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Kyiv's District Administrative Court has satisfied the claim of the national oil and gas holding Naftogaz of Ukraine against Ukraine's Cabinet of Ministers, ordering that the Government set up a procedure for defining the sources of compensation that Naftogaz should receive after fulfilling special obligations imposed on it by the Government with regard to gas supplies for households, according to the court ruling of July 19, 2017, published in the Unified State Register of Judicial Decisions.
"This is to oblige the Cabinet of Ministers of Ukraine to fulfill cl. 7, Part 4 of Article 11 of Ukraine's law on the natural gas market. That is to define the sources of financing and the procedure for determining compensation that is provided to the natural gas market's entities, on which special obligations are imposed, by amending the Resolution of the Cabinet of Ministers of March 22, 2017, No. 187 [resolution on the imposition of special obligations]. It should envisage the sources of funding and the procedure for determining compensation," the document said.
According to the plaintiff’s arguments, the Cabinet of Ministers, while fulfilling the norms of the law on the gas market, imposed special obligations on Naftogaz, namely, to sell gas at a fixed price (UAH 4,849, or US$187 before VAT), which was produced by the subsidiaries of the state holding (Ukrgazvydobuvannya and Chornomornaftogaz) to the suppliers of gas for households (regional gas companies), religious organizations, and producers of thermal energy.
Read alsoNaftogaz: Not gas price rise for households, but new calculation methods "However, the Cabinet of Ministers has not determined the sources of financing and the procedure for determining compensation, which a gas market subject with the responsibilities imposed has the right to receive," the document said.
The resolution also notes that, according to representatives of Naftogaz, such inactivity on part of the Government deprives the state holding of a legal right to receive compensation.
However, the Cabinet's agent noted that the determination of compensation is a right for the plaintiff and not a duty of the government. Moreover, the law on the gas market does not set a time limit for the Cabinet to determine such compensation.
"Hereby to recognize inactivity of Ukraine's Cabinet of Ministers unlawful. Inactivity means that sources of financing and the procedure for determining compensation that are provided to the natural gas market entities with special obligations had not been defined," the court's ruling reads.
As UNIAN reported earlier, the Cabinet set a single gas price for households at UAH 6,879, or US$266, per 1,000 (UAH 4,942, excluding VAT and fuel delivery fee) from May 1, 2016. According to Prime Minister Volodymyr Groysman, the decision will eliminate all existing shady schemes for cashing up on the difference in fuel prices.
Read alsoNaftogaz finds new gas suppliers from EuropeGas companies sold gas to households at the said price, which was set until April 1, 2017. Then the Cabinet extended special obligations for Naftogaz to sell gas through regional gas companies, and set the gas price for households at UAH 4,849 per 1,000 cubic meters until October 1, 2017. The price is before VAT and the fuel delivery fee.
In mid-July, CEO of national joint-stock company (NJSC) Naftogaz of Ukraine Andriy Kobolev said that regional gas companies owed Naftogaz UAH 30 billion, or $1.2 billion, for gas received on special obligations.
UNIAN memo. Over 70% of the Ukrainian regional gas companies and distribution companies belong to the structures of Ukrainian businessman Dmytro Firtash. Naftogaz of Ukraine is a wholesale buyer of gas for imports, including from its subsidiary, Ukraine's largest state-owned gas producer Ukrgazvydobuvannya. The company sells gas both for households and industrial consumers in the free market.