on the Rotterdam stock exchange (the Netherlands) today is almost half the price of coal in Ukraine: US$47 per tonne (futures) against US$80 per tonne.

As a result, electricity is most expensive in the region for Ukrainian legal entities (enterprises, shops, kindergartens, schools, etc.).

"But Akhmetov (and thus, Shmyhal) has the highest profit. DTEK Pavlohradvuhillia – Akhmetov's main coal mining asset – in 2019 showed UAH 6.7 billion [US$245.7 million] in net profit. DTEK Trading received another UAH3.5 billion [US$128.3 million] in profits – a company that buys coal from Akhmetov's mines and sells it to Akhmetov's thermal power plants. And this profit will be even greater because DTEK has a monopoly (90% of coal production in the country and 63% of thermal generation)," Dubinskyi added.

In turn, Ukrainian Member of Parliament, Chairman of the Verkhovna Rada Committee on Energy, Housing and Utilities Andriy Gerus claims imports from Russia were holding back the uncontrolled rise in electricity market prices and had no physical impact on the grid.

"Such imports used to perform the function of a 'gun on the wall', that is, it had a psychological effect, making pricing collusion and uncontrolled price hikes impossible. They had no physical impact on the grid. The [enterprises] of "green" industry [renewables] do have a physical influence, as they will produce over 10% this spring. First, they will squeeze out coal TPPs and then NPP units," he wrote on Facebook.

Gerus believes that the decision to impose a duty on imports of electricity and coal from Russia is unlikely to affect the cost of electricity, but at the same time, it will affect it in such a way that it won't fall in price to the European level. In Europe, electricity is now twice cheaper than in Ukraine.

As UNIAN reported earlier, Ukraine's Cabinet of Ministers on March 18 imposed a special duty at 65% on imports of electricity and coal, except anthracite and coking coal, from Russia, effective April 1, 2020.

According to the operator of the Ukrainian integrated power grids Ukrenergo, the share of imported electricity in the country's power grids stood at 3.9% as of February 1, 2020.

Imports to the trade zone of Ukraine's Integrated Power System (IPS), synchronized with the energy grids of Russia, Belarus and Moldova, accounted for 82.9 million kWh, or 0.6% of the total electricity generation in this zone. In particular, 33.99 million kWh – from Russia and 48.9 million kWh – from Belarus.