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Ukraine's National Commission for state regulation in energy and utilities (NCRE) is set to continue raising power rates for households as they cover only about 42% of power generation costs.
"NCRE resolution No. 220 dated February 26, 2015, on power rates set for households was designed to bring the electricity tariffs for individuals to the sustainable level [when tariffs cover costs] in March 2017. However, the average weighted power rates increased in 2015-2016 too. The average retail electricity tariff for households in January 2017 (that covered costs) was UAH 2.31 per kWh with VAT (including subsidies). Thus, the population now pay only 42.29% of the market tariff," the commission said in a statement.
Therefore, even after the final phase of earlier scheduled increases in the power rates under the resolution, households will pay by 57.7% less than the market value.
Read alsoPM Groysman insists on reviewing nuclear energy development programThis means, the commission said, cross-subsidies in the electricity market will continue and will not be eliminated in March 2017, as was previously planned.
Thus, the regulator is mulling over further measures to bring the power rates set for households to the economically justified level.
Nowadays, the tariff for households is set at UAH 0.714 (about $0.03) per kWh if less than 100 kWh per month is consumed, UAH 1.29 ($0.05) per kWh for 100-600 kWh, and UAH 1.638 ($0.06) per kWh for consumption exceeding 600 kWh per month.
As UNIAN reported earlier, the NCRE in February 2015 approved a two-year schedule of increases in power rates for the population, providing for a gradual growth to UAH 0.9 per kWh at the consumption of 100 kWh per month and UAH 1.68 per kWh at the consumption of more than 100 kWh per month. The last increase is scheduled for March 1, 2017.
Commission members stated then that such a gradual increase in the tariffs was designed to eliminate cross-subsidizing and to adjust the electricity prices to market levels.
According to this concept, the commission had to raise the tariffs for the population, keeping the tariff for the industry unchanged. However, the NCRE repeatedly increased power rates for industrial producers in 2016.
Meanwhile, experts connect the rise in the power rates for the industry in 2016 with the use of the so-called "Rotterdam Plus" formula for calculating the wholesale price of electricity, because, in their opinion, the price of coal used for power generation by thermal power plants is overestimated, which ultimately pushes the tariff up.
Last April, the NCRE approved the market methodology for calculating the wholesale price of electricity, which is based on European coal prices index (API 2 Index), including shipment costs of coal onto the domestic market (the so-called formula "Rotterdam P Shipping").
UNIAN memo. Cross-subsidizing is designed to artificially keep low prices of electricity (or other energy) for individual households at the expense of high rates set for industrial consumers. Thus, one group of consumers cover the costs of the other group, which pays a price that is below the market one.